Supply chain risk has increased exponentially over the last several years. Mother nature is unpredictable which is the antithesis of what the supply chain needs to perform predictably and profitably. For example, the California wildfires created a logistical nightmare – trucks were parked along the 15 freeway, rail cars were stacked up and being re-routed as best as possible, trucks in and out of Southern California were affected and even the ports were impacted. I was asked to comment about the fire in a Wall Street Journal article. This occurrence was not an isolated incident. There are almost too many examples to choose from; however, one that pops to mind is the Japan earthquake. It sent ripples throughout the world in supply chain disruption. In the U.S., hurricanes, tornadoes and floods can have a dramatic impact. Certainly everyone remembers the impact of Hurricane Katrina. And this doesn’t even begin to address other supply chain risks such as the port strikes and political unrest.
Successful executives will not hide their heads under a rock! Instead, executives will incorporate these risks into their strategic plans and risk analyses. Some of this is uncommon common sense. If you have a key supplier located in a hurricane zone, you should develop a backup. If you want to make sure supply will remain largely uninterrupted, it will require ongoing relationships with multiple suppliers. You can also work with your suppliers to strategically position inventory. There are a host of options. The bottom line is that pre-planning will work. Panic after an event will just create unhappy customers and give your competition a definite advantage.
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