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Profound findings of note:
Volatility increases of 5.40% for production disruptions, 10.48% for excess inventory, and 10.23% for product introduction delays.
Addressing supply chain risk can have a profound impact on operational metrics, working capital, and strategic (shareholder) value.
This paper documents the impact of supply chain disruptions on operating performance.
Based on a sample of 885 disruptions announced by publicly traded firms, we estimate that in the year leading to the announcement, firms on average experience a 107% drop in their operating income, 114% drop in return on sales and 93% drop in return on assets. During this time period the level of return on sales drops by 13.78% and return on assets by 2.32%. Firms that experience disruptions face on average 6.92% lower sales growth, 10.66% growth in cost, and 13.88% growth in inventories.
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