When customers are satisfied with purchasing your products, both in-store and online, you can assume you are doing it right and stack profits. This brings you continuous business viability and relevance. But a minor disruption in operations makes us aware of the importance of the supply chain.
This brings to our awareness the impact of the supply chain disruptions in our production and distribution processes. An example is the coronavirus outbreak causing the COVID-19 pandemic that caused disruptions affecting the global supply chains. This causes an unpleasant experience for both the manufacturers and the consumers.
This article examines the definition of supply chain disruption, types of supply chain disruptions, measures to prevent disruptions, and ways of creating effective plans to manage the supply chain crises.
Table of Contents
A supply chain is a system that involves people, organizations, activities, and processes that ensure that a product gets to the final consumer or customer after converting the raw materials to a finished and usable product.
As defined by the dictionary, disruption is an interruption that occurs in an event or process. It may be due to either external factors or internal factors. Either way, it prevents the activity or function from continuing.
Supply chain disruption is the breakdown that occurs either in the production or the distribution phase. This may be due to external factors such as fire outbreaks and natural disasters. Likewise, it may be caused by internal factors like quality concerns. Both factors can cause a reduction in productivity, increased production and distribution costs, and make customers more dissatisfied.
However, consumers have little or no knowledge about the complex activities that get them the final products. Their primary concern revolves around receiving the products and having access to quality products.
There are different effects some supply chain disruptions can have since two various factors are acting as supply chain disruptions; the external and the internal factors. However, these disruptions have a significant impact on the company’s success and failure.
Below are five types of events that can lead to supply chain disruptions.
2. Transportation and logistics problems
3. Natural disasters
4. Pricing problems
5. Quality control problems
One of the factors that can majorly affect global supply chains is pandemic. Pandemics are disease outbreaks that occur throughout a region or the world. An example is the impact of coronavirus outbreak on the global supply chain1. The disease was specific to China, spread fast across the globe. This kind of public health crisis has an enormous impact on the supply chains.
Due to coronavirus, there were travel restrictions and lockdowns around the world. This resulted in a reduced number of company operations at every level because of its effect on people, regions, and companies worldwide.
International trade flexibility makes it more possible for organizations to break into other countries and gain a valuable number of consumers for their products. This increases their business opportunities. Meanwhile, this has resulted in increased international transportation and logistics systems in their supply chains2. This may, in turn, cause delays through the supply chain.
This transportation supply chain disruption may occur due to other systems’ problems. An example is a natural disaster like an earthquake or landslide. This may cause blockage of the transportation routes resulting from the affected areas. This will cause a change in systems and bring about a delay in the supply chain.
Another example is the coronavirus pandemic. Countries initiate lockdowns to prevent the widespread of the disease. This makes it difficult for goods to get delivered to the consumer. Likewise, it moves materials along the supply chain to become slower.
Natural disasters, also known as Force Majeure events like earthquakes, tsunamis, landslides, volcanic eruptions, and wildfires contribute to supply chain disruptions. They do not only affect specific businesses. They affect both local and international economies through affected regions.
An example was the 2011 Japan earthquake3. This resulted in a loss of $210 billion for Japan. This affected the global supply chains. Companies like Toyota, Nissan, and GM shut down their businesses in Japan and the US due to the unavailability of needed materials. Meanwhile, this further affects businesses that depend on these two countries’ delivery.
Another example was the Hurricane Sandy of New York in 2012. It affected every point of the fuel supply chain. There were power outages that resulted in fueling scarcity. No one was prepared to expose the fragile nature of New York’s fuel supply chain4.
The fourth type of supply chain disruption is the pricing system. This is affected majorly by economic policies around the world. It is known that some of your suppliers may not reside in your locality. As a result, their local and international economic policies directly impact their pricing systems. You can choose to change your suppliers due to this. That’s because you want to have enough profits recorded from your inventories.
Another way price fluctuation can disrupt the supply chain is the impact of emerging markets. Emerging markets can affect political stability, which in turn causes inflation or can lead to supply chain shortages. Supply chain leaders further get threatened as a result of this.
No company wants to send low-quality final products to their consumers. However, this may occur when there is low-quality management in the supply chain. It may occur at any level of the supply chain. This, in turn, causes delays in product delivery due to defective products. Therefore, every company’s outcry—at different levels of the supply chain—is to produce high-quality products to increase customer satisfaction5.
One more factor that can be included as a type of supply chain disruption is the cyber-attacks. This can happen to businesses, any time. This occurs mainly for companies that don’t have adequate cybersecurity to protect their data. Your supply chain can get you exposed when it relaxes its security measures. You must know where you may be vulnerable through your supply chain. This will increase your preparation and make you communicate better with every link along your chain.
You don’t go to war unprepared. The best form of offense is a good defense. While this holds for everything around you, it is valid for the supply chain. There is no alert system for supply chain disruptions. That is why you should be prepared before eventuality occurs.
Below are a few things to incorporate as strategies while maintaining supply chain disruptions.
1. Build an inventory
2. Include backup suppliers
3. Create an emergency plan
4. Enhance supply chain’s visibility
5. Conduct vulnerability audit
There are essential materials that ensure the viability of business every time. These may include finished products, components, or raw materials. Whatever is vital to ensuring that your supply chain stays active, you should have enough stock of it. When you have a store filled with essential materials, your business will remain operational during disruption.
It is okay to have local suppliers getting your materials because it is cost-effective and excellent. But it affects your business massively when your suppliers suffer from supply chain disruptions. It goes on to delay your production and distribution. This, in turn, affects your profits.
