April 03, 2017

Beyond Speculation: How to Handle the Increasing Type & Frequency of Supply Chain Events

Hannah Fliesler

It is one thing to read the news to keep up with current events, but how do you know which events are relevant risks to operational performance? Are you hearing about events from other coworkers, suppliers, or even customers days after they have happened? Some events receive an immense amount of news coverage that later reveal little-to-no business impact. However, the most troubling are events with little to no coverage that end up causing industry-wide shut downs. Today we will look at specific examples of both, and what you can do to focus your time and attention on the “right” events.


Leverage Information, Not Emotion

Natural disasters tend to attract much more attention than other types of events. Take for example Hurricane Newton. In early September 2016, this hurricane developed quickly off the Mexican coast and rapidly intensified to a Category 1 hurricane in just 24 hours.

The news cycle was intensely focused on this event. Weather analysts scrambled to predict the potential impact, local residents frantically stocked up on supplies, and companies braced for impact. Adding to the pressure, two potentially destructive Typhoons had made landfall in Florida and Japan just days before, so risk management resources were tight.

However, for all the attention Newton had garnered, it fizzled quickly. The promise of destructive gale force winds turned into harmless bouts of massive rainfall.  Little to no damage was announced by major companies, and business continued on as usual.

Unfortunately, some of the most impactful events rarely make major public headlines. Furthermore, even if an event is reported, rarely is the potential supply chain disruption spelled out in the press release.

Read Between the Lines

Many companies have been crippled by just one of their supplier sites going down, especially if it is a single or sole-source material. For example, after the 2011 Japan tsunami shut down a Merck site, a major producer of pigment, automotive customers were unable to order specific colors of cars for months. Because this tsunami initially received a windfall of press coverage, while many companies were affected, at least the impact was known to be severe pretty early on.

That is not always the case. Contrary to popular belief, factory fires are one of the biggest sources of supply chain impacts in the world. Multiple industries encountered this crisis in 2012 when an explosion destroyed a Germany-based Evonik Industries' plant. As this plant supplied a large percentage of a specific resin (a key component in vehicle production and medical device manufacturing), companies across all industries had to scramble to avoid a complete line down. See below for one of the first stories to break on this fire:

evonik.png

(Source: HazardEx)

The alert discusses only a few materials made onsite, said to be involved in the production of fire retardants, flavoring and fragrances. Unless those in the automotive and life science industry knew this site was especially important, they would likely have looked it over. By being able to identify this is a key supplier and site, companies can extract valuable information from an otherwise vague article before the sites real impact breaks. Why is this important? After this fire, it was reported that there was a global shortage of this specific resin, and those slower to find an alternative paid extremely high premiums or experienced supply shortages.

Strengthen Supplier Relationships

Are you depending on your suppliers to let you know if there is an issue? Consider in a crisis event that suppliers may prioritize certain customers depending on their business relationship. Can you be confident your suppliers would let you know of an issue in advance? In the case of the Evonik fire mentioned above, while the fire occurred on March 31, a press release wasn’t made public until four days later.

evonik2.png

Relying on your suppliers for notification is much more successful when you have clear and open lines of communication. Don’t wait until the press release- require suppliers to notify you.

Look to Other Mediums

In today’s interconnected world, news travels fast. The prevalence of social media has magnified the speed of news delivery, and people are turning to “crowd sourced” content more than ever before for their media consumption. Twitter, which has historically been just a delivery point for news, is now a major source for breaking and developing stories. Harnessing these new platforms gives you a unique advantage. Many companies use Google alerts or Twitter monitoring to monitor brand sentiment, but for a companies who are considering doing something as time-intensive as developing a keyword strategy, this can be a time intensive and less reliable way of getting disruption intelligence. There is a 24x7 service that is focused solely within the context of supply chain disruption, analyzes these events for you, and runs them through the context of supply chain and risk. That service is Resilinc’s EventWatch, a best in class tool for this specific purpose.

In Summary

If you are solely using general news sources and supplier outreach to stay aware of supply chain disruptions, you could be incredibly exposed. As not every company has unlimited resources to dedicate to event monitoring, consider tailoring your approach with the suggestions above.  Want to learn how Resilinc can provide you the solutions to build a best-in-class supply chain resiliency program?

 

Feel free to reach us at info@resilinc.com , if you are considering a risk management solution or have more questions on what it means to implement one in your organization.

Want to learn how Resilinc can provide you the solutions to build a best-in-class supply chain resiliency program?

 

Download Resilinc's Ultimate Guide to Supply Chain Resiliency Program Success

 


 Sources:

Hanjin Company Website

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