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Every day, businesses are trying to find new ways to stay competitive and meet customer demand as it increases daily. Several organisations look to meet these demands by efficiently managing their supply chain.
The COVID-19 pandemic opened the eyes of consumers to how disruptions could cause shortages, limit supply, and increase prices. Before then, most consumers never knew what supply chains were. The pandemic was also a test of most companies and how they responded and almost 4 years down the line, some organisations haven’t fully gotten up to speed and still feel the effect.
One certain thing is that supply chain disruptions don’t sound like a warning bell. They can occur unexpectedly and from various sources having significant implications for your business and as such, logistics managers must find a way to navigate and ensure the smooth operation of the supply chain process.
The good news is that there are strategies and approaches that logistics managers can employ to mitigate their impact and maintain supply chain flow. We will be looking at these strategies shortly. But Before that, let’s define a supply chain.
Understanding the Concept of Supply Chain Disruption?
Supply chains are dynamic and can vary significantly depending on the industry, product type, geographic location, and market demands. The primary goal of a supply chain is to ensure the timely, cost-effective, and efficient flow of goods or services from point of origin to point of consumption while meeting customer needs and maximising value. Adding the term “disruption” to this changes the meaning.
A supply chain disruption refers to any event or circumstance that interrupts the normal flow of goods, services, or information within the supply chain, leading to delays or deviations from the earlier planned course of operation.
These disruptions can occur at any stage of the supply chain and can be caused by several factors.
Doctors don’t just administer drugs to patients for ailments without first determining the cause of the ailment. To solve a problem, you need to know the cause. So here comes the question, what causes supply chain disruption?
Causes of Supply Chain Disruption
The causes of supply chain disruption stem from 2 risks in particular. Internal risks, which you can control, and external risks, the ones you can’t control.
You might be thinking, how do you have control of one and not the other? We are about to find out.
What are Internal Risks?
Internal risks in supply chain disruption are those threats originating within your organisation or its immediate operational environment. They can include:
Inefficient operations:
If your business operational processes such as production, logistics, or warehousing are poorly handled, it can lead to delays and increased costs. This might be from using outdated technology or a poor workflow design.
Poor Inventory Management:
Problems such as overstocking or understocking and lack of real-time inventory tracking can lead to supply chain disruptions. Having too much in stock ties up capital, while having less can slow down production or delay deliveries.
Supplier Dependence:
Having to rely heavily on a single supplier or a limited number of suppliers increases your vulnerability to disruptions as any issue with these suppliers can directly impact the supply chain.
Equipment Failures:
Breakdowns in critical machinery due to a lack of preventive maintenance can halt production lines and disrupt supply chains. Regular maintenance and upgrades are important to reduce this risk.
Quality Control Problems:
If the quality of production doesn’t meet standards, it can result in bad products, leading to returns, recalls, and production delays. Always maintain high-quality standards to avoid such disruptions.
Inadequate Risk Management:
Failure to identify, assess, and mitigate risks within the supply chain can leave you unprepared for disruptions. You need to implement a good risk management strategy.
Policy and Compliance Failures:
Failure to comply with internal policies or external regulations can result in legal penalties, stopping your operations and damaging your reputation. Ensure you strictly adhere to all relevant policies and regulations.
These are common internal risks that could cause a supply chain disruption and are under your control. Now, what about the external risk? The ones you might not be able to control?
What are External Risks?
As we just mentioned, external risks in supply chain disruption are threats that originate outside the organisation and are often beyond direct control. Here are some common external risks along with explanations:
Natural Disasters:
When unforeseen events like earthquakes, hurricanes, floods, and wildfires occur, they can disrupt transportation routes, damage infrastructure, and bring production to a halt at supplier locations. These disruptions can lead to delays and increased costs.
Political Instability and Geopolitical Tensions:
Political unrest, government changes, trade wars, and geopolitical conflicts can impact cross-border trade, leading to delays, increased tariffs, and even a complete stop of trade routes, which disrupts your supply chain.
Global Health Crisis:
Pandemics and health emergencies, just like COVID-19 can severely disrupt global supply chains by affecting labour availability, transportation, and consumer demand. Recall the pandemic in 2020.
Market Demand Fluctuations:
There can be a sudden change in consumer demand. This can be driven by trends, seasonality, or economic factors, and can lead to you overproducing or underproducing, creating supply chain imbalances.
Raw Material Shortages:
If essential raw materials get scarce due to environmental factors, geopolitical issues, or increased global demand as the case might be, it could disrupt production schedules and increase costs as well.
These are some of the causes of supply chain disruption and their effects can be devastating to your business hence, there should be measures put in place to manage and reduce the effect they might have.
We will be treating those measures in the next section.
How to Manage Supply Chain Disruption
To effectively manage supply chain disruptions, you have to take measures that not only manage internal risks but external risks as well. Yes, as much as most external risks can be totally out of control, you can always put measures in place to either avoid or cushion the effect. Let’s have a look
Always carry out a Risk Assessment
A risk assessment helps you identify potential sources of disruption and assess their impact on your supply chain operations. Develop contingency plans like backup suppliers, alternative transportation routes, and emergency communication protocols in case a disruption occurs.
Diversify
This cannot be said enough. Always diversify your sources of supply, distribution channels, and transportation routes to reduce the dependency on single sources. This is not always easy, especially with suppliers as you run the risk of damaging supplier relationships. It is however necessary.
Have a Backup Inventory
Always have a buffer or safety stock as it is always called. This is a reserve of products your team can fall back on in case of a supply chain disruption like a high increase in demand. This might take up more space and increase costs, but it lets you meet demand without raising or cutting prices immediately.
Collaborate and Communicate
Communication with suppliers can reduce disruptions. Encourage collaboration and communication among your supply chain partners to share information, and resolve issues that might arise collectively.
Aside from the suppliers, having open and honest communications with your customers about any supply chain disruption that may impact their ability to receive products or services at expected times helps to manage expectations and build trust.
Stay informed
Always monitor geopolitical events and trade policies that could affect your supply chain. Being proactive and adapting to changes can help you anticipate potential disruptions more effectively.
Automate with Technology
Time and over again, technology has proven to be a good tool in mitigating supply chain disruptions. One such brilliant technology tool you can deploy is Instanta as it offers predictive analytics and real-time tracking systems that can provide you with the visibility and insights needed to monitor and manage your supply chains proactively.
With Instanta, you can identify disruptions early, respond quickly, and optimise your logistics operations for full efficiency.
Keep an eye on your suppliers/vendors
An unreliable vendor or supplier has no place in your organisation. He is a disruption waiting to happen if proper care isn’t taken. By closely monitoring vendors, you can spot issues if any, give them feedback where necessary, and also determine if they should stay or leave, depending on your assessment.
You do not have to do this manually either as Instanta offers you effective vendor management to ensure you have only reliable and efficient vendors on your team.
Managing supply chain disruptions in logistics requires a strategic approach. By implementing these strategies mentioned, you can effectively navigate disruptions in the supply chain. With effective supply chain and logistics management, you can minimise the impact of disruptions, maintain business continuity, and deliver value to your customers.
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