A disruption in your supply chain can have significant impacts on multiple areas of your business. To ensure that operations remain smooth and your buyers receive their goods without any delays and quality issues, you have to maintain a robust supply chain.
While there are a lot of moving parts in a supply chain and that disruptions can occasionally happen, you have to make sure that you learn from supply chain disruptions to not make the same mistake twice. These disruptions can be costly and impact your reputation and bottom line.
Let us understand what a supply chain disruption is, the types of supply chain disruptions, and how you can prevent them.
What is a Supply Chain Disruption?
Supply chain disruption can be defined as a breakdown during the production or distribution phase that can affect the normal flow of operations. These disruptions can be caused by external factors and internal factors.
External factors like natural disasters, machine breakdowns, and fire outbreaks can disrupt the supply chain. Meanwhile, internal factors like quality concerns can interfere in the production and distribution of goods.
When a supply chain disruption happens, it can increase the production and distribution cost, reduce productivity, and affect shipping and logistics. Your customers may or may not realize a supply chain distribution.
If you know that your customers may be affected due to an interruption of processes at your end, either by having to wait longer to receive their goods or not being able to avail the regular discounts, you have to share with them the issue you’re facing and how you’re working hard to resolve it at the earliest. There is nothing that beats authentic and regular communication with your buyers.
Types of Supply Chain Disruptions
Supply chain disruptions vary in probability and severity. It is important to know the types of disruptions that can happen to position yourself better to avoid them or reduce their impact on your business.
1. Natural Disasters
While the probability of natural disasters is less, you have to take them into consideration if the supplier you are dealing with is present in a geographical location prone to disasters like earthquakes, volcanic eruptions, floods, hurricanes, etc.
The Japan earthquake in 2011 is an example of how a natural disaster can disrupt and halt the supply chain of businesses around the globe. The nuclear disaster at the Fukushima Daiichi nuclear power plant as a result of the earthquake crippled the global economy and affected many businesses.
Such disasters are a stark reminder of the emergency measures needed to reduce the severity of supply chain disruptions.
A global pandemic can wreak havoc on the supply chain. The recent COVID-19 pandemic was a wake-up call for many businesses unprepared for disruption on a global scale. The businesses with suppliers from China suffered the most as global trade was badly affected. The massive supply chain problem for health supplies impacted the lives of millions of people around the world.
3. Transportation and Logistics Failures
As trade has become more international, there is an increased strain on many international and domestic trade routes. An overreliance on certain routes can lead to congestions and delays in the delivery of goods to consumers. The geopolitical factors also play a role in the smooth movement of supplies by land, sea, and air.
4. Quality Concerns
The issues with products at any stage during production can cause supply chain disruptions. You do not want to ship sub-par quality products to your buyers and hence need extra time to ensure the highest quality of goods before shipment. Giving more attention to quality control and management is vital to prevent quality concerns.
5. Price Fluctuations
Price fluctuations for essential and raw materials required to manufacture products can have an impact on profitability. There are a number of factors that can cause price fluctuations of essential supplies and you need to take them into consideration to avoid supply chain disruptions.
5 Tips to Prevent Supply Chain Disruption
To ensure that your supply chain remains strong and able to withstand disruptions, you must put in place a good strategy to manage eventualities. While there may be a lot of things that need improvement to prevent almost all supply chain disruptions, you have to focus on the major disruptions that can happen to your supply chain and devise a strategy to mitigate and overcome them.
1. Create an Emergency Plan
You need to have an emergency plan in place to avoid surprises that can put you in a bad spot running your business. Take the time to evaluate the entire supply chain and create a backup plan with a reserved emergency budget to give you room to think and come up with innovative ways to tackle the problem.
2. Build Your Inventory
You need to have a stockpile of essential supplies and/or finished goods for several months to ensure that your business is not affected in case of a severe disruption of trade. Always plan for the worst-case scenario so that you are prepared even if the worst situation presents itself.
3. Diversify Your Suppliers
Similar to diversifying your investments so that you are not entirely hurt when one of your investments does not yield expected returns, you need to diversify your suppliers across geographical locations so that if there is a disruption of services in one location, you can rely on suppliers from other locations.
The COVID-19 pandemic made businesses consider diversifying their suppliers since they saw that their suppliers in China could not fulfill deliveries as borders were closed and international trade was affected.
If possible, try to maintain connections with a few local suppliers as you can reliably depend on them in case you have trouble accessing your international supplier base.
4. Conduct Supply Chain Vulnerability Audits
You need to understand your supply chain to identify potential weak spots that can be troublesome if left unattended. While supply chain vulnerability audits can take time, it is essential that you do regular audits to understand the health of your supply chain and be better prepared to tackle problems that can disrupt your supply chain.
5. Partner with a Logistics Expert
A logistics expert can be hugely helpful when disruptions happen. A highly skilled supply chain expert can allow you to continue fulfilling your orders when the primary solutions do not work as a result of a major disruption. With the expertise of a fulfillment partner, you can understand how to deal with disruptions and navigate better to serve your buyers.
Supply chain disruptions have an impact on all operations of your business and you need to avoid and manage them effectively to continue shipping goods and meeting the needs of your customers.