Mitigating Disruption in the Supply Chain

Any sort of disruption or delay within the supply chain can result in empty retail shelves, manufacturing interruptions, disappointed customers, decreased revenue and increased costs. That's why shippers and their third-party logistics providers (3PLs) are placing more significance on mitigating disruptions.

The 2019 Annual Third-Party Logistics Study measured the level of importance shippers and 3PLs place on mitigating supply chain disruptions. It's the first time the study visited the topic since 2013.

Penske Logistics, along with Penn State University, Infosys and Korn Ferry, presented the 2019 study findings during the annual Council of Supply Chain Management Professionals EDGE conference in Nashville, Tennessee.

Many Concerns Remain Identical

The most common disruptions shippers face have remained fairly consistent over the past five years. Among shippers:

• 77% reported disruptions from increased transportation and logistics costs, up from 74% in 2013
• 76% reported transportation and logistics network disruptions, up from 63% in 2013
• 67% reported an increase in supplier costs, the same as in 2013

Among 3PLs:

• 83% reported an increase in transportation and logistics costs, the same as in 2013
• 74% reported transportation/logistics network disruption, up from 63% in 2013
• 67% reported an increase in supplier costs, down from 69% in 2013

Impact of Social/Public Pressure and Cyberattacks

In 2013, disruptions from social/public pressure or cyberattacks weren't measured. But today, 13 percent of shippers and 10 percent of 3PLs cited social/public pressure as a cause of disruption, while 10 percent of shippers and 11 percent of 3PLs cited cyberattacks.

How a company fares against a disruption is often directly dependent on the organization's level of preparedness and the risk-reduction strategies both shippers and 3PLs have in place.

There is no single solution to protect supply chains. So shippers and 3PLs are taking a multi-pronged approach to limit the ripple effect a disruption may have, the study found. The top methods shippers and 3PLs use to mitigate and manage supply chain disruptions are supply chain visibility tools and partnerships.

Disruption Mitigation Investment Varies

Both 3PLs (47%) and shippers (34%) expect to continue investing in supply chain disruption mitigation/response capabilities within the next two years. The level of investment being planned varies:

• 34% of 3PLs and 32% of shippers plan to invest less than $1 million
• 12% of 3PLs and shippers plan to invest $1 million to $10 million
• 4% of 3PLs and shippers plan to invest $10 million to $50 million

Shippers said the most common reasons for not investing in supply chain disruption mitigation/response capabilities are a lack of executive support (52%); a lack of understanding about available tools for supply chain disruption response (48%); and a lack of available capital (44%).

Among 3PL respondents, the majority—50%—cited a lack of available capital as their top reason for not investing in mitigation/response capabilities. Other reasons included the inability to build a business case for investments (48%) and a lack of understanding about available tools for supply chain disruption response (43%).