ROI of Supply Chain Risk Management – 12 Examples

ROI of Supply Chain Risk Management

Everyone knows that mitigating risk in the supply chain is very important. Nevertheless Supply Chain Risk Management often is still not one of the top priorities in procurement compared to other activities related to increase savings. Even though experts fear that supply chain risk could already rise again over the next three months according to the latest CIPS Risk Index Report.

We collected some facts & figures on the impact and ROI of SCRM from our customers’ experience, from recent studies and some examples which might be useful to increase SCRM’s importance and relevance:

12 Examples

What our customers say

  • Hit rate increase of risk events 85%  (compared to google alerts)
  • Early risk warning means a reduction of reaction time of 1.5 days
  • Elimination of manual effort 1hour/day per purchaser/logistic responsible
  • One hour production standstill = $ 250,000

What studies say

  • 88% of companies have suffered significant disruption in the past at the cost of £200,000over the last 12 month (1)
  • Supply  chain  disruptions  reduce  shareholder  value  by 7% (2)
  • One-point decrease in reputation score associated with ~$5 billion lower average market value (3)
  • ~50% savings in contingent business interruption insurance rates by proving supply chain visibility (4)

What already happened

  • General Motors lost over $2bn due to labor strike that disrupted production in several US states
  • Canon had a negative impact of $607 million on net sales and a reduction in operating profit of $225 million due to Thailand floods in 2011
  • BMW had a production stop due to Iceland ash cloud  in 2010 – 7,000 vehicles were affected
  • The share prices of Toyota fell by 16% and Honda by 13% within five days of the Japan earthquake in 2011

If you want to increase the visibility in your supply chain and mitigate risk, learn more about how to monitor all kinds of risks, minimize the impact and proactively take actions.

(Sources: 1) Zurich 2012, “The Weakest Link”; 2) Word Economic Forum, “Building Resilience in Supply Chains”; 3) Cirano, “Corporate Reputation: Is your most strategic asset at risk”; 4) Source: Sourcing Innovation, “The ROI of Supply Chain Resiliency”)

 

Rolf Zimmer is a founder and managing director of riskmethods, and is responsible for Finance, Product Strategy and Customer Success Management.

Rolf has been working in software business and procurement for 18 years. He has excellent knowledge in the areas of procurement, supply management and risk management – which he gained from working inside procurement departments as well as from consulting activities at SAP, Ariba and Emptoris, among others. His previous position as Sales Director at IBM included responsibility for distribution of the “Emptoris” Supplier Relationship Management suite and associated consulting services.


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