Supply-chain disruption occurs more often than most organizations anticipate, and the impact associated with disruptions is increasing. Organizations plan as if catastrophic or “black swan” events occur once in a generation, but in reality, these types of disruptions are occurring every two or three years.
Companies need to focus on near-term supply-chain restoration. But they must also keep longer-term strategic thinking in mind.
Most outside risks that supply chains face come from political, economic, climate or cyber threats. Organizations must assess and understand their vulnerabilities in these dimensions.
Disruptions negatively impact operations. These events can increase the price of raw materials, make shipping more difficult, extend lead times to customers and enhance supplier risk. Although these impacts can occur to any business, some are more vulnerable than others. If companies are unprepared to navigate disruptions, the magnitude of these risk scenarios will be enhanced.
Some factors that can lead to increased negative impact include:
With most disruptions, organizations need to first focus on near-term supply-chain restoration. But they must also keep longer-term strategic thinking in mind as they consider the supply chain across three horizons:
These horizons ensure organizations have the tools to address immediate issues and restore supply-chain operations, while also positioning themselves for long-term success.
Now is the time for companies to begin restoring, rethinking and redesigning supply chains to set defenses for the next disaster. Consumers will increasingly demand heightened levels of service and expedited delivery. Going forward, companies will need to be more flexible and operate with speed and accuracy to remain competitive and survive supply-chain disruptions.
Andy Prinz is a managing consultant, and Chris Iannacone is a consultant, at PA Consulting.
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