Many enterprises today are constantly dealing with the various effects of supply disruption, including factory closures, scarcity of raw materials, congestion at the port, and inflation, among other issues. Fortunately, the emergence of highly advanced supply chain management practices and tools like Elementum service management software has brought new ways of improving supply chain processes.
Still, you need to be familiar with the impact that regular disruption of your supply chain processes has on your organization so that you can figure out the best actions to take to minimize this effect.
What Is Supply Chain Disruption?
First, disruption is the disturbance or the occurrence of complications that interrupt a process, activity, or event. Therefore, supply chain disruption is the stoppage of the free flow of critical processes like the production of goods and their shipment to customers. Unlike in the past, when various elements of a supply chain were not so complex, today’s supply chain consists of complex networks that are widely interconnected. So, any minor disruption at any point along the supply chain causes everything else to stop immediately.
Many factors contribute to this disruption, including loss of data, geopolitical occurrences, financial problems, accidents, natural calamities, conflict of interest, and unsustainable procurement. Other causes are not clearly categorized–for instance, issues like shortage of raw materials, Brexit, and environmental problems cover wider areas than a single category. Fortunately, most environmental causes of supply chain disruption can easily be addressed through sustainability management. So, it’s important to understand what sustainability management really is and how it can improve operations along your supply chain.
Impacts of Supply Chain Disruption on Your Enterprise
Currently, enterprises around the world are dealing with the impact of the COVID-19 pandemic on their supply chain. This disruption has impacted the entire chain, causing many serious repercussions, some of which are yet to be felt. Here are some common effects of supply chain disruptions:
Serious natural disasters or accidents can disrupt the production, harvest, or transport of products or raw materials, leading to a shortage. For example, when the COVID-19 pandemic broke out, countries, cities, and towns were put on total lockdowns. This meant factories could not continue to produce their products and raw materials could not be transported to the factories, which led to a drastic shortage in the market.
Price stability is when there is a balance between supply and demand. So, when there is a short supply of certain products, the demand goes up, causing the prices to skyrocket. This results in inflation, which is the general increase in the cost of goods and services. Consequently, there will be a drop in the purchasing power of certain currencies.
The shortage of raw materials leads to a drop in the production of goods, which puts manufacturers, stores, transporters, and shops at risk of going out of business. When the output drops, your sales and profits also drop. Eventually, your company will not have enough money to sustain its operations, and the only option left will be to close.
Redundancy and Job Losses
As noted above, disruption of any component of the supply chain creates a domino effect, paralyzing operations across the entire chain. For instance, when there is a shortage of raw materials, production and shipment are directly affected. The workers involved in these processes are also rendered jobless.
Understand that the impact of supply chain disruption in various businesses directly affects the global supply chain and economy. Fortunately, you can easily deal with these disruptions by implementing the right sustainability and supply chain management programs, like Elementum Service Management software, the main focus of which is to identify and mitigate exceptions using powerful project management tools.