What 10 Years of Supply Chain Disruptions Can Teach Us
Over the last decade, the global supply chain has weathered its share of disruptions, from climate changes and geopolitical conflicts optimised to the consequences of man-made errors and mistakes. Even as we move beyond the most recent supply chain heavy-hitter – the COVID-19 pandemic – procurement leaders across nearly every industry are realising the need to be prepared for future crises has never been more pressing.
But identifying and addressing the factors that will enable organisations to pivot in the face of supply chain disruptions can be challenging. It’s never been more important to reflect on the lessons history can teach us and learn what we can do to avert the impact of future crises.
Natural disasters and other events prompted by global climate change have struck the supply chain, causing a wave of regional and national impacts that have rippled outward.
In 2011, a 9.1 magnitude earthquake rolled through Japan, triggering a 133-foot-tall tsunami wave that sparked the meltdown of a nuclear power plant and knocked out the power to millions of homes and businesses, including plants that produced over 20 percent of the world’s silicon wafer supply. As a result, vehicle manufactures lost hundreds of thousands of hours in production time – and thus, a significant amount of sales. Because they failed to diversify their supply chain, they did not have the ability to get the products they needed to sustain their regular rate of production.
In the United States, hurricanes Michael, Sandy, Irma, and Harvey caused similar impacts on small businesses; a lack of access to last-mile deliveries and supply chains financially destabilized many businesses that were never able to recover. A similar series of events occurred in Thailand in 2011; as a result of an intense monsoon season, factories and plants that produced over 25% of the world’s production of hard drives were shut down, and hard drive prices nearly doubled. It took two years for that supply chain to recover.
Natural disasters aren’t the only culprit of supply chain disruptions. Brexit, the United Kingdom’s vote and decision to leave the European Union in 2016, triggered changes to regulations around trading, employment, and travel that has stunted economic growth in the UK and forced previously stable supply chains to change. And, of course, COVID-19 cost the global supply chain $28 trillion in a single year destabilised due to unprecedented disruptions thanks to the global quarantining of workforces and equally unprecedented demand.
When reflecting on the last decade of supply chain disruptions, it can be easy to be overwhelmed by the magnitude of past impacts and the desire to avoid such disruptions in the future. As history has shown us, one of the most important takeaways is the need for a strong foundation of agile, consistently updated supplier data. Access to this information allows for greater flexibility and diversity, protects against the kinds of supply chain upsets procurement officials want to avoid, and enables organisations to remain agile in the face of unstoppable disruptions.
Ensuring you have a diverse portfolio of suppliers is also key to ensuring your organisation’s ability to remain flexible in the face of future global supply chain disruptions. Whether your company works with a few dozen suppliers or a few thousand, there is always room for more variety. Short of having a crystal ball, diversity in both data and suppliers is the best way to ensure your organisation won’t be negatively impacted by any crisis that may strike.
Finding and building a diverse portfolio of suppliers isn’t always easy – yet another reason why data collection and management is vital. Employing automated, AI-enabled systems to ensure supplier data is consistently maintained across all channels is key, as we rarely know when disaster is about to strike, and often, the only way to move forward is to pivot to suppliers that are unaffected by the current supply chain crisis.
Finally – though it likely goes without saying at this point – agility is vital to ensuring your organisation and its supply chain will survive crisis after crisis. When COVID-19 swept the globe, procurement teams were paralysed because they lacked quick access to good supplier data that would help them survive the massive global disruption. The supplier base is the biggest untapped asset and, if optimized properly, can deliver hundreds of millions of dollars in value, provided supplier data is agile and available to those who need it most.
As we reflect on the past decade of global supply disruptions, one theme emerges: the data that helps procurement professionals manage supply chains is vital to ongoing success and resilience in the face of many challenges to come. It is essential that procurement professionals take a long, hard look at their supplier data and consider what improvements can be made to improve performance and agility. This, above all else, will go a long way in ensuring organisations and their supply chains can survive any challenge to come.
Stephany Lapierre, Founder/CEO of TealBook
Stephany Lapierre is the founder/CEO of TealBook, a highly coveted supply chain thought leader and one of the most influential minds in emerging data technologies. She has been recognised as one of the Top 100 Most Influential Women in Supply Chain, and her company, Tealbook, has both been named a Top 50 company to watch by Spend Matters and won the Cool Vendor Award by Gartner.