Supply Chain

Supply Breaks Slash Share Values 7%

And company stock prices don’t start to bounce back until three months after a supply-chain disruption has been announced, a study found.
David KatzFebruary 6, 2013

Supply-chain disruptions cut about 7% of a firm’s shareholder value, according to research by Accenture cited in a recent World Economic Forum (WEF) report on supply-chain resiliency.

As a “result of information dissipation, communication and speculations,” shareholder value typically starts slipping about 10 days before the date the disruption is actually announced, according to the report. (See graph, below.)                         

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Based on its analysis of 62 supply-chain disruptions that were publicly announced from 2005 through 2011, Accenture, a management consulting and outsourcing firm, found that the share prices of companies generally don’t start to bounce back until three months after the supply break has been announced.   

The takeaway from the research? “The longer it takes to resolve the disruption, the more negative is its impact. Firms need to develop the ability to quickly resolve the problem and prevent escalation and worsening of the situation,” according to the WEF report. 

The announcements studied were about publicly traded companies that experienced such mishaps as production issues, parts shortages, and supply-chain problems stemming from natural disasters.  Apart from company websites, the announcements appeared in Bloomberg, Businessweek, Forbes, The Wall Street Journal, Supply Chain Digest, Time, and other media sources.

Examples of such announcements included: “Japan Earthquake May Cause Prius Shortage,” “Nissan to Suspend Domestic Lines because of a delay by supplier Hitachi Ltd. in delivering auto-engine components,” and “Vestas Shares Fall 20 Percent Following Production Delay Warning.”