Threats to Supply Chains the Top Concern for FTSE 100 Firms

Major global events including the Suez Canal blockage, COVID-19 pandemic and Red Sea shipping crisis have resulted in significant disruption to global supply chains. 

Now, almost three-quarters (72%) of FTSE 100 firms list threats to their supply chains among the principal risks facing their business. 

That's according to research from INVERTO, the specialist supply chain management arm of Boston Consulting Group, which says the succession of crises has highlighted to boards just how fundamental the smooth running of supply chains is to the profitability of their companies.

Meanwhile, just 54 FTSE 100 companies provide shareholders with details on how they are mitigating supply chain risks.

"The severity – and short notice – of disruptions in the Suez Canal and Red Sea were real wake-up calls for businesses," says Lina Tilley, Principal at INVERTO. "They were a powerful reminder that a geographically distant and narrow supply base can become a major business risk."

Procurement risk management in a post-pandemic world

October's edition of Procurement Magazine explored risk management in a post-pandemic world.

Todd Abner, CEO at OMNIA Partners, Alex Saric, CMO at Ivalua, and Samir Khushalani, Partner at McKinsey, all agreed the pandemic had highlighted a critical need for robust risk management strategies in procurement.

Clearly, organisations must now prioritise risk management to ensure business continuity and resilience in the face of future disruptions.

"Procurement practice is transitioning from basing decisions on assumptions of supply security to mitigating disruption risk by optimising their supplier portfolio with, for example, a robust diversification strategy," said Samir.

Risk management strategies

"One way companies can reduce their supply chain risks is by having alternative supply chains," adds Lina.

"This can include building multiple supply chains in different countries to ensure that an unexpected impact on one doesn't become a business-critical event."

Risk management strategies reported by FTSE 100 companies over the past year include:

• Regular meetings with suppliers to ensure potential risks are shared and monitored
• The compilation and updating of a 'risk register', used to document the risks facing particular suppliers
• Holding higher levels of 'buffer' stock to mitigate the impact of short-term crises
• Having diverse supply chain streams to ensure damage to one does not cause business interruption.

Several organisations are also assessing how technology can be best used to prevent damage to their supply chains.

Other measures mentioned in the annual reports of FTSE 100 companies include:

• Rollout of cybersecurity measures to protect supply chain businesses – not just their own business – from cyber attacks
• Increased use of AI in designing and monitoring supply chains
• Use of algorithms to identify and monitor raw materials that are at high risk of possible disruption
• Due diligence of the supplier's financial resilience and the resilience of the supplier's infrastructure

Elsewhere, a number of FTSE 100 companies confirmed supply chain risks are discussed at board level, both within the executive committee and the audit committee.

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