Supply chain disruptions are a fact of life. In a recent survey carried out in 71 countries, 80% of supply chain professionals stated that they had experienced at least one major supply chain disruption in the past 12 months1. More worryingly, Accenture have reported that disruptions can reduce shareholder value by 7% in affected companies2. Whilst there are major disruptions, it mustn’t be forgotten that micro-disruptions also take place on a day to day basis.
“When people think of ‘supply chain disruptions’, the natural tendency is to focus on rare events or ‘acts of God’. However, the reality is that disruptions are also an everyday feature of supply chain operations; causing stoppages to production lines, low efficiencies and product rejections and recalls” explains Richard House, FuturMaster UK Managing Director. “Effectively communicating the supply chain situation and including it as an integral part of the planning process is critical to achieving smooth and efficient operations.”
How macro and micro disruptions are occurring might be obvious, but the question we should really be focusing on is: Why? Over the past two decades, globalisation has caused our supply chain networks to undergo huge modifications and a rapid increase in complexity. Throughout this period, three key factors have contributed to the current situation:
1. A rise in off-shoring production facilities – off-shoring originally served to help manufacturers reduce costs and at the same time meet rising demand whilst exploiting new international markets. However, distancing fundamental operations from the rest of the supply chain network can also introduce greater risk and reduce control.
2. Growth of Omni-Channel – this refers to the growing number of channels through which a customer is now able to purchase a product, whether it is online, offline, ‘click and collect’ or through mobile applications. It is now even more vital for supply chains to be flexible and for stock to be available at the right locations at the right time. Missed sales opportunities can be snapped up by a competitor showing available stock. The customer only needs to make a few swipes on a smartphone to find it.
3. An increase in supply chain stakeholders – the smooth running of supply chain operations is heavily dependent on the effective cooperation and collaboration between supply chain stakeholders. Through introducing more stakeholders and elongating the supply chain, cooperation between suppliers, manufacturers and distributors can be greatly reduced.
Research has shown that IT plays a crucial role in minimising supply chain risk through enabling collaborative processes across businesses2. When implemented successfully, a supply chain system can give you back control, allowing users to work efficiently and focus on what’s truly important: solving key issues, mitigating risk and capitalising on sales opportunities. Functionality such as scenario planning, information sharing and exception based alerts are integral to creating an effective workflow that anticipates potential disruptions and opportunities. Placed on a collaborative platform, these functionalities connect departments and subsidiaries across organisations, allowing your supply chain to work as one.