These everyday disruptions could put your supply chain at risk
Tsunamis. Earthquakes. Political upheaval. When you’re overseeing operations for a global business with customers thousands of miles away, you may stay up nights thinking about the major unpredictable disasters events that could put your supply chain at risk.
But the truth is, an everyday event like a power outage is far more likely to cause disruption of your global supply chain — and such disruptions happen more often than you think. According to study by PwC and the Business Continuity Institute, 75% of companies experience at least one major supply chain disruption a year. If you don’t have contingency plans in place for even seemingly mundane events, the business consequences could be enormous.
Here are some minor events that could put a global supply chain at major risk.
Today, there is more reliance than ever on digital systems to facilitate real-time, accurate data that’s a critical component to inventory management. As supply chains become more complex and borderless, technologies that include GPS tracking and wireless sensor networks help deliver information that’s essential to important business decision-making.
When a power outage disrupts access to your digital information supply chain, chaos can ensue — especially if there isn’t a backup system in place. Companies, and their supply chain partners, can use cloud-based technology to ensure data is protected. For example, if your supply chain depends on digital data, it’s critical that all connected parties sync their cloud backups. Otherwise, there could be a mismatch in data that could cripple an organization, and ultimately a cause loss in time, money, and customers during times of disruption.
Additionally, businesses that rely heavily on virtual infrastructures should seriously consider spreading the storage and transmission of their data to multiple hubs rather than solely relying on a single, distant cloud server.
When you rely on one data center that’s far away, in closer proximity to another business than your own, the speed and reliability of that data can be impacted if there’s a problem with the bandwidth or connection.
Think about it this way: Your smart devices don’t have enough built-in storage to maintain all of your data every time you need to transmit data wirelessly; it is routed to a large-scale cloud center. The problem with this is that if an outage causes the cloud to go down, your business’ virtual infrastructure goes down with it. But with a redundancy option called “fog computing” or “edge computing,” a power outage isn’t going to affect you as much because you’ve stored your data in multiple regional data centers close to you (i.e. your phones and tablets can still access data if there’s an outage in the cloud). With fog computing, data is routed and accessed more speedily and reliably since the bulk of your data is processed in a centralized server closer to the data source (each phone or smart device has its own network to process information). No longer do you have to worry about numerous other devices trying to access the same cloud center, slowing down your connection, or an outage bringing your entire system down.
The beginning of 2014 was difficult for several supply chains around the US and North America overall because of an especially brutal winter. It severely delayed transportation, and many companies discovered they didn’t have adequate contingency plans.
A new study predicts that climate characteristics like the Polar Vortex will make winters longer and colder in March, and even April. It is also predicted to cause unpredictable and potentially disruptive weather patterns. Kevin McCormack, assistant professor at Northwood University, says supply chain problems, such as those caused by bad weather, are predictors of future business issues.
“A supplier that has constant weather issues causing delays … can either plan for these through safety stock or change the route, or supplier,” he says. “[Weather issues] will not go away by themselves.” Having flexibility and diversified transportation options from air, ocean, and ground modes could be a company’s saving grace during uncertain times.
Could your supply chain survive weeks or months of absentee employees? This might not be something businesses deem as a huge threat, but the last thing you want is a supply chain paralyzed by widespread illness.
A harsh flu season or widespread food poisoning could keep large numbers of employees away from the office for days. A more serious illness could take a critical employee out of work for months. For companies with multiple complex inventory systems, cross training workers is crucial to protect the efficiency of the supply chain — and the bottom line.
What you can do
Companies can make their supply chain more resilient from everyday disruptions by having a contingency “playbook” or plan in place that lists every knowable risk. Here are four main aspects of that plan.
1. Identify the risk. At the very least, suggests J. Paul Dittman, executive director of the Global Supply Chain Institute at the University of Tennessee, call your department leaders into a conference room to “brainstorm it, list it, and decide what could possibly impact you with your global supply chain.”
One way to help identify risks, advises McCormack, is to ask your subcontractors detailed questions about their process. “Understand what’s coming into their supply chain,” he says, adding that most businesses often don’t even ask that question. “They think, ‘Well, that’s a small subcontractor, and they’re only 5% of our business. But that 5% can nail you to the wall, reputation-wise. Just ask the questions.”
2. Plan your risk response. You don’t know when these everyday risks will happen, but you do know that they will happen, so it’s important to be ready. Dittman suggests thinking about the most likely issues your business will encounter, and ensure you have a plan in place. These should include a way of determining the threat level and response, as well as a unified way of processing and sharing that information with all partners.
3. Mitigate the risk. You may focus on the effects only once an issue arises, but there are things you can be doing now to mitigate risks, says Dittman. When putting together your contingency plan, design strategies with countermeasures that lessen costly disruptions, like adding more labor if you have complex products and processes. Companies that use improved visibility can detect potential disruptions in the supply chain before they happen and find ways to avoid those potentially devastating incidents. For example, in the case of extreme weather, find alternate routes ahead of time and create protocols that keep transport operatives able to change routes quickly, should a short-term recovery plan be needed.
4. Expand your risk response team. Businesses that don’t have the expertise in house to deal with these ongoing risks may want to collaborate with a third-party logistics provider (3PL), such as UPS, who can set up contingency plans to keep your supply chain running smoothly. For example, an experienced 3PL will be able to offer redundancy and flexibility through the use of multi-client facilities from which they can store a portion of your inventory and dispatch your products when you aren’t able to do so. The vast networks of 3PLs can also help provide resilience disruptions go from risk to reality. When a major supply disruption of mere hours can potentially take years to recover from economically, it’s worth the time spent to make sure you have the right plans in place — and the right 3PL in place — to handle those risks and keep business running smoothly.