The COVID-19 pandemic completely disrupted the global supply chain and exposed many underlying problems with the system. Let’s explore the dynamics and possible disruptions within the supply chain as a service.
Supply Chain Disruption
Any disturbance or breakdown in the process between the production of the product to its delivery to end consumers is called a supply chain disruption. In simpler words, a disruption is an event that damages your business’s ability to produce, deliver and sell products.
The phrase “broken link in the chain” is a perfect way to describe a supply chain disruption. Modern supply chains are too complex and intertwined to label just a single link as broken. One broken link means the whole chain is broken, and one disruption impacts every aspect of a supply chain. When a disruption strikes your business operations, it is imperative to react as soon as possible.
Causes Of Supply Chain Disruption
There are a multitude of potential causes of supply chain disruption that can hamper a business’s ability to sell and deliver more products. Below are a few of the more common causes.
Fluctuation In Demand
Whenever the demand for a product fluctuates, it causes a supply chain disruption. In the case of a drop in demand due to an internal change such as less marketing or a change in the design or process of a product, it’s easier to predict and take the measures accordingly. In unexpected cases, such as the appearance of COVID-19 that forced people to stay home, the airline industry experienced an enormous disruption.
Businesses can also face a disruption when there is a sudden or massive demand for their products that was unexpected–this is called a demand surge. Some demand surges are predictable and can be handled efficiently, such as the demand for different products during the holiday season.
Still, unpredicted and large events like pandemics can disrupt the supply chain at a completely different level. An example of this type of demand was the toilet paper shortage in the U.S. during the pandemic.
Cyber Security Threats
Cyber attacks are one of the most serious modern threats to the process of supply chain management–they can cause disruptions on a very large scale. In some cases, the effects of cyber attacks on a supply chain can be more severe than those of natural disasters and weather conditions.
Cyber attacks are unpredictable. They can hit a business from anywhere, at any time, and can sometimes cause irreparable and irreversible financial and reputational damage. Businesses have to navigate many online functions, operations, and processes in order to stay ahead of the competition, and access to global markets has created many new business opportunities. However, new risks such as cyber attacks and data security threats are a serious challenge for businesses.
Most companies focus on cyber threats within their internal systems and forget to assess their entire supply chain. To avoid supply chain management issues, some larger companies do a risk assessment of their suppliers for cyber-attack threats.
As a business, you can’t eliminate the risk of cyber attacks, but you can mitigate the risk to a large extent through regular audits of your supply chain and by educating your suppliers about best practices. With a well-managed supply chain, you can reduce the chances of an attack damaging your operations and processes.
Natural disasters are inevitable, unpredictable, and can disrupt supply chains. When a part of the world is facing an earthquake, flood, tsunami, hurricane, or any other form of natural disaster, it can disrupt supply chains with:
- Congested ports
- Delayed or postponed deliveries
- Delayed or postponed cargo flights
- Imbalanced supply and demand
The level of supply chain disruption can be affected by the severity of a disaster. At its worst, a natural disaster can bring an entire supply chain to a complete stop. Recovering or resuming the business operations can take a lot of time, effort, and resources.
For example, during the earthquake and tsunami in 2011, Japan incurred losses of $210 billion, which heavily impacted the global supply chain. It’s hard to predict the effect of natural disasters in advance, but businesses can take measures to ensure a quick recovery. These steps include:
- The development of a disaster response system and recovery plan
- Consistent communication with supply chain managers
- Understanding the risk to a business’s reputation
Other than natural disasters, changes in demand and supply, and cyber security threats, there are many other factors such as geopolitical issues, financial viability, and man-made issues that can cause supply chain disruptions. Businesses can’t predict or avoid all potential disruptions, but proper planning, using the supply chain as a service, and optimizing recovery processes can help increase the resilience in the supply chain.