Supply Chains Disruptions in the Modern Era of Disaster

2011 was a year of great natural disasters. With the earthquake and resulting tsunami in Japan and tragic flooding in Thailand, supply chains in the region and around the world were greatly disrupted. The companies hardest hit were those who relied on parts manufacturers in this region of the world to supply “just-in-time” products. This strategy allowed many companies to cut costs by eliminating excessive inventory. However, a disruption in the supply chain when operating this way can mean lost revenue as businesses scramble to find replacement parts, or in the worst case, have to wait until their suppliers get production back online and up to speed, according to www.forbes.com.

With the severity of natural and manmade disasters hitting hard in recent years, relying on one source for inventory also causes bottlenecks after a disaster. And, as was shown in Japan, manufacturers far from the source of disruption were affected, as rolling brown outs cut power to plants, halting production of parts needed by businesses to complete their orders. This often required workarounds that added further costs. By taking the time to look at the big picture, such shortages could have possibly been foreseen and the impact at least partially alleviated.

Going forward, industry experts emphasize that companies need to take an enterprise-wide view of their business, including examining suppliers and third-party vendors who provide materials to those suppliers. Adopting the stance of “just in case,” as opposed to “just in time,” businesses will be better able to handle a disruption in the future. By mapping out their value chain and looking for potential bottlenecks and disruptions, companies will be able to more effectively plan recovery strategies in the event their suppliers are unable to meet demand.

For more information about supply chain lessons learned, visit: http://www.forbes.com/sites/ciocentral/2012/03/13/japan-one-year-later-the-long-view-on-tech-supply-chains/