In this time of global financial insecurity, large scale companies are stretching further and further across the planet in order to reduce costs and remain competitive. But this strategy brings with it risks. The pressure on a global company’s supply chain is simply immense, with operations stretching across whole continents and handfuls of countries, variables are introduced that can be incredibly hard to track. A company need a global supply chain risk management process.
With supply chain infrastructures running the length of the planet, how is it possible for a company to know what is happening at any given time and at any given point within its chain? A supply chain is only as strong as its weakest link, and in this fragile economic state, global operations rely on their supply chain management to bring together all the disparate elements into a smooth churning synergy. But how does a company’s supply chain cope with all the challenges that these variables produce?
Global companies face challenges on all fronts regarding the pressures of supply chain on an international scale. With head offices say in New York, and a production arm in China or Pakistan, the most obvious challenge faced by a global company is one of distance. But what specific challenges does this kind of distance throw up?
Like a fog, distance can cloud vision, and block out or at the least delay information – and to a supply chain, information is money. A global company, with its head offices in the West, is going to be unaware, at least for a time, of the state of its supply chain in the event of localised flooding or civil unrest. The supply chain may not even be aware that the issue even exists until severe damage has been caused. Even if the factory was untouched by such a disaster, what about the infrastructure – roads, airports and harbours? Large scale emergencies create questions and uncertainty for those on the ground, never mind those in large corner offices in Manhattan.
The problem is not just limited to natural disasters or weather systems. Civil and political unrest can cause chaos to even a healthy supply chain. Then there are epidemics and pandemics, such as the H1N1 flu, which have the potential to grind a whole economy to a sudden and shuddering halt. These situations can cause utter chaos to those present, but the real danger to a global companies supply chain is more subtle than this chaos… it is ignorance.
Ignorance to a crisis is the arch enemy to a supply chain. It may be a cliché but it is true – knowledge is power, or in this case, money – and even the most solid supply chain can crumble through nothing more than a little ignorance. Even if contingency plans were made, the delay in being aware enough of the crisis to implement the contingency can cause severe flow problems.
To an extent, these challenges can all be overcome or circumvented by good planning and a world class supply chain management system but only if they are aware of the crisis. It is this knowledge gap – between the event happening, and feedback working its way all the way across the planet to head office, that can make or break a company’s financial position. It is not the event itself, cataclysmic as it may be, but it is ignorance to the event that is the killer for supply chain. How can you overcome a challenge that you are blind to?
The secondary challenge faced by a global operations supply chain management is one of local knowledge and experience. Civil and political unrest, for example, can seem to strike as suddenly and as unexpectedly as forked lightening to the outsider. Yet to those who live on the inside of that country, the sense of radical change or shift in power can almost be sensed. There is something about being on the inside that gives one the ability to more accurately predict, and therefore to prepare for this kind of change.
It is this preparation that is key to the success of any supply chain. Sensing and predicting the event or crisis, allows for contingency plans to be drawn up and/or implemented. These are essential for the reduction of downtime, and for shipping dates to be met. Contingency plans, if acted upon swiftly enough, can really protect the integrity of the supply chain. The key to this swift acting, once again, is information. Factories in neighbouring countries can be actively tooling up as the sense of political unrest grows in another, with one factory primed to take over as soon as trouble rears its ugly head.
Of course, not everything can be predicted, and some events, such as the recent volcanic ash cloud over Europe, can catch everyone by surprise. But the majority of incidents, problems and challenges faced by the supply chain of any global company can be pre-empted, predicted and planned for. But a contingency plan is only as strong and useful as the information that brings about its implementation. It is this information that will determine the success of a supply chain management system when disaster strikes, as it surely will, given enough time.
- Supply Chain Innovators: The Future of E-Commerce (supplychainventures.typepad.com)
- Even Accenture Pays Attention to Supply Chain Risk Management: A Five-Pillar Framework (spendmatters.com)
- Small Business Supply Chain Articles (bjconquest.com)