The increasing outsourcing of production to the Far East has introduced heightened complexity into global supply chains. In addition, product life cycles are shortening, more new products are being introduced at a faster pace, customers are becoming more demanding and to add to the equation companies are attempting to reduce inventory.
This is the reality in which the supply chain/logistics teams have to operate, and the response to these challenges is critical to the financial health of individual
companies.
As a result of these dynamics, and with the increasing complexity through globalisation, supply chain disruption is becoming more of a risk and as a result has assumed a significantly higher position within a company's agenda, or if it isn't, it certainly should be.
A recent paper from Kevin Hendricks and Vinod Singhal — 'The Effect of Supply Chain Disruptions on Long Term Shareholder Value, Profitabiltiy and Share Price Volatility' — clearly highlights that companies suffering from supply chain disruption problems experience between 33 and 40 per cent lower stock returns relative to their benchmarks over a three year period and that these supply chain disruptions have a significant negative effect on profitability.
It does not matter who caused the disruption, what was the reason for the disruption, what industry a firm belongs to or when the disruption happened — the outcome is that significant supply chain disruptions devastate corporate performance.
— Michael Profitt is the Chief Executive Officer of Dubai Logistics City (DLC).
