It is normal for companies to sometimes face supply challenges that can be considered extreme due to the fact that they can disrupt and even completely shut down the capabilities of their operation. Things like natural disasters and socioeconomically caused unrest can be reasons why the supply chain is interrupted. One may think that in this day and age, these types of happenings should be fewer and supply chain interruptions are a thing of the past, but in reality, it is quite the opposite. As the supply chain gets more complicated, there are more moving parts to worry about and that means that there are more opportunities for things to go wrong. As the supply chain grows, becomes more complex and far-reaching, then so do the possible risks that it would face become more difficult to avoid and require a more vigilant eye to make sure things run smoothly.
Today in David Kiger’s Blog, we want to talk about some of the main factors one must face ensuring the supply chain is prepared to deal with risks and to ensure that when some of these factors occur, the organization is prepared to deal with the consequences and to return operations back to normal as soon as possible. It is a known fact, that the supply chain is the area of the company that is most affected by risk and that is probably due to its systemic impact in the organizational financial performance and the global nature of these part of logistics itself. When supply chains are global, companies face even greater risks such as longer lead times, global customs causing supply disruptions, political and economic instability and just regulations overall.
This is probably one of the most obvious factors that simply cannot be controlled but that can highly affect the supply chain. Lately, on our blog, we have talked about the recent hurricanes and what they have done to the supply chain, not just in the immediate aftermath of their destruction, but also the lasting effects that ripple through it even months after. Natural disasters can completely destroy entire sectors of the supply chain when earthquakes, floods, fires, and storms hit production or distribution centers. The biggest challenge of weather-related disruptions is the fact that they can hardly be predicted and definitely cannot be avoided, so what is a company to do? Not much really, other than put contingencies in place to react for when disaster strikes and being ready to get things back to normal as soon as possible.
It is common for today’s supply chain to work with products and services that are researched, marketed, shipped and sold across different geographies, each of them presenting its own set of challenges when it comes to their socio-political and cultural components. Understanding these variables is of great value and careful consideration pair along with acquiring knowledge about independent local conditions is absolutely necessary in order to make the right risks assessments when operation in different regions.
The financial crisis is a factor that demonstrates time and again, that the supply chain is even more closely tied to the economy than we originally believed. If the economy is in trouble in a particular area where a link of our supply chain operates, we can expect our elements to be deeply affected by the situation. The trouble with that is, that is a supplier, or a manufacturer goes bankrupt or suffers financially, then the entire supply chain can be affected even it’s not directly related to the area where the economic upheaval was originated.
Compliance is very important for the supply chain, especially nowadays that laws and regulations are becoming more complex and demanding as logistics operations are more global than ever. What happens to companies is that they have to deal with the pressure of navigating through all of that red tape and realizing that sometimes the costs that are incurred by making sure that things are compliant outweigh benefits. Something else to keep in mind is that people are more conscious than ever before about the environment, something that has made governments pressure companies and create even more regulations that sometimes makes it unsustainable for organizations to continue running a business as normal. It is understandable that it may be frustrating, but it is a fact of evolution of the market and so companies must find ways to adapt and be up to speed with the requirements and legal regulations imposed so they can operate normally and offer their customers their products and services. The same way customers evolve, so do companies have a very huge responsibility with the public and the theater in which they operate. The environment is important and no company that thinks otherwise will ever be supported by the people of today, a generation that is more concern about the effect we have upon our planet and who are constantly trying to find ways to lighten that burden.
* Featured Image courtesy of Pixabay at Pexels.com