Customer and service related issues - such as a temporary loss of sales and a reduction of service levels - are the biggest concerns facing those responsible for managing risk in the food and drink retail supply chain, according to the results of a new survey of 30 leading firms in the sector.
The research, carried out by consultancy Solving International, comes after earlier work by Cranfield School of Management in conjunction with the Chartered Institute of Logistics and Transport, which showed companies were most vulnerable to the loss of their IT capability (90%) followed by fires (70%) and loss of sites (67%).
Nestlé's global business excellence (Globe) project, under which the world's biggest food manufacturer is standardising on SAP computer systems, exemplifies the IT issue. "Everything in Nestlé is done through SAP transactions," says Nestlé business continuity manager David Hulme. "So if we lose the servers on which SAP runs, we're not in business." Consequently Nestlé backs up its main servers which are housed in Germany.
"Using SAP gives great benefits and huge savings," says Hulme. "But there are massive risks that we have to manage. Most crises are not fires, but loss of power or computer access for an hour."
Around 43% of those surveyed by Solving had experienced a major disruption to their supply chain over the past three years.
The vulnerability of supply chains is made worse by the growing tendency of manufacturers to outsource their logistics operations, source more ingredients from outside western Europe, and use many different versions of enterprise resource planning software which are often not compatible, says Solving director Clive Geldard. Inefficient management is widely seen as the most likely reason for outsourcing strategies failing, says Geldard: "That can pose some risk issues."
Experience shows, he adds, that supply chain problems are caused by placing "too much faith in state of the art technology"; from having "overly ambitious time-lines"; and from plans being compressed by external events or commercial pressures.
On top of these are the problems caused by "overly optimistic" expectation management, too much complexity in the systems and poor management of trading partners, he adds.