What are the Biggest Supply Chain Disruptions to be Concerned About?
A smoothly operating supply chain is critical for a variety of reasons. Whether you’re a company manufacturing and distributing steel beams, groceries, widgets, t-shirts, or medicine, goods need to go through a variety of steps to get from manufacturing to consumer. The coronavirus pandemic has demonstrated that the entire global supply chain is intimately interconnected and that major supply chain disruptions- and the impact those disruptions can have across international boundaries, can be devastating to businesses. Although major disruptions such as pandemics are rare occurrences, when they do happen, the effects ripple across the supply chain.
Supply chain disruptions create uncertain times for businesses and consumers alike. They also highlight how dependent our economy is, and how much we rely on supply chains running smoothly.
While some disruptions are more localized and only impact a small area of businesses or a particular industry, global disruptions like COVID-19 have an impact across most industries and countries. This is particularly evident when the disruption affects an area like China, India, or Vietnam- where a diverse range of supplies is manufactured. COVID-19 has caused a majority of businesses and industries to experience at least some supply chain disruptions. This includes longer lead times with supply orders from China, slower processing in manufacturing and distribution centers thanks to reduced staff, strain put on certain industries thanks to a rapid increase in demand, and so on.
Though this pandemic has had an extended global impact, the majority of supply chain disruptions fall into the category of more localized and short-lived.
Disruptions in the supply chain vary in severity and impact. The most disruptive, as recently demonstrated, is one that has an effect on nearly every region of the world. Public health crises such as pandemics are the most severe due to the vast number of people, regions, and international companies that are forced to respond.
While such crises are the rarest, they can be the most devastating, and take the longest to recover from, as the issue is ongoing. Pandemics can throw off every stage of the supply chain and make normal operations difficult to return to.
Thanks to the interconnectedness of the global supply chain, many companies receive shipments from international suppliers. While this is mostly a good thing- allowing for a broader range of business opportunities and a greater sense of global connectedness, it can also have a negative impact of strain on existing transportation networks. Congestion, delays, hang-ups at international ports or issues with customs and more can create additional points of concern.
Transportation failures can also be compounded by other disruptions, such as regional political issues, natural disasters, pandemics, and other causes for limited freight movement or delays.
Earthquakes, their ensuing tsunamis, wildfires, hurricanes, volcanic eruptions- the world is full of potentially dramatic natural disasters that can occur. When these disasters occur in regions where a great deal of manufacturing or supplies originate, it can have a major effect on the supply chain. When a disaster event occurs in a particular region, it draws attention to how reliant certain links in the chain may be on that area, which is why many companies have begun diversifying their suppliers.
Having other options for needed supplies is a way to safeguard against major delays in the event that one area needs time to recover from a major natural event.
When demand and availability of certain products or supplies change, prices can trend upward, causing a disruption as the companies that rely on that material decide how to respond. Whether it means increasing prices on their end, switching suppliers, slowing production, or reducing profits by eating the costs- companies may experience disruptions while they respond to these increases.
With commodities, prices are routinely volatile, and just as quickly as they increase they may drop back down. Other goods and supplies aren’t as notorious for fluctuations but may rise and fall according to outside factors, such as a sudden increase in demand.
Cybersecurity is an important safeguard against issues in all industries, but it can have an impact on supply chains as well. Whether the issue causes delays while companies scramble to resolve the hack, deal with the impacts of stolen data, or simply try to undo whatever maliciousness has occurred, since supply chains are so interconnected, a cybersecurity breach in any link of the chain can spread to all of the links rather quickly.
Be sure your business partners have taken proper cybersecurity measures, and this disruption is less likely to have a major impact on your business. Any major disruption in the supply chain is an issue, but with contingency plans in place, most can be resolved without too much delay.