Supply Chain Disruptions – Prevention Is Better Than Cure
Over the years, with the advent of information technology and faster means of transportation, the supply chains have become longer and more complex. With increased length and complexity, the supply chains have become more vulnerable. According to the Supply Chain Resilience 2013 study conducted by the Business Continuity Institute (BCI), approximately 75 per cent of organisations experienced supply chain disruptions in 2012.
As part of supply chain planning using the traditional methods, we rely on knowing the likelihood of occurrence of potential events which may disrupt the supply chain. Therefore, currently our supply chains are responsive to events such as poor supplier performance, errors in forecast, machine breakdown, and so on. Our methods work well, using historical data points for these events, to quantify the frequency and magnitude of such risks. But in case of events which have very high impact, but very low probability, such as the 2011 Fukushima earthquake, tsunamis, hurricanes, wars, etc., it is virtually impossible to have historical data and therefore it is impossible to handle such disruptions using traditional methods.
The increasing risk and rapid propagation of disruptions across the supply chain has put companies in challenging situations. In order to maintain supply chain continuity, it is important for organisations to keep a check on the following:
- Increase visibility of the supply chain – Maintain supplier relationship with not just direct suppliers, but also include second and third tier suppliers
- Identify the potential points of disruptions, both internal and external, and invest in managing such resources in advance
- Carry out disruption studies at the points of high risk, to gauge the time to recover
- Have a Plan B – Have alternate sources of supply available and in case of disruption, try to manage with the available resources
It is often feared that increasing resilience of the supply chain will add to the cost and reduce possible rewards from the supply chain. But building resilience in the supply chain is not just a good practice, but also an important preparedness measure. Prevention is better than cure. Having supply chain resilience helps organisations to bounce back from potential disruptions and also helps in gaining a competitive advantage.
– Neeraj Saini, Senior Supply Chain Consultant, Bristlecone