UAE Businesses inefficient at managing Value Chains

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Businesses across UAE are struggling to protect their value chains, Oracle survey finds
Oracle executives during Oracle Value Chain Summit. Businesses across UAE are struggling to protect their value chains, Oracle survey finds. Photo-Oracle

According to a recently released Oracle Survey, EMEA businesses are struggling to protect their value chains. The EMEA region includes Europe (UK, France, Germany, Russia, the Nordics, the Netherlands, Poland, Turkey) and the Middle East and Africa. The UAE was one of the countries included in the survey.

The report titled Managing the Value Chain in Turbulent Times is the outcome of research that was carried out on behalf of Oracle by Dynamic Markets and comprised quantitative survey of senior decision makers in large organizations across 9 regions in EMEA. A total of 677 decision-makers were surveyed from companies with more than 250 employees.

Key findings of the research include:

Disruption has become endemic: Over the past 12 months, 63 percent of businesses across EMEA have reported that they have seen disruption to their value chain due to unpredictable events beyond their control. In the UAE, this figure was higher than the EMEA average, at 74 percent. Such disruptions appear as economic (24 percent), adverse weather (19 percent) and bankruptcy of suppliers (16 percent).

Huge stake at play: Among those businesses that have experienced disruption in the last 12 months, it has taken 63 days on average to get back to normal operations. The cost to organizations has amounted to an average AED 2,479,849 per incident and includes costs associated with lost sales, lost customers, product recall and the work involved in having to rebuild the value chain. In the UAE, the cost was higher than the regional average at AED12,412,247.20 per incident. Compared to the UK, Russia, France, Germany and Turkey, the UAE incurred the most significant cost per incident.

Inadequacies in risk assessment: Despite the disruption being caused to the value chain, 75 percent of organizations admitted that they have not performed a risk assessment on all elements of the chain, leaving them exposed to financial loss. In fact, the study found that 58 percent of businesses which have not performed a comprehensive risk assessment have been affected by disruption, highlighting the impact of the lack of preparation.

Compliance presents a challenge: Compliance is also of great importance to large businesses within EMEA, with 79 percent having to comply with at least one type of legislation and trade regulation affecting their value chain. The research shows that a significant proportion of companies are struggling to comply with these regulations, with 30 percent having failed to comply with at least one, which they are meant to adhere to during the last 12 months. Failure to comply with legislation can lead to financial penalties or, in extreme cases, punitive legal measures.

Businesses struggle with communication and collaboration: Senior decision-makers (82 percent) stated that departments or groups in their organization are generally bad at keeping them informed. In addition, 85 percent of senior decision makers said that various departments or groups of people within their organization do not provide timely data and information relating to products and services. This lack of communication presents a significant challenge when it comes to understanding and managing the value chain.

Technology a barrier to effective communication/collaboration: The study further revealed that a poor communications infrastructure may be to blame for many of these communications issues. Individuals within these surveyed businesses believe that internal communication and collaboration suffers due to data and/or technology problems. In addition, 21 percent think they have incompatible technology and just over 27 percent believe their organization has inadequate IT systems in place. A further 56 percent stated that data and/or technology problems hinder external collaboration and communication.

Dominic Regan; “It is clear from the study that many large businesses across EMEA have yet to get to grips with their value chain. The survey paints a picture whereby a lack of communication and collaboration, when combined with poor risk assessments and inadequate compliance measures, is putting businesses at risk of significant operational disruption and financial loss. The good news for businesses is that this state of affairs can certainly be remedied. By ensuring that all supply chain applications can work together, businesses can share information quickly and cost effectively across the entire business in a way that is both resilient and adaptable. The value chain allows businesses to keep their promises to their customers. It is a highly important asset and, as such, should be adequately managed and protected.” — Dominic Regan, Senior Director, Value Chain Execution, Oracle EMEA

Dr. Cherry Taylor; “The research demonstrates very clearly that consumers and businesses of all shapes and sizes are interconnected through their value chains. The fall out of incidents taking place in distant parts of the world can affect to customers both locally and globally. The complexity of these value chains is immense, as are the challenges for companies too. The research shows there is room for improvement in terms of functionality, and that the majority of value chains are not durable in the face of all too common incidences and that value chains are not especially forward looking in terms of opportunity and influence.” — Dr. Cherry Taylor, Managing Director, Dynamic Markets

The survey sought to identify issues in value chain management, including risk, managing information, innovation and sustainability, to facilitate businesses within EMEA and focusing on enhanced risk assessment and communications channels to improve Value Chain Recovery

The research was completed in March 2013.

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