According to data collection by RetailNext, 56% of retailers experienced moderate disruption to the supply chain due to Covid-19 and 64% faced the challenge of adapting their supply chain for ecommerce.
It is not only a pandemic that can cause supply chain disruptions, but they also occurred long before Covid-19 and they will occur after. Therefore, it is essential that every business has a strategy in place to mitigate the risks of supply chain disruption – helping them be prepared.
What is Supply Chain Disruption?
The supply chain is a network of organisations, people and activities that work together to move product from supplier to customer. Supply chains can vary in size and can be spread across the globe.
A supply chain disruption is exactly as it sounds – it is a sudden change or crisis that negatively impacts a supply chain. It can be local or international, natural or man-made. The basis of a good supply chain is that all the integrated parts work smoothly together – but because the chain depends on these different integral parts there are multiple things that can disrupt it.
Common Supply Chain Disruptions
Covid-19 has highlighted just how much a global pandemic can impact the supply chain – but it is not only global pandemics like this one that can disrupt supply chains. Pandemics, epidemics and public health crises across the world can have large impacts on the supply chain because of the sheer number and locations involved in the chain. These types of disruptions can happen anywhere and because of the impact it has on people, communities and global economies it can impact operations throughout the chain of production.
2. Transport Disruption
Due to global expansion, it is incredibly common for supply chains to reach across various international suppliers. The growth across the globe has benefitted businesses and international economies but it has also impacted transport networks internationally and domestically as more and more goods are shipped globally.
Transport issues and delays are commonplace in the supply chain – and these disruptions are therefore one of the ones most commonly planned for. However other disruptions to the supply chain can also impact transportation greatly – whether this be adverse weather, natural disasters or local lockdowns as seen throughout the pandemic. Any disruption to transportation can slow the movement of the supply chain and prevent vital products reaching their destination on time.
3. Quality Control Issues
At any stage in the supply chain if an issue with the product is identified it can directly impact the supply chain and final product supply. Business owners want to be able to supply quality products to their customers, on time. So, it is vital that as part of a good supply chain there is high tier quality control. Creating a good quality control system is essential to ensure products reach customers on time, and in the best condition.
4. Price Changes
It is common for suppliers to change their prices, but it can create disruptions across the chain if a business decides to review suppliers when price fluctuations happen. When suppliers increase their prices, business owners must decide on doing one of three things: changing suppliers, increasing prices themselves or bear the price increase and see a reduction in profits. There are a variety of reasons prices can fluctuate, and it can go hand it hand with other disruptions – when it is harder to access certain products, prices may increase. Similarly, political situations and local economic issues can impact prices across the board.
5. Cyber Attacks
Unfortunately, cyber-attacks can happen to anyone. Around 65,000 attempts to hack SMBs occur every day in the UK and about 4,500 of these are successful. Businesses are big targets for these types of attacks and if they aren’t well protected, they may fall victim to hacking and data breaches. The supply chain can also open businesses up to a higher likelihood of a cyber attack and the more people in the chain, the higher the likelihood is.
If any part of the supply chain is vulnerable to cyber attack or has minimal security, it can provider hackers with the opportunity to access data throughout the chain. It is therefore important to communicate across the supply chain to ensure all preventative steps are being taken and to identify where there may be vulnerabilities.
6. Natural Disasters
Natural disasters such as tsunamis, hurricanes, tornadoes, earthquakes and storms can all have a massive impact on supply chains. Across the globe there are many examples of how natural disasters such as these have affected global supply chains.
In 2018, in the aftermath of Hurricane Florence, supply chains were struck with a backlog of deliveries. In North Carolina, there was significant damage to warehouses and other buildings with road and rail networks disrupted as well. Aside from a single 9 mile stretch of road flooding meant that most of the I-95 shut down. Freight operations did resume, but 4 days after employees returned to work in difficult conditions. The event meant a number of industries were impacted, not only in North Carolina but globally, such as textiles, agriculture, automotive and manufacturing.
How to Mitigate the Risk of Supply Chain Disruption
1. Identify the Risks
You can’t manage any risks without first identifying what they are. Obviously, in nature supply chain disruption can be unpredictable however there are some things you can prepare for. By anticipating disruption, you can be in a better place to manage it. Risks should be identified across the board and done when suppliers are on-boarded for full visibility.
Make sure to map out and assess each aspect of the supply chain – detailing where risks lie with the help of individuals throughout the chain. Once you know the risks you should make note of them and monitor them regularly.
2. Build a Risk Management Framework
Once you have identified potential risks across the board – create a register which can be used to monitor them all. Make sure to include categorisation of the seriousness of each risk – this should be based on a number of things such as: the impact the risk would have on the business, the likelihood of it happening and the ability to response. This is how you can identify the severity of each risk. From here, technology can be implemented to keep an eye on the risks, tracking key aspects of risks and sending alerts. Although technology can be helpful here it is also important to have accountable individuals – people whose job it is to monitor and assess risks, reporting on them regularly.
3. Introduce an Emergency Plan
Even when you think you know all the risks and how to deal with them, you can still be hit with unexpected disruption so it is important to have an emergency plan should something go wrong. When creating an emergency plan it is important to consider everything – from allocating budget for emergencies to building up inventory and moving goods.
4. Identify Back Up Suppliers
Part of your emergency plan and risk assessment should be to identify back up suppliers. If your current supplier experiences disruption, one of the ways you can mitigate this risk is to have a backup. To do this, you need to identify suppliers in different geographical locations – building relationships with them so they will step in if you need them.
5. Diversify Supply Base and Warehouse Networks
As above, having a diverse range of suppliers across different locations will be beneficial for things such as natural disasters, health issues and transport delays. This helps to ensure that amid disruption you will have a back-up. Similarly, distributing your stock across warehousing locations can provide you with added security – ensuring that if there is adverse weather or transport issues you should always be able to get goods from somewhere.
6. Partner with Experts
Outsourcing your fulfilment and logistics to experts means that you always have the added comfort of professional guidance. Your third-party provider should be able to step in and support you should disruptions happen and can advise on things such as distributing stock across locations and identifying concerns.
At Trident we have a global network which deals with sending, storing and selling. With over 30 years’ experience in logistics and freight we can provide support across the supply chain – giving advice on mitigating risks and solutions for ensuring continuity in your business. We can handle the day-to-day so you don’t have to worry about it.