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Written by Marijn Overvest | Reviewed by Sjoerd Goedhart | Fact Checked by Ruud Emonds | Our editorial policy

Supply Chain Disruptions: How Vulnerable Is Your Organization?

Key take-aways

  • Supply chain disruptions are unexpected events or obstacles that interrupt the usual flow of goods, services, or information within a supply chain.
  • Varied disruptions include natural disasters, supplier issues, transportation delays, demand fluctuations, cyberattacks, and geopolitical factors.
  • Preparations for supply chain disruptions include risk assessment, diversification of suppliers, supply chain visibility, collaboration, inventory management, and data security.

In recent years, business leaders and the global economy have had to weather one supply chain disruption after another.

The reality is that supply chain disruptions are unpredictable but always constant. We never really know when it will hit, but it is omnipresent.  

Thus, ensuring visibility, resilience, and agility in an organization cannot be overstated. These key factors help organizations build responsive solutions for supply chain disruptions.

Additionally, modern organizations have the privilege of technology solutions that streamline processes. 

If you want to learn more about supply chain disruptions and how your organization can survive them, keep reading to find out how to identify disruptions and mitigate their impact on your organization.

What Are Supply Chain Disruptions?

Supply chain disruptions are unexpected events or obstacles that interrupt the usual flow of goods, services, or information within a supply chain.

These disruptions can occur anywhere from suppliers, manufacturers, distributors, and even customers.

They come in various forms and sizes, ranging from natural disasters and supplier bankruptcies to geopolitical conflicts and transportation delays.

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What are the Common Supply Chain Disruptions in the Industry?

Here are some common supply chain disruptions in the industry that you should watch out for.

1. Natural Disasters

Earthquakes, hurricanes, floods, and wildfires can affect deliveries, which results in delayed or canceled productions, ultimately causing adverse effects on supply and demand.

A recent example of this is the 2011 Japan earthquake and tsunami. It has affected the whole global economy as automotive manufacturers in Japan, such as Toyota and Nissan, temporarily shut down.

2. Supplier Issues

Supplier bankruptcies, quality problems, or sudden changes in their operations can disrupt the supply chain. This was the case that happened in 2019, with Forever 21’s bankruptcy.

The prominent fashion retailer sent shockwaves through its supply chain. Suppliers faced financial losses, and alternative arrangements had to be made swiftly.

3. Transportation Delays

Issues like port congestion, strikes, or fuel shortages can lead to delays in the transportation of goods.

The 2015 West Coast port labor strike in the United States is an example of this disruption. It resulted in significant delays in the movement of goods.

It led to congestion at ports, backed-up shipments, and disruptions across various industries, affecting timely deliveries.

4. Demand Fluctuations

Unexpected shifts in customer demand, like the ones seen during the COVID-19 pandemic, can strain supply chains.

The COVID-19 pandemic caused sudden and unprecedented demand fluctuations. Industries like personal protective equipment (PPE) and healthcare experienced surges in demand.

Whereas hospitality and travel saw a sharp decline. It’s challenging to match supply with rapidly changing demand patterns like this.

5. Cyberattacks

Cybersecurity breaches can compromise data, disrupt operations, and lead to financial losses. We have seen this in the NotPetya cyberattack of 2017.

It initially targeted Ukraine but quickly spread globally, disrupting operations at several major companies.

Maersk, a global shipping giant, had its systems compromised, resulting in significant delays in cargo movement and financial losses.

6. Geopolitical Factors

Aside from cyberattacks, geopolitical attacks like tariffs, trade disputes, and political instability in key regions can affect the movement of goods across borders.

Take, for example, the trade tensions between the United States and China in recent years. It led to tariff escalations and trade restrictions.

This geopolitical dispute disrupted supply chains, forcing companies to reassess their manufacturing and sourcing strategies.

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How to Prepare and Mitigate Risks from Supply Chain Disruptions

To bolster your organization’s resilience against supply chain disruptions, consider these steps:

1. Risk Assessment

Start by conducting a thorough risk assessment of your supply chain. This involves identifying and assessing vulnerabilities based on the likelihood of occurrence and their potential impact on your business.

By understanding these risks, you can prioritize them and develop proactive measures to ensure your supply chain continues to operate smoothly, even in the face of unexpected disruptions.

If your business relies heavily on a single overseas supplier for an important component and the supplier is located in an earthquake-prone region, a risk assessment would highlight the potential impact of earthquakes on your supply chain. This should prompt you to develop contingency plans.

2. Diversify Suppliers

Reduce your dependency on a single supplier by diversifying your supplier base. If possible work with multiple suppliers for important materials.

This way you’re spreading the risk. Having multiple suppliers for essential components ensures that production isn’t halted if one supplier faces issues.

If you work with a supplier based in a location prone to earthquakes or other natural disasters, it would be wise to collaborate with additional suppliers capable of providing the same supply of material.

This ensures that if any issues arise with the primary supplier, you can still obtain the materials from alternative sources.

3. Supply Chain Visibility

Invest in technology, such as advanced supply chain analytics and automation. These tools provide real-time visibility into your supply chain, enabling you to detect disruptions early.

With supply chain visibility tools, you can track the movement of goods and monitor various supply chain metrics. If a shipment encounters delays or disruptions, you can take real-time corrective actions to minimize the impact on your operations.

4. Collaboration

Foster open communication and collaboration with your suppliers and partners. Work together to develop contingency plans that outline how to respond to potential disruptions.

Collaborating with key suppliers allows you and your suppliers to plan for scenarios like transportation strikes together. By sharing information and resources, you can develop strategies to minimize downtime.

5. Inventory Management

Maintain strategic stockpiles of critical materials or components. These stockpiles act as a buffer against supply shortages during disruptions. 

If you’re a manufacturer of medical devices, having a reserve of essential components can ensure continued production during unexpected supply interruptions.

6. Data Security

Strengthen your cybersecurity measures to protect sensitive supply chain data. Cyberattacks can disrupt operations and compromise vital information.

Implementing robust cybersecurity measures can safeguard your supply chain data from breaches that could disrupt communication and logistics.

Conclusion

Supply chain disruptions are a reality that organizations must face. By understanding the types of disruptions that can occur and taking proactive measures to prepare and mitigate risks, your organization can enhance its resilience and maintain the continuity of operations even in challenging times. 

Frequentlyasked questions

How can I assess the vulnerability of my organization's supply chain?

Try to review your supply chain for weaknesses, like relying on one supplier or facing cybersecurity threats. Check if suppliers are financially stable. Plan how to deal with these risks and update your plan regularly.

Is there a one-size-fits-all solution for mitigating supply chain disruptions?

No. Risk mitigation should be tailored to an organization’s specific needs and situation.

What role does technology play in managing supply chain disruptions?

Technology offers real-time insights into supply chain operations, enabling businesses to identify disturbances early and help professionals take informed risk-reduction measures. Examples of this technology include data analytics and supply chain visibility tools.

About the author

My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

Marijn Overvest Procurement Tactics