Supply Chain Disruptions - Managing the Threats

Published by MBA Skool Team, Published on December 08, 2015

A Supply Chain Disruption is an occasion that may happen in any piece of the chain and reasons undesired effects on its accomplishment of destinations and execution. Disruptions refer to events described by a low probability of event and a substantial effect. On account of their restricted and sudden rate of event, interruptions are connected with a high instability regarding their normal effect.

During recent times, supply chain literature and industry practices have been focussing primarily to increase efficiency and reducing costs. It lead to efficient and effective during normal times, but at the expense of being powerless against disruptions. Every now and then continuous and in addition uncommon disasters additionally upset production network operations

Disruptions are a sign that a company's production network is not solid and vigorous.

Image: pixabay

Supply chain disruptions received a greater attention in recent years.

1. Supply Chain has become more complex due to globalization, outsourcing and single sourcing

2. The focus on Supply Chain disruptions has increased

3. Academicians and practitioners are discussing and highlighting the need to adopt practices that can prevent disruptions

Supply chain disruptions frequently result in a direct financial hit for businesses, but the damage a disruption can cause a company’s reputation and leads to longer term consequences.

Disruptive have a tendency to have a domino impact on the on the supply chain: An impact in one area — for example, a fire in a supply plant — ripples into other areas.

The option is to reconfigure supply ties to better handle disturbances, while tolerating any impacts on cost proficiency. In many instances, it is not an all-or-nothing proposition. Companies could choose to implement or plan various types of strategies in several times with particular settings

Preparing for supply chain disruptions

You should undertake a business impact analysis to set up your business to address the effects of supply chain disruption.

Disruptions can be both internal and external which can be break into delay in supply of raw materials, machinery breakdowns or maintenance problems or any other activities related to your business. By recognizing the key business exercises influenced by interruptions to your supply chain, you can prioritize your efforts to concentrate on those exercises that would have the most effect on your end result.

Disruptions in operations and supply chain can be costly to the firm and its investors. Companies have been used to such disruptions and the effect varies based on the disruption. It may not be clear how the disruption influence the firm and impact systematically.

List of Supply Chain Disruptions

Supply chain disruptions are listed based on the following categories such as

• Company Level

• Network Level

• Environment

The three categories are further subcategorized into

Company Level

• Production Failure

• Quality, HR and IT Problems

Network Level

• Distribution Network Clichés

• Demand volatility

• Supply Delay

• Transportation

Environment Level

• Natural catastrophes

• Security Risks

• Political/ Economic instability

• Regulatory and Legal Risk

Handling disruptions in supply chains

Handling disruptions in supply chains can be of different forms and include different types of activities. Based on the activities related to involvement of time all these activities can be classified into two major categories: "Pre-Disruption" vs. "Post-Disruption".

Another classification used for similar purpose is "Proactive (Predictive)" vs. "Reactive"

It says about the measures that can be taken well in advance to handle the risk of disruptive events while reactive refers to reacting once an event commences.

Pre-disruption handling consists of the following steps:

• Identification of Risk

• Assessment of Risk

• Handling Risk

• Monitoring Risk

Post-disruption described three steps to handle disruptions such as

1. Discovering the disruption

2. Disruption recovery and

3. Redesigning the Supply chain

It states that a disruption should be discovered and analysed at first before implementing solutions to recover and then the firm should decide on redesigning the supply chain to become more flexible in the future.

Many companies do not adequately prepare for them. That can lead to have disastrous consequences when catastrophes do strike and can force even operationally savvy companies to scramble after the fact

For example everyone knows about Toyota after the 2011 Fukushima earthquake and tsunami.

To manage the disruptions effectively the two perspectives are crucial and must be addressed.

Disruption Lifecycle

Disruption Life cycle is of two phase, Potential Disruption and Actual Disruption. There is a time of time over which an interruption is inactive and just a probability; it exists essentially as a Potential Disruption. When an instance of the disruption occurs in reality, it is an Actual Disruption.

Pre-disruption helps you to discover the potential disruptions and prevent the actual disruptions.

Post disruption view handles the Actual disruption once it has occurred and analyse the disruption to prevent the risk of happening the same in the future.

Reducing the Risk of Supply Chain Disruptions

Complexity quality nature can mean diminished efficiency as Manager's fight with the regular threats of delays and Fluctuations, and it can provoke extended danger of disruption, in which conditions between items can convey everything to a stop. Controlling the measure of complexity nature can hence prompt higher expense effectiveness and diminished danger, which is a win-win. We should begin considering so as to examine hazard.

Managers can reduce risk by creating a flexible supply chains designs to control the risk that might occur rather than allowing it to spread through the entire supply chain.

So there are two strategies for reducing supply chain delicacy through regulation while at the same time enhancing financial performance: (1) Breaking the supply chain into segments or (2) Dividing the supply chain to areas.

Large companies can segment their supply chains to increase profits and decrease supply chain risks and fragility in the supply chain. There should be a specialized capacity supply chain for the products and goods which will be of high-volume commodity items with low demand uncertainty.

The supply chain needs to be flexible even when there is a centralized production to avoid concentrating risk in a single plant or production line.

Containing the effect of a disturbance can likewise mean regionalizing supply chains so that the effect of losing supply from a plant is contained inside of the area.

Port-Related Supply Chain Disruptions

As importance of ports increasing, the port-related disruptions can create effect on a network of supply chains. This unprotected situation of port needs to be addressed to ensure the proper functionality of ports and enhance a proper supply chain.

Seaports play a crucial role in the movement of cargo within the intermediaries of supply chain. Transformation of seaports from a classic gateway to a very important value adding to the logistic related activities. As the supply chain trends and practices increased and developed, the supply chain disruptions also increased as it started from the origin ports which are easily inflame in today’s business environment. Identifying measures where the port management can implement to reduce the Port-Related Supply Chain Disruptions and reduce the occurrences of threats.

Port-Related Supply Chain Disruptions threats are defined as operational risks involved in port processes that are capable of interrupting the continuity of upstream and/or downstream supply chains.

This article was authored by Chaitanya Deepak Beera from IIM Shillong


How to Handle Disruptions in Supply Chains –An Integrated Framework and a Review of Literature, Behzad Behdani, Arief Adhitya, Zofia Lukszo and Rajagopalan Srinivasan

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