The best way to go about this is to build a relationship with other suppliers, such as Alibaba.com, to provide you with the same materials. This can be from the same locality as you or different geographical locations. You went ahead to build a quality relationship with them. You requested that they make your business active and viable during disruptions.
This helps you reduce the impacts of supply chain disruptions and eliminate delays from the systems.
Having an emergency plan should include a contingency plan. While both may feel the same, they have a different context in this regard. The emergency plan may consist of emergency funds and other eventuality plans. But a contingency plan is a detailed prediction of possible occurrences based on environmental analyses.
A contingency plan foresees possible events and has simulated processes to manage such events. This makes it possible for supply chain leaders to adapt quickly to disruptions. They have been trained to expect similar events while in business. As a result, companies develop promising and conservative strategies to manage any disruptions happening at different supply chain levels.
The key to improving your supply chain’s visibility is having access to the right set of data. This gives you an insight into the kind of products consumers are demanding, the areas of great demand, the changes occurring in such sites, and the factors contributing to that. This enables supply chain leaders to understand their consumers better and develop efficient ways to serve them better.
The next substantial question is, how are you using the available data? Your analytics is an AI tool that helps with this. With good decision-making skills, leadership will be able to deduce the importance of the data and how well it can serve the supply chain.
One of the best ways to prepare for disruptions is to analyze your supply chain, list out the weak spots and focus on creating or finding alternatives to those weak links. You must assess various conditions that can affect the routes of your supply chain. Such conditions can be environmental, political, or social conditions.
It is okay to plan for the long term, but what do you do when disruptions hit your supply chain in real-time. This requires short-term strategies to manage ongoing crises. This section explains quick and practical strategies that can be used to manage supply chain disruptions.
1. Establish available inventory
2. Customers’ communication
3. Revisit your emergency plan
4. Supply chain vulnerability audit
5. Manage customer demand
6. Recognize logistics flexibilities
7. Cash flow evaluation
It is good to keep accounts of the available inventory at a particular time. It is best when such an account is available during disruption times. This enables you to take a physical count and conduct an audit. They may be finished products, some components, or raw materials that you have available. They are essential to know to keep production active.
One factor that guarantees business success is customer satisfaction through effective communication. You appear accountable and genuine to your customers when you communicate with them at every critical time. This makes them feel like a part of the company. Meanwhile, this helps your business thrive better during disruptions.
You should communicate the delays and the reasons for the delays. This makes your customers more understanding. However, communication should not stop with your customers. It would be best if you consistently communicate with your team, partners, logistics department, and every point of the supply chain. This makes everyone be on the same page.
The purpose of your contingency plan is to thrive during eventualities. These simulated strategies help you to create alternative means to affect points of the supply chain. You do this effortlessly because your plan has placed every possible occurrence and affected links into consideration.
There is no way you can avoid mistakes in operations. It will happen at one point or another. But the best is to know where it is happening. You can’t understand this except you conduct a vulnerability audit to understand where things are going wrong with your supply chain. This will help you evaluate your solutions’ sustainability and their efficiency.
Disruptions are a result of certain events. These events bring about change in customer’s demands. They can also affect how they are buying things and purchasing them. This gives you a better insight into the kind of products your customers want more. Make endeavors to enhance your products to meet your customers’ demands.
It is crucial to recognize supply chain points where you can accept secondary supply operations methods. This results from effective communication and having a solid relationship with your suppliers. Likewise, appreciate your suppliers’ efforts in making your operations more efficient. This makes it possible to manage disruption moments.
One of the crucial things to consider is the impact of supply chain disruptions on your cash flow. Conduct necessary evaluation to know where likely financial impact may occur. This makes you plan and adjust adequately for the best.
The best way to manage supply chain disruptions is to use the most prominent platform that comprises verified suppliers around the globe. Alibaba.com is the best place to contact supply chain leaders with efficient and effective operation systems. These organizations have undergone a verification process before being listed as suppliers.
With Alibaba.com, you enjoy efficient logistics operations that mitigate the supply chain disruptions. These are supplies that are stocked in their warehouses around China. They offer quality but pocket-friendly materials and spare parts needed by manufacturers for different production processes. Besides that, you can access competitive markets, giving you various markets to purchase from.
Thus, head over to Alibaba.com to seek the best alternative method of building relationships and creating a list of top suppliers from China. These suppliers have access to the global logistics system of Alibaba.com that is easily adaptable to any supply chain disruption.
You can reduce supply chain disruptions’ risk by employing strategies such as building inventory, developing backup suppliers, managing product demand, and opening effective communication lines for your team, suppliers, partners, and customers.
Supply chain disruption can occur due to external and internal factors. External factors include natural disasters, telecommunication problems, and power outages, while internal factors include machine problems or management problems.
There is no specific rule or strategy to achieve this. This is regarded as resilience in the industry. This depends majorly on the organizations and the kinds of plans prepared for disruptions. This also includes the team, suppliers, and the leadership efforts to implement a sustainable disruption management system.
Having a smooth-running supply chain operation grants you business success. It makes it easy for you to think that there won’t be future occurrences that can disrupt your operations. However, it is wise to have long-term strategies to help you thrive during a crisis.
Supply chain disruptions will always occur. Your job is to plan and respond appropriately to the events. This is achievable by evaluating the risks, analyzing the situations, and implementing effective strategies to adapt in such circumstances.