Supply Chain Problems Equals Lower Share Value

A recent report published by PriceWaterhouseCoopers (PwC) suggests that problems with a company’s supply chain can directly drive the share price lower. The report analyses 600 companies and PwC found that on average the share price of a company drops 9% within one day after a report of a supply chain disruption. They also found that one year after the announcement, two thirds of companies are still trailing in share price performance compared with similar companies who did not had supply chain problems.

Supply chains have become highly dispersed and in some cases very fragile. Many firms source parts and services globally and issues can with foreign vendors can delay production or worse, such as last year’s contaminated milk incident or the lead paint in children’s toys. The PwC report highlights that companies are aware that their extended global supply chains are vulnerable to risks, especially product safety, which was rated by companies as their primary concern.