We live in a complicated world. A world in which everything that happens around us affects us all in one way or another. Supply chains are no exception; over the years, supply chains have become longer and more complex and at the same time, the severity and frequency of supply chain disruptions seem to be increasing.
Supply chain disruptions span from day to day risks, from malfunctioning equipment to high impact threats such as natural disasters. However, equipment, natural disasters and extreme weather conditions are no the only threats to supply chains. Systemic vulnerabilities, such as oil dependency and information fragmentation, political unrest, cyber crime and the ever rising cost of insurance and trade finance also pose serious risks as well.
Millennium Logistics Management holds the value of investing better protection of supply chains as a high priority because they understand that supply chain disruptions have a dramatic impact on a business and their financial performance and know that investing in risk reduction capabilities perform better operationally and financially.
Take a look at the following examples of how two separate companies dealt with supply chain disruptions:
Company 1: A popular technology company has just released an innovative product which is in high demand by the public. Pre-order wait times increased very rapidly from days to weeks to months. What could be the cause of this predicament? The slow rollout is attributed to one of the company’s suppliers, who unfortunately produced a defective component and experienced a shortage of a specific material. How is this popular and successful company able to overcome such disruption? Simple, they employ multiple suppliers!
Company 2: A communication technology company encounters a severe supply chain disruption when a lightning bolt hits a power line at a company manufacturing facility. The bolt triggers a fire, which in turn ruins millions of electronic products. This particular company has a employed a single-source policy, which means there is no other supplier to get the product from. Production has now been disrupted and come to a complete stop thanks to that missing part. The bottom line result for this company is a major loss!
One of the strategies that companies with resilient supply chains adopt to alleviate risk is having several suppliers (or backup suppliers) for the same component. As you can see from the examples above, a reliable supply chain is of the utmost importance.
In a reliable supply chain, a company identifies flexibility as a key step to increase efficiency and a risk management program with flexibility provides companies with strategic value. Flexible supply chains are able to recover from disruptions more quickly than those companies without flexibility, which gives them a competitive advantage in the market place.
Bottom line, supply chains can take steps in order to avoid or at least reduce risk and maintain resilience by being a step ahead, creating a crisis management plan and diversifying vendors and suppliers. It is important to understand potential threats to the supply chain because once you understand their effects, you can act accordingly and diminish them efficiently. If you have any questions about ways to avoid supply chain disruptions or if you need help improving your current supply chain process, contact Millennium Logistics Management!
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