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Surprise costs, on-time delivery failure said biggest risks to profit, sales

SURPRISE costs and on-time delivery failure have become the biggest supply chain risks, says a joint survey from the UK's Transport Intelligence and supply chain software provider Kewill of Hyderabad.

The survey, launched during Ti's Emerging Markets Logistics Conference in Singapore, found that supply chain risk has moved up the corporate agenda for 3PLs and shippers.

Some 74 per cent of global original equipment manufacturers and logistics executive respondents revealed that a sudden increase in costs could greatly hurt profitability.

Ti senior analyst Cathy Roberson told Lloyd's Loading List that all businesses were at risk from a lack of reliability by transport providers, and to sudden fluctuations in pricing.

"Unlike failed investments, which might be flagged up early on, sudden shifts in product availability caused by supply disruption, or a major surge in supply chain costs, can have a very immediate and damaging impacts on the bottom line," she said.

Slow steaming and cost cutting has resulted in reliability declines for the second consecutive month in August, dropping to 71.1 per cent from 71.6 per cent in July, according to SeaIntel's latest Global Liner Performance report.

According to the Ti-Kewill survey, this is an increasing problem given the severe modal shift from air to ocean reported by respondents over the past three years.

Some 73 per cent of respondents said poor schedule compliance is now viewed as a significant risk. The failures of lines and airlines are made worse by a lack of supply chain visibility with some 83 per cent of businesses saying it is a key problem.

Said Kewill vice president Guhan Periasamy: "Visibility of performance by mode of transport and lane will have the greatest impact on revenue and profitability if not addressed in the next three years. With better visibility it is easier to manage risk."