In the past twelve months, 75% of companies reported at least one supply chain disruption1, which came in the form of strikes, breakdowns, and natural disasters. This past month, countries in Asia experienced twin earthquakes that disrupted many supply chains including those of top automotive manufacturers.
Supply chain disruption continues to be one of the biggest concerns for supply chain executives. Many of these same executives admit that their supply chain risk strategy is lacking. In fact, a recent Deloitte Consulting survey showed that two-thirds of executives had a supply chain risk strategy but only half of the respondents believed their strategies were “effective”2. Your supply chain needs to be prepared when disaster strikes. The following are some tips to keep in mind when establishing an effective risk strategy.
- Diversify your Suppliers
Your parts suppliers are managing their own operating risk. When choosing suppliers, it’s important to analyze the level of risk that comes with conducting business with them. For instance, if they only have one location, the risk of doing business with them is higher than those with multiple locations. In the most recent earthquakes in Japan, manufacturers struggled to get parts from their suppliers to keep their production line moving. In these scenarios, including other suppliers can help production continue to operate.
- Diversify your Manufacturing Locations
Just like your suppliers, it’s important that you have different manufacturing locations in your network as well. With facilities across multiple areas, if a natural disaster affects one location, you’ll be able to utilize the others allowing for production to continue. For example, if a hurricane hits a facility on the East Coast you can redirect production towards locations on the West Coast and vice versa.
- Have the Relationships to Reroute
It’s important to have the right relationships to easily utilize other modes of transportation as well as ports. Working with a sophisticated 3PL is beneficial because they can provide different supply chain solutions and have partnerships in place to easily navigate your freight to keep your operation moving. During the West Coast Port strikes, many shippers turned to their carriers for assistance. These partners were able to redirect freight to different ports and then distribute in a timely and cost efficient manner.
- Scenarios and Planning
Every supply chain should be prepared before a disruption or disaster strikes. The best way to prepare is to plan out possible scenarios based on the risk of certain disruptions happening in your location. For instance, determine the next steps for your operation if a tornado touched down near your Arkansas facility or your suppliers in Japan were recovering from an earthquake. Knowing all the possibilities and communicating next steps can help your employees and partners keep operations moving.
- Include all Partners in Risk Planning
Disruptions come with little or no warning so planning and communication become even more critical. When planning out scenarios, it’s important to have partners with involvement in your supply chain to be included in the planning process. If something disrupts their supply chain or yours, collaboration can create synergies to better respond to different scenarios. If you are working with a 3PL, they have experience and many contingency plans in place.
- Invest in Supply Chain Technology
When disruptions occur and your operation halts, it doesn’t necessarily mean your orders have to. Investing in the right technology can help manage the information still coming in during these disruptions. The right technology could also present alternatives for your network whether it is alternate suppliers or more information on tracking your shipments.
- Be Prepared to Rapidly Respond
One of the most important things to remember is to act quickly. The quicker you respond and execute your risk strategy, the sooner your operation will resume running.
A supply chain disruption can come in many forms. Regardless of the type of disruption, great communication paired with the right strategy and supply chain partner can make your operations more resilient.