Supply chain disruptions span from day-to-day risks like malfunctioning equipment to high-impact threats like natural disasters.
90% of companies believe supply chain disruptions have a dramatic impact on their business and financial performance, but only 60% pay even marginal attention to reducing risks.
The 40% of companies that do invest in preventing disruptions are considered to have a mature risk mitigation program. Companies that invest in risk reduction capabilities perform better operationally and financially – something for CEOs and CFOs to note.
Learn from these 2 examples of how separate companies dealt with supply chain disruption:
Example 1: A communication technology company encountered a severe supply chain disruption when a lightning bolt hit a power line at a company manufacturing facility. The bolt triggered a fire, which ruined millions of electronic products. The company employed a single-source policy, which means there was no other supplier to get the product from. Production was disrupted, thanks to a missing part, resulting in major loss on the bottom line.
Example 2: A popular technology company released an innovative product which was in high-demand by the public. It wasn’t long before pre-order wait times increased from days to weeks to months. The slow rollout can be attributed to one of the company’s suppliers, who produced a defective component and experienced a shortage of a specific material. The company was able to overcome the disruptions because it employed multiple suppliers.
Having several suppliers or back up suppliers for the same component is one of the strategies that companies with resilient supply chains adopt to mitigate risk.
The above examples highlight the importance of a reliable supply chain. In a reliable supply chain, the company has identified flexibility as a key step to increase efficiency. A risk management program with flexibility provides companies with strategic value.
Flexible supply chains can recover from disruptions more quickly than those companies without flexibility, giving them the competitive advantage in the market place.
Supply chains can take steps in order to reduce risk and maintain resilience by creating a crisis management plan and diversifying vendors and suppliers. Understanding potential threats to the supply chain and their effects helps companies mitigate them efficiently.
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