What Do You Do With a Broken Supply Chain?

Fix it, of course. Though that’s never as easy as it sounds.

Supply chain disruptions are not a matter of if, but when. High-impact events that were once considered very low probability — “black swan” events — sometimes seem to be almost regular occurrences. While not all such events reach the magnitude of the 2011 Tōhoku earthquake and tsunami, over 200 natural disasters occur annually across our globe. With our globally interconnected business environment, problems that used to remain isolated now have far-reaching impacts.

If we accept that disruptions will happen, the question then becomes, how disruptive must they be? Organizations can mitigate the effects of supply chain disruptions by applying the principles of supply chain Risk Management and Visibility.

According to the Supply Chain Resilience 2013 survey by the Business Continuity Institute, 75% of respondents experienced at least one incident that caused significant disruption, with 42% of disruptions originating below the Tier 1 supplier. Unfortunately, however, over 50% of organizations have no visibility beyond Tier 1 (according to the 2013 KPMG study, Global Manufacturing Outlook). Is it any wonder why, in the same survey, nearly 20 percent of organizations said it takes 3 weeks or longer to assess the impact of unplanned disruptions?

Managing — let alone trying to minimize the risk in — a supply chain without visibility into all of the supplier relationships and processes is like trying to navigate an obstacle course blindfolded. You might make it through, but not quickly, and probably not without injury. The lack of visibility actually increases the risk that you will get injured, and a lack of visibility into a supply chain increases the risk that snags will become snarls and disruptions will become disasters. To effectively deal with supply chain risks in our global environment, an organization must look deep into the supply chain and work as hard as possible to predict potential problems and then, in true risk management style, develop ways to prevent the problems — if possible — or if they can’t be prevented develop plans to deal with them before they happen. An effective Risk Management program will anticipate and react to triggers as deep in the supply chain as possible.

The world is not going to get any less chaotic in the near future. Are you prepared for the disruptions that are almost sure to come your way?

Image: “Japan 日本 March 2011 — Tōhoku earthquake and tsunami (東北地方太平洋沖地震) 118,” by Douglass Sprott, from Flickr under Creative Commons.