£58 million: the real cost of supply chain disruption in the UK manufacturing sector

The research, commissioned by Achilles – a global supply chain risk management company – revealed the total average cost of all supply chain disruptions was £105,000 per manufacturer.

The survey revealed:

• Manufacturers were hit hardest in 2013 by suppliers failing to deliver the products of the required quality, which cost the industry an estimated £20.4 million
• The second most costly disruption was suppliers failing to deliver products on time, which cost £17.2 million
• Then came the financial failure of suppliers, which cost the industry £7 million
• Suppliers exposing firms to litigation cost the industry a further £7 million
• Smaller costs included the consequences of severe weather disruption and natural disasters which carried a bill of £3.6 million, damage to reputation cost £2.4 million, suppliers failing to meet health and safety regulations cost businesses £0.79 million and suppliers being involved in industrial action cost businesses a further £0.26 million.

The most costly supply chain disruptions per manufacturer include:

• Failing to deliver on time – 61% of manufacturers experienced this; 42% of which incurred a cost. The average bill per disruption was £55,000
• Suppliers failing to deliver products of the required quality – just over half (54%) experienced this issue; 34% of which incurred a cost. The average fee was £91,000
• Financial failure of a supplier – one third (32%) experienced the financial failure of a supplier, with 46% paying a financial price. The average cost was £39,000

Despite the significant costs involved, 58% of manufacturers said they were reliant to some extent on pieces of paper to manage information about suppliers.

Adrian Chamberlain, Chief Executive of Achilles, said: “This research shows that manufacturers are paying a heavy price for supply chain failures; many of which could be prevented.

“In our experience, efforts to improve information about the supply chain work best when whole industries – such as oil and gas – work collaboratively to agree and implement standardised requirements of all suppliers in terms of business critical areas, such as health and safety to reduce the burden of administration. They can then manage the information on a global, centralised database – implementing the same high standards not only in the UK but in every country in which they operate.

“With a significant impact on the bottom line, addressing supply chain failure should be at the forefront of people’s minds, because the cost will be felt not only by industry but also shareholders and consumers.”

*- Some manufacturers would have experienced duplicated incidents, whereby one type of disruption would affect/overlap on another EG the financial failure of a supplier would also mean they were unable to deliver.

*- The survey was carried out among procurement professionals from 108 manufacturing companies with 250+ employees. This sample is representative of the entire manufacturing sector in the UK.

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