On 9 April, Zurich was delighted to headline a Whitehall and Industry Group workshop on Supply Chain Risk Management in Central London.
The Whitehall and Industry Group exists to build understanding and co-operation between the public and private sectors. Zurich has been involved since 1999, including providing its experience and insight on areas such as change and talent management and even placing key team members into core government departments through WIG’s ‘people exchange’ programme.
This latest event was well-attended by senior managers from key government departments and agencies including the 
Department for Work and Pensions, the MoD and the Metropolitan Police. The private sector was also represented by organisations such as Maersk, RBS and Qinetiq.
Andrew Jepp, Head of Local Government at Zurich, David Forster, Zurich Strategic Risk Engineering, and Nick Wildgoose, Zurich Global Corporate UK Supply Chain Product Manager, all gave their perspectives on how supply chain risk management is an increasingly important determinant of how both private and public sector organisations perform.
This was then followed by an in-depth case study by Mark Patterson, Vice President of Procurement at DHL. DHL was recently appointed as the outsourced procurement and logistics partner to the NHS, supplying practically everything except drugs, agency nurses and utilities to hospitals around the UK.
All the speakers agreed that supply chains are becoming increasingly complex and that, in an era of focus on short-term cost reduction, outsourcing and partnership working will grow further but that this may give rise to new risks. Some of the headline risks that can impact supply chains include:
- Sourcing from a single supplier
- Natural catastrophe or ‘black swan’ (high-impact but unexpected) events
- Currency and pricing
- Supplier/Customer insolvency
- Pandemics
Zurich has worked with the Manchester Business School for the last year capturing supply chain disruptions from the last 10 years, and analysing them by type, industry and duration. We have seen examples of 'black swan' supply chain disruptions, which can have repercussions for many years. Some organisations never entirely recover.
As an example, a recent customer experience showed that despite excellent work addressing supplier risk and mitigation, including joint supplier sourcing, they had not considered that the production facilities were situated in the same earthquake zone, and both were adversely affected by the same event. Indeed, the recent disruption caused by the volcanic eruption in Iceland could also be termed a 'black swan' event and have a number of repercussions going forward.
Zurich and DHL are united in what constitutes good supply chain risk management whether in the public or private sector. As David Forster put it “organisations need to build in ‘bounce-backability’”. This does not merely mean having a business continuity plan in place. In an outsourced or partnership arrangement, this is done by having closely-aligned objectives and outcomes; clear understanding of who owns the risk; by embedding supply chain risk as a strategic board-level issue; and by ongoing monitoring and assessment. In planning also for worst-case scenarios, organisations should also develop something akin to a ‘pre-nup’ or, in other words, an exit 
After the main panel debate, a roundtable discussion followed and where a number of common themes emerged in terms of what organisations were identifying as the top 10 supply chain risks:
1. Partnerships
Often partnership working can act more like a ‘gentleman’s agreement’ with little or no contractual basis. This brings with it risks that real partnerships cannot exist or last.
2. Short-termism and Protectionism
Cost as the sole driver risks leads to other types of risk. It also drives organisations to push their own agenda.
3. Control and Ownership
In an outsourced/partnership arrangement, organisations have less direct control and are more vulnerable to the fortunes of their partner.
4. IT & Data Management
Cyber and privacy risks grow in an increasingly technological and online world.
5. Links between risk and reward
This will require culture change in the public sector and the private sector does not have a good record on this e.g. banks
6. Lack of Trust
Emphasis on auditing and monitoring each other and not on getting the job done
7. The risk to Reputation
Brand damage due to high-profile failure takes a long time to re-build.
8. Political and economic changes to the public sector
Cultural and fiscal changes will bring uncertainty and change.
9. Standardisation vs customisation
The balance between cost reductions and the demand for increased tailoring by customers
10. Complexity and sophistication of relationships
Harder to pin-point where responsibility and accountability lie
Zurich will use these insights to complement the work already done within its Zurich Municipal and Global Corporate businesses in order to develop clear insight into the issue of supply chain.
The discussion at the WIG workshop confirmed many of our findings in the briefing paper, ‘A New World of Risk’, published in 2009 (http://www.zurich.co.uk/newworldofrisk) and will be used to help public sector customers adapt to the new risks they face.
For our business customers, Zurich will feed these views into the work it is doing with the Wall Street Journal and professional bodies gathering thoughts on improving supply chain risk. http://www.supplychainriskinsights.com/
