Supply chain disruptions can wreak havoc on the systems that people depend on to keep themselves and their families fed, safe and clothed. A report on supply chain resilience found the shocking statistic that every year, one in three businesses loses $1 million or more to supply chain disruptions. When you factor in the increased supply chain disruptions caused by the coronavirus outbreak, it becomes clear that our logistics systems are often more fragile than we realize.
The professionals who manage supply chains are always searching for ways to manage and solve these problems. However, avoiding supply chain disruptions in the first place is an even better option when possible. To avoid the pitfalls of a dysfunctional supply chain, logistics managers need to understand their supply chains like an electrician understands the wires that run through a waterproof electrical junction box.
What are the common disruptions supply chains face, and how can they be mitigated or avoided completely? We’ll examine seven common supply chain disruptions and how to prepare for them.
1. Price Fluctuations
A sudden dip or spike in supply or demand for one commodity can create imbalances throughout a supply chain. Shop floors can be left without critical raw materials when prices jump, and warehouses can suddenly become stuffed with unsellable inventory when prices dip. We’ve seen this trend play out particularly dramatically during the coronavirus pandemic, with certain items (such as N95 masks) skyrocketing in price while thousands of other commodities experience a substantial slump in demand.
Key Preparations: Predictive analytics and big data are key tools for mitigating this risk. Market analysis tools can help detect patterns in pricing data that may predict spikes. If your data tools suggest a spike may be coming, prepare by purchasing futures contracts or stocking up on the necessary commodities.
2. Transportation Delays
Congestion and delays are nothing new in the logistics industry. Managing high volume on roads, in seaports and in airports has always been part of the process, but COVID-19 represents a deadly new player on the board, with the power to shutter highways, ports and national borders. Today’s logistics professional must be prepared to work around unprecedented levels of transportation disruption.
Key Preparations: It’s all about choosing the right transportation partners. Before you give a third-party logistics partner (or 3PL) your business, make sure they can provide detailed information about their agility plans and capabilities for overcoming disruptions. Ask specifically about how the 3PL has handled coronavirus-related disruptions and about their capabilities for rerouting shipments through different distribution chains.
3. Technological Malfunctions
The wave of new logistics technologies has created many key advances, but it’s also created dependence on these technologies. No matter how durable the diecast aluminum enclosure they’re encased in, it won’t always protect technologies from the inevitable malfunction. That means supply chains can be seriously disrupted by technological malfunctions such as software glitches and server downtime.
Key Preparations: First, have backups of all critical data that constantly update themselves. Second, keep an open line of communication between critical technology partners (such as ERP software vendors) and your IT staff. Third, carefully consider new technology investments in terms of their resilience, technological maturity and level of support offered by the vendor.
4. Quality Mismanagement
Supplier quality issues are among the most dreaded types of supply chain disruptions. That’s because if quality issues aren’t caught in time, they can put a business’s customers and partners at substantial risk. Whether it’s poorly-machined parts or bacterial contamination, quality control issues must be addressed aggressively. And in the era of the coronavirus pandemic, sanitation concerns are more vital than ever.
Key Preparations: Create stringent quality assurance and quality control practices for both upstream and downstream supply chains. Your upstream QA efforts should focus on the quality of components you receive from vendors, while your downstream QA should carefully monitor any quality issues raised by customers. For food and pharmaceutical manufacturers, make sure you’re working with a robust HACCP plan.
5. Natural Disasters
Natural disasters can have some of the most dramatic and problematic effects of any type of supply chain disruption. Floods, earthquakes, wildfires and other disasters can all wreak havoc on previously steady supply chains. Even worse, the logistics chaos often doesn’t end when the disaster does, as local authorities often must spend weeks or even months cleaning up.
Key Preparations: Networking and diversification are the keys to helping your supply chain overcome natural disasters. A flexible and globally integrated network of suppliers allows your business to keep moving even when other parts of the world are at a standstill.
6. Cybercrime
Twenty-first century technology means 21st century threats, and cybercrime is among the most important new dangers on the scene. Logistics companies often manage large volumes of sensitive data (including payment information) that can be attractive targets for cybercriminals. In some cases, cyberattacks can even cripple entire networks.
Key Preparations: Invest in cybersecurity as a cornerstone of your business practices. Monitor trade publications for new cybersecurity threats and engage in periodic consultations with cybersecurity experts. Train employees in cybersecurity best practices so that they don’t accidentally leave themselves exposed.
Political Unrest
Strikes, riots and all kinds of other unrest can have serious destabilizing effects on supply chains. Labor forces can suddenly become restricted, and curfews may restrict the hours during which goods can be moved through ports and warehouses. In extreme cases, it may be unsafe to move goods at all–or strikes may completely paralyze a supply chain.
Key Preparations: Stay informed on the political situation in countries and U.S. states that your supply chain runs through. As with natural disasters, you need a diverse network of suppliers that allows you to temporarily redirect your supply chain away from political hotspots.
Of course, it’s often said that “no plan survives first contact with the enemy,” so every one of these mitigation strategies will require continuous refinement and adjustment as conditions evolve. However, creating a road-ready plan from the beginning will give you an improved starting point for the tough decisions when they arrive.
