Almost 50% of UK businesses rely on three customers to generate over half of their sales, leaving them vulnerable to upheaval such as the escalating situation in the Middle East, new research found.
Logistics consultancy SCALA said its findings meant many companies lack resilience because they were depending on too few options for generating revenue.
SCALA released the research as heightened risk around shipping and energy flows increased the risk of disruption, rerouting and cost volatility – with knock-on effects for lead times and service performance.
Its report found manufacturing footprints remained concentrated in China, Europe and the UK, with ‘Other South East Asia’ destinations acting as a secondary hub.
Disturbingly, its survey of senior supply chain leaders found 47% generated more than half of their sales from their top three customers.
SCALA’s report said this situation created “critical vulnerability: a major supply chain disruption, whether a production delay, transport disruption, or technological malfunction, could damage service levels, jeopardise relationships, and even lead to the loss of a key customer.
“In such cases, the financial impact can be immediate and severe, with revenue loss compounded by reputational damage and reduced market confidence.”
The report also found that progress on cultivating supply chain resilience was uneven, with just 33% of businesses having already implemented the strategies required to respond adequately to disruption; 52% have commenced and partially implemented them and 14% have yet to begin.
Chris Clowes, executive director at SCALA, said: “Many supply chains were built over time to optimise cost and service in a more stable operating environment.
“But in today’s conditions, heavy dependence on a small number of manufacturing regions or a handful of major customers can leave less headroom when disruption, like that which we face today, hits.
“Our advice to organisations looking to boost their resilience is to identify where the business has too few options, then build practical alternatives into sourcing, transport and the customer portfolio - before the next shock tests the system.”
The report can be read here
