Many different external factors can threaten the supply chain both globally and locally. While it can be difficult to predict when the next political fiasco or natural disaster will strike, looking to recent issues can provide insights into what sorts of incidents manufacturers can prepare to face. BSI Supply Chain Solutions recently released its latest Global Supply Chain Intelligence report, which examined the major events that rocked supply chains around the world in 2014. By examining this data, original equipment manufacturers (OEMs) may learn which areas they need to better protect and what steps they can take to do so.
What issues triggered negative results for businesses?
There are countless threats looming over OEMs' shoulders, but natural disasters ranked as the top issue for supply chain companies. BSI also pinpointed human rights issues, such as child labor problems in nations like Haiti and Jamaica, as being a real concern last year, among many others including terrorist threats and strikes at coastal ports and airports.
"Companies are facing an increasingly wide range of challenges to their supply chain, from human rights issues to natural disasters," said Shereen Abuzobaa, commercial director for BSI Supply Chain Solutions. "Such complexity creates black holes of risk for organizations, both directly affecting the bottom line but perhaps more seriously, hidden supply chain risk, damaging a company's hard-earned reputation."
What was the financial impact of these issues?
No matter what events and issues create delays and other problems within the supply chain, there is almost always a financial loss as a result. The port strikes and subsequent congestion in the U.S., Germany and Asia Pacific led to major monetary deficits. For instance, BSI revealed that shipping companies using Hong Kong ports lost $1 million per month, while companies with operations in Belgium lost a collective $1 billion due to strikes in the region.
This year, supply chain terrorism was a main concern due to threats including ISIS' extortion and cargo theft in the Middle East that added up to $3 million in lost revenue daily. Natural disasters are always problematic for supply chains, and last year alone events like flooding led to $32.8 billion in business damage, the report found.
What can OEMs do to mitigate supply chain risk?
Preparation is crucial for any supply chain company to protect themselves from as much damage as possible in light of external threats. James Cascone, a partner at Deloitte & Touche LLP as well as the leader of the company's Global Restaurant and Foodservice Industry, explained to The Wall Street Journal that enterprises need to take a broad approach to risk assessment. It is essential to examine the various aspects of the supply chain that could come under fire in the event of an arising threat, rather than just focusing in the major considerations like procurement and delivery.
He suggested to the source that companies should first assess their current risk mitigation structure in terms of the technology, processes and structure already in place. This will allow OEMs to get a clear picture of what they have and what they still need to invest in and implement, so they can begin to develop strategies to deal with various potential scenarios.
By having these policies and procedures in place ahead of an unexpected issue, OEMs can save precious time addressing the problem. This will allow them to cut down their financial and other losses while they work to rebound from whatever obstruction interrupted their operations. It will also help to retain customers, prevent lost sales and revenue, and keep the company's reputation in tact, whereas getting caught off guard may negatively impact all of these factors.