Can an earthquake shake your Supply Chain?
- March 13th, 2012
- By: Navdeep Sidhu
Yes, it certainly can and a tsunami can wipe your profits as well. Companies like Toyota are still recovering from the effects of the earthquake and tsunami last year in Japan which not only disrupted the supply-chain but also brought some plants to a complete halt. Here is some food for thought for developing a risk mitigation strategy.
By having a contingency plan in place, the impact of natural disasters on the supply-chain be reduced. Some of the strategies that can be used to reduce risk are:
- Reducing dependence on single source, having at least 2 suppliers for each component (preferable in different geographies)
- Dispersing production facilities geographically; ability to produce a product (e.g. a specific model of a car) in at least 2 geographies
- Holding additional stock during certain months (hurricane or monsoon season)
- Ad-hoc or back up supplier strategy; using a new supplier if your main supplier is unable to deliver
- Alternative logistics plan in case the supplier is able to produce but the supply route is disrupted or damaged
It may be the time to re-think the supplier strategy and also upgrade your B2B systems to be able to quickly on-board ah-hoc or seasonal suppliers.