Supply Chain Disruptions Explained

by Josh Biggs in Tips on 17th October 2021

As our world slowly returns to normal, things are still far from there in the post-pandemic age. COVID-19 threatened and impacted far more than just our global healthcare system. It also disrupted the supply chain. Shortages of consumer goods ranging from toilet paper to computer chips have caused more than customer frustration. Orders get delayed and prices are increasing to meet the demand. In this article, we will look at many of the ways that the supply chain can be disrupted and discuss how those risks can be best mitigated.

The Introduction of New Technology

Adding new supply chain technology will improve industry efficiency. However, adopting new technology presents many challenges. They range from suppliers that are slow to upgrade, the steep learning curve for employees and staff to adapt to the new technology, and the time-consuming process of IQ OQ PQ (Installation Qualification Operational Qualification Performance Qualification). Automation and robotics will usher many industries into the future. However, adoption by all participants along the supply chain will take time which will present a disruption as well. To prevent hiccups in the adoption of new technology, you must be a leader. It requires setting the pace as an early adopter. It also requires using influence to encourage all others along the supply chain to keep up. By doing this, you can reduce any potential disruptions as others follow the process of upgrading to meet your new standards.

Issues With Transportation

The nightmare that COVID-19 has created on shipping has forced a need to reexamine how we transport goods. Outbreaks of the coronavirus rerouted several shipments to locations far and away from traditional transportation routes and created delays and shortages of storage space. Some products spent longer getting processed. This often resulted in revealing weaknesses existing within the transportation network. The use of performance management tools afforded companies a means to track and monitor the condition of shipments in ways that have not been done before. Being able to locate a package along the supply chain, and identify the environmental conditions that the package has been exposed to, has greatly enhanced the transparency of the shipping industry. Tracking tools also assist in finding bottlenecks in the supply chain so that remedies can be implemented to prevent further disruptions.

Natural Disasters

Unforeseen natural disasters like a fire or extreme weather events have a devastating impact on the supply chain. This is particularly true if a company’s supply chain has a small geographic footprint. An example of this is when freezing temperatures recently gripped Texas, which disrupted the outdoor furniture industry. The problem came from foam-producing plants in the state. These plants had to shut down because the freezing weather impacted the power grid. While such a disaster is rare, it does indicate the need for companies dependant on supply chain partners to develop relationships through diversifying suppliers and other manufacturing partners. That way, should another disaster disrupt the supply chain, companies can turn to different suppliers for products. By using a different source a product shortage can be avoided.

Fluctuations In Price

Pricing continues to change and can have a huge impact on the supply chain. A supplier could implement a significant price increase on a product or component required to produce a product and put you in a position where your prices have to change to allow for the increase. Price changes in any place along your supply chain can result in a string of increases as others adjust to the financial implications that accompany a sudden price change. A price increase may force companies to look for more competitive alternatives. This can disrupt the supply chain even further. Plus, not all price changes are permanent. An increase may be temporary to address a seasonal shortage of supplies or could indicate an upcoming trend related to the cost of manufacturing the goods supplied to your company. 

Sudden Increases In Demand

The toilet paper shortage of 2019 was the result of panic buying. It also demonstrates that businesses were not ready for the sudden demand for a product that we typically take for granted that will always be available. Demand for products is influenced by much more than panic shopping. Factors that impact demand include changes in market trends, product cannibalizations, and the changing seasons where products are required more at one time of the year. Demand forecasting tools help companies to accurately predict when demand for specific products may shift or increase. This allows businesses to better prepare for the potential needs of consumers. When companies are not ready for switches in demand cycles, disruptions in the supply chain occur as did with the toilet paper shortage.

Cyberattacks

The ongoing digitization of the supply chain has presented the opportunity for cyberattacks. Even with the most current digital security measures in place, there is no guarantee that your company won’t be a target. If a partner further down the supply chain does not have effective security, hackers may use that weak link to access your network. Cyberattacks don’t always revolve around ransom, either. Hackers have used the information to get into large corporate systems to disrupt operations causing massive financial losses to the companies involved. For example, the recent Colonial Pipeline hack resulted in a huge fuel shortage along the East Coast. Recovering from a cyberattack can sometimes take even longer than the initial attack which puts companies, and their databases at risk. Having security in place helps, but it must be updated regularly and match the security measures throughout the supply chain.

Final Thoughts

To truly understand how disruption can impact the supply chain, it may help to view that string of partners and suppliers as a fragile ecosystem that requires the perfect balance of conditions to function properly. When something causes the conditions to change suddenly, the ecosystem suffers. To prevent that from happening, companies need to have vision, plans, and preparation to meet any possible event that can throw that balance off and result in a supply chain disruption.

Categories: Tips