If the low level conflict between North and South Korea escalates, supplies and markets in South Korea will most likely be affected. The degree of disruption, if it occurs, will depend on the spill over into Japanese, Taiwanese, Philippine and Chinese trade. While the situation in another hot-spot, the South Asian region, is still “relatively” stable, it can be tipped into crisis mode by any number of flash-points erupting into conflict. Iran, Afghanistan and Pakistan are but a few of the areas where political instability can turn into critical supply issues.
Most companies address (to a greater or lesser degree) these and other disruption issues as a matter of basic supply chain strategy. However, the ability to react if, and when, the disruption occurs is critical to lessening the impact on the business while being able to take advantage of the competitive opportunity presenting itself. Being able to fulfill obligations to customers and suppliers depends on one’s ability properly see, develop and execute an action plan that limits the effects of the disruption and ensures that supply can be maintained.
Visibility and Agility – The Key to Adapting to Traumatic Supply Disruption
When traumatic supply disruption occurs, the more quickly a company can respond, the more likely it is for the negative consequences to be mitigated. There are two fundamental components to minimizing supply chain disruption effects. The first is a continuity plan, while the second is a business disruption insurance program.
To address business continuity when traumatic supply chain disruption occurs, companies need visibility into virtually every aspect of their supply chain at the product level. They need to be able to analyze:
- what supplies are at risk
- what quantities are at risk
- what alternative supply sources exist for the products at risk
- what logistics capabilities exist to insure supply continuity
- what are the best total landed cost alternatives for the products to be supplied
- what are the compliance issues related to supply fulfillment
- what are the time constraints in restructuring the supply availability
Once analysis is complete, the organization needs to swiftly execute a comprehensive procure-to-deliver capability to reduce the costs associated with the implementation of the alternative sourcing. The level of agility in execution is directly linked to the access of information, the speed of analysis, the response time for decision-making, and the ability to put the decision plans into action.
Effectively responding to supply disruption requires systems that present information comprehensively from source availability and inbound logistics options to the manufacturing or distribution network. Visibility into product, supplier and service provider compliance is integral to the supply acquisition decision. Finally, integrated total landed cost management is an important supporting function for insuring optimal supply purchasing decisions.
By definition, traumatic supply disruption can be anticipated and even planned for. However, until the disruption takes place, there is little that will be done in the way of supply disruption mitigation. When it happens, a company’s success (whether real or relative) will depend on the speed by which it reacts and its agility in putting plan to action. Those companies with highly tuned global supply chain systems will be the winner both in normal times, and specifically when supply disruption occurs.