The Real Business Costs of Supply Chain Disruption
THEBUSINESS COSTSOF SUPPLY CHAINDISRUPTIONWritten by ABOUT THIS REPORTThe Business Costs of Supply-Chain Disruption is a report written by The Economist Intelligence Unit and commissioned by GEP. It explores the impacts of recent instances of disruption to global supply chains, the measures that firms are taking to build resilience and weather future disruption, and the challenges that they are facing in doing so. To better understand these issues, in November and December 2020 The Economist Intelligence Unit surveyed 400 senior supply-chain and procurement executives in five sectors (agriculture and food, industry,1 consumer goods and retail, healthcare and pharmaceuticals, and energy and utilities). The respondents are based in eight countries across the US and Europe (Belgium, France, Germany, Ireland, Luxembourg, the Netherlands and the UK) and work in senior roles in their organisations, with 60% being C-level executives and theremainder being director-level or above. Half of them work in organisations with annual revenue of over US$1bn.We supplemented the results with secondary research and in-depth interviews with experts.We would like to thank participants for their time and insights. Those interviewed, in alphabetical order, were:Terrance Brick, VP Global Supply Chain, Boston ScientificOmera Khan, Professor of Supply Chain Management, Royal Holloway UniversityHau Lee, Thoma Professor of Operations, Information and Technology, Stanford Graduate School of BusinessDavid Paulson, VP Avnet United & Velocity, AvnetLutz Quietmeyer, Head of Transport and Logistics Operations, AirbusLeigh-Ann Russell, SVP Procurement, BPYossi Sheffi, Director of the MIT Center for Transportation & Logistics, Massachusetts Institute of TechnologyManMohan Sodhi, Professor of Operations and Supply Chain Management, City, University of LondonMourad Tamoud, Chief Supply Chain Officer, Schneider ElectricMatthew Winterman, Head of Supply Chain, RocheThe findings and views expressed in this report are those of The Economist Intelligence Unit and do not necessarily reflect the views of the sponsor.March 2021THE BUSINESS COSTS OF SUPPLY CHAIN DISRUPTION AN EIU RESEARCH PROGRAMMESPONSORED BY1 Includes automotive, machinery, chemicals, aerospace and telecommunications.1 FOREWORD BY GEPWithout question, the disruptions experienced in 2020 and the start of 2021 have wrought havoc for business leaders and communities on an unprecedented scale. While the Covid-19 pandemic captured much of the spotlight, this period has also been marked by environmental catastrophes, trade disruptions and geopolitical tensions. Many supply chains bent or were broken, prompting many leaders to speculate on what the new normal will mean for their businesses.GEP has sponsored this report by The Economist Intelligence Unit to shed more light on how leading firms around the world are responding to the supply shock. This research elucidates the disruptive impact that the events of 2020 had on supply chains and the setbacks that many businesses faced. Many firms are now operating as a smaller or changed business as an outcome of these events. Notably, this research explores the trade-offs between resilience and efficiency that many firms are grappling with as they re-prioritize business resources for the future.A new roadmap is emerging. Supply chain disruption has not ended; indeed, many firms now recognise that a new model is needed to accommodate the inevitability of disruption. This has profound implications on the choices business leaders will make on technology investments, network localisation strategies and more.THE BUSINESS COSTS OF SUPPLY CHAIN DISRUPTION AN EIU RESEARCH PROGRAMMESPONSORED BY2John PiatekVice President, ConsultingGEP A SERIES OF STORMSAlthough the havoc wrought by the Covid-19 pandemic caught most businesses by surprise in the early months of 2020, modern multinationals are by now no strangers to supply-chain shock and disruption. The concurrence of a number of disruptive forces, including trade disputes, cyberattacks, commodity price fluctuations and the increasing frequency and severity of natural disasters, are testing the complexity and interdependence of global supply chains that multinationals have built up over recent years. Executives anticipate that disruption is only set to increase in the coming decade.To explore the business costs of such disruptions, and how firms are adapting to mitigate them, The Economist Intelligence Unit (EIU) undertook a survey of senior supply-chain and procurement executives from the US and Europe (see About This Report) and conducted in-depth interviews with experts from academia and industry. Our research found that disruptions have incurred substantial financial costs (averaging 6-10% of annual revenues), as well as reputational costs—in terms of customer complaints and damage to brand reputation—as companies have struggled to maintain supplies of their goods. Indeed, firms were as likely to r
