Disruption in the supply chain
The supply chain encompasses all stages from the time the customer generates the order for a product until it is delivered and charged, covering phases such as the supply chain of goods for its manufacture or quality control. Any variation throughout this process can cause inefficiencies or, ultimately, breach the objective of the supply chain: that the merchandise reaches the final customer with the required quality and in the agreed time and place.
It is understood as disruption in the supply chain, therefore, the alteration of any phase of the supply chain caused by agents external to the product: climatology, changes in legislation or cyberattacks, among others.
We can classify the different disruptions according to their origin:
Natural: These are nature-related catastrophes, such as earthquakes, tsunamis, or volcanic eruptions.
Biological: originate from epidemics or pandemics, such as coronavirus or Ebola. Given the globalization and internationalization of an increasing number of companies, a good prevention policy in the supply chain will be crucial to prevent its spread.
Policies: derive from government decisions or supranational institutions that directly influence the proper functioning of the supply chain. This is the case of the trade war between the United States and China or the 1973 oil crisis.
Technological: from errors or malicious use of certain technologies ( global server drops, data leaks, cyberattacks, etc ).
How to prevent risks in the supply chain
Although there are unexpected disruptions that can alter industrial activity, prevention is key to avoid or mitigate the effects of such alterations.
To that end, organizations should analyze each phase of the product supply chain and identify possible risks related to its operation: excessive dependence on a supplier, tight room for maneuver due to errors in the management of the last mile or excessive seasonality of a product, among others.
What is the solution then? Beyond knowing the product and determining possible threats, today there are tools to monitor and analyze the performance of all parts that make up the supply chain, in addition to how to apply continuous improvement projects to increase the productivity of its operations.
How to manage a disruption: logistical action plan
As part of the process of preventing a disruption, every company must, based on an examination of the threats present in its supply chain, develop an action plan to alleviate or nullify the effects of a catastrophe on your premises.
Thus, any action plan must follow the following guidelines:
Analyze the causes and consequences that disruption causes in the production, storage or transportation of merchandise to the end customer.
Prioritize by importance, to guarantee the safety of personnel and those who may be exposed to the effects of the catastrophe. Once this is checked, the stored material, raw materials and installation must be secured.
Listen to all the participants of the supply chain: An action plan should not be limited to information specific to the company’s activity, but should also integrate that of other participants in the supply chain. After all, this is the only way to ensure correct traceability on the product.
Collaborate with external agents: either with other logistics companies, such as 3PL ― have more knowledge on the ground ―, with other links in the supply chain mangement or the relevant authorities.
Once the guidelines that any action plan must contain to be effective in the face of supply chain risks have been described, its execution must be prepared. The consultant PwC points out the following phases: prepare ― the planning we just saw, which is to assess the main threats and how to mitigate their effect ―, answer ― execute the agreed lines of action to reduce the impact on the company’s productivity ― and, finally, recover and collect information on what impact the disruption has had ― and thus interpret how the plan has worked and what aspects need to be improved in the event of a possible repetition ―.
Examples of disaster risk management
Any company specialized in the design and construction of infrastructures must take into account not only the materials and the land destined to build, but also the weather conditions, in addition to seismic risk or the presence of volcanoes in the area, etc.
Thus, when Mecalux develops self-supporting warehouse projects, in which the shelves form the structure itself, bearing the weight of the complex, company engineers also assess the impact of all external variables: wind force, snow overload, type of terrain, etc.
These are some of our projects where risk management played a crucial role:
Five months before the devastating 8.8 earthquake on the Richter scale that devastated Chile in 2010, the documentary registration company Iron Mountain had hired Mecalux to build one of its many warehouses in the South American country. After the earthquake, the company lost seven of its facilities, but Mecalux resisted.
Big data and analytics
Macrodata, analytics, and automation are enabling organizations to mitigate shocks through agile and digital management of the supply chain. The implementation of predictive and prescriptive analyzes, as well as advances in big data, algorithms and robotics, will have far-reaching effects. Organizations that harness the power of these solutions will benefit from increased synchronized visibility, planning and execution, data-driven decision making, predictability, agility, and profitability.
2. Digital supply chains
Digital supply chains will continue to be essential elements of many trends on this list, such as risk, resilience and security. Successfully digitizing supply chains requires large-scale sensor deployment over the Internet of Things; digital twins; shared internal and external interfaces, as cloud-based networks; and automation and process verification. The best organizations will embrace the capabilities of the digital supply chain or lag behind more agile and more efficient competitors.
3. Supply chain risk and resilience
Risk and resilience of the supply chain require collaboration between global networks that are very complex and highly interconnected. Key strategies include supplier diversification, production capacities, and transportation processes, as well as searching for alternative materials and non-traditional partnerships. Many supply chains will become more compact and localized. Resilient supply chain design will also be critical to mitigating adverse events faster than competition, offer excellent customer service and generate value and market share.
4. Artificial intelligence and machine learning
Artificial intelligence and machine learning, key components of many trends on this list, are becoming a driving force to maximize and enable systems thanks to interoperability in various business scenarios. They are essential for integrating people, processes and systems into a wide range of operating environments. The evolution driven by technology towards industry 5.0 -which implies a more collaborative approach-, as well as between humans and robots, will have a significant impact on numerous functions of the supply chain.
Labor shortages, supply disruptions and increases in demand are forcing organizations to resort to robotics and, as a result, Smart robotics is transforming supply chains by transforming supply chains. Driven by rapid technological and affordable advancements, mobile and fixed robots will assist workers in the tasks of last mile storage, transportation and delivery. Safer, more efficient warehouses, with fewer staff, will reduce costs. Although the initial capital investment will be high, the cost savings will be spectacular.
6. Data security and cybersecurity
The more digital supply chains become, the more vulnerable their global networks are to cyber attacks. This interconnectedness means that supply chain actors can unintentionally expose themselves and their customers to privacy violations, identity theft, and worse. Greater collaboration is to be expected in protecting networks, devices, people and programs.