Just over a month ago, Hanjin Shipping Co, the world’s 7th largest shipping and Logistics Company in the world, filed for receivership on August 31, 2016. Hanjin Shipping Co. bankruptcy caused a major impact not just to logistics and shipping, but to the underpinning global supply chain and its sourcing operations. It has left nearly 80 ships with almost 500,000 containers offshore, with goods worth over $14 billion marooned at sea. The event, considered one of the biggest bankruptcies ever filed by a shipping company, has a disruptive domino effect on the supplier-dense regions of the world, in turn affecting supplier health and sourcing operations.
Topics: supply chain visibility, supply chain resiliency, supply chain risk management, mobile SCRM, multi-tier mapping, proactive risk mitigation, crisis management, solution partner, bankruptcy, hanjin
“50 percent of businesses fail in the first year and 95 percent fail within five years. Better success rates notwithstanding, a significant percentage of new businesses do fail.”
- US Small Business Administration, 2014 Statistics
By now, you’re most likely one of those millions of people that have chosen to Get Up, Get Out and Explore, traveling around the globe to locate, capture and train as many Pokémon as you possibly can. And if you are in the minority, or you are not just ready to admit your obsession to your colleagues, here is a quick introduction to the game1:
On June 24th 2016, citizens of the United Kingdom voted and passed a referendum to leave the European Union. Better known as “Brexit”, the move sent a shock wave through global financial and currency markets. In context of the interconnected globalized economy, Brexit is not a localized phenomenon. Given the significance of the UK to the world economy, the vote has global economic repercussions and its’ impact is not limited to the UK and its citizens.
In early 2016, Facebook-owned Oculus brimmed with confidence following scores of pre-orders on January 6th for its highly-anticipated $600 Oculus Rift virtual reality headset. Oculus founder Palmer Lucky told attendees at CES 2016 that “Preorders are going much better than I could have ever possibly expected. I can’t talk about numbers, but we sold through in 10 minutes what I thought we were going to sell through in a few hours.”
While preorders went better than they expected, what was a competitive NPI window for the VR pioneers quickly snowballed into a botched launch within a few months due to “unexpected component shortages,” leaving the Rift’s avid early-adopters furious, their deliveries pushed back months after the initially promised delivery dates of late-March. In a key window that can potentially leave scars on a new company's brand, the recent delays shed light on how aligning a company’s Supply Chain and Procurement with Design early on is crucial when rolling out a successful new product introduction.
Tesla’s crossover Model X sports utility vehicle – characterized by its unique “falcon-wing” doors – was hit with significant delivery delays due to severe component shortages and issues with direct suppliers’ capabilities and cooperation, compromising the company’s initial forecast and resulting in a temporary stock price drop.
Tesla announced in early April that it was unable to meet its delivery target of 16,000 vehicles for the quarter due to component shortages on about half a dozen of its 8000 parts. At prices for Tesla cars starting at $70,000, the delivery shortfall equates to almost a $100 million gap, which is not minor by any means. In the aftermath of the announcements, Tesla announced the departure of two senior manufacturing and production executives, Greg Reichow, its vice president of production, and vice president of manufacturing, Josh Ensign.
Supply chain practitioners, accustomed to the ongoing disruptions throughout the sub-tier supply chain, are familiar with the usual risks that threaten supply chain continuity: factory fires, port disruptions, force majeure, chemical spills, and so on. But as global supply chains grow more interconnected, seemingly unrelated events can have a ripple effect, branching out and impacting your supply chain.
In this post, we examine three of these less apparent supply chain risk types, explain the nature of their risk in the supply chain context, and present guidelines to help you better respond to and mitigate such risks.