Supply chains are like the heartbeat of manufacturing and production facilities. You can’t even afford to have them stopped even for a moment. However, supply chain failure and disruption is a bitter reality of the business. Sometimes enterprise succeeds in resolving it and mitigating its effects. Then there are times when supply chain disruption comes with a list of long-lasting repercussions.
5 Causes of Supply Chain Disruption
For supply chain planners and managers, it is essential to know what events, inactions, and discrepancies precipitate into supply chain disruption. One can only take preventive measures and make risk mitigation plans when they are fully aware of the underlying reasons behind supply chain disruption.
External Causes of Supply Chain Disruption
A supply chain system doesn’t work in isolation. It works in the greater industrial and manufacturing landscape where many things are not under the control and supervision of supply chain managers. These are the three major external reasons that can derail a supply chain.
Environmental Occurrences and Natural Disasters
Earthquakes, wildfires, cyclones, typhoons, tornados— all these environmental occurrences of extreme degree can disrupt a supply chain system irrespective of its strong foundation and robustness. There is no way around this cause of supply chain disruption.
In September 2018, a cyclone over the Philippine Sea interrupted all the shipping routes proceeding north and south to the South China Sea. It resulted in disrupting the supply chain of several national and internal enterprises of the region and beyond. Likewise, tornadoes and earthquakes can also cause the same disruptions that culminate in supply chain failure.
One can’t stop cyclones or earthquakes from happening, but it is possible to make alternate plans to minimize their effect on the supply chain. For instance, supply chain managers should know about the climate vulnerability of the origin, destination, and routes of their supply chain. This can help them in making strategies to keep the ball rolling.
Let’s suppose an enterprise provides wholesalers products in a tropical region that experience a high number of small and large cyclones during summer. To ensure their products remain available to wholesalers during that period, the enterprise can ship some consignments in advance, given that the cost-volume-profit analysis allows it to do that.
Government Policies and Regulations
This is another external cause of supply chain disruptions and more frustrating than the first one because they usually happen due to erroneous and half-baked decision-making of some individuals. Changing government policies have become the biggest hurdle and challenge for supply chain managers to address of late. They have to develop a supply chain strategy that is minimally contingent on quickly changing rules and regulations.
From trade restrictions to new taxations and labor laws to border control, there is a host of things a supply chain manager has to take into account while establishing a supply chain blueprint of an enterprise. Let’s try to understand the effect of government regulations and policies on the supply chain with an example.
A manufacturer is delivering automotive components and parts from Mexico to contractors in California. A change in border laws about the shipping of machinery parts can derail its entire supply chain. It can result in its trucks stranded at the border and waiting for the US customs’ go-ahead, which is doing its work and making sure new regulations are being complied. If the enterprise doesn’t address this bottleneck at the transportation and delivery stage in advance, it will delay the fulfillment of scheduled orders.
Transportation Issues
Reasons that are part-external and part-internal can also disrupt the supply chain to an extent. It will be easier to understand if we break down this issue in its parts.
Fuel Cost:A strike by OPEC or local oil distribution system can hike the price of fuel. Increased fuel prices can lead companies to delay their shipments because the extra cost doesn’t just eat into their profits but, in some cases, also infringes on the breakeven point.
Route Efficiency and Mode of Transportation:Truck, train, or ship— what route and mode of transportation you use also play a role in the continuity or disruption of a supply chain.
Internal Causes of Supply Chain Disruption
An enterprise can also face supply chain failure and disruption due to these two internal issues.
Not Keeping Up with Technological Advancements
When end-to-end visibility and high agility have become integral elements of supply chain management, companies that are persisting with the “legacy-style” supply chain system are bound to face a disruption one way or the other. Experts agree that manual and excel-based methods no longer offer the attention to details that a highly extensive and complicated modern supply chain system requires.
Companies that incorporate the realities of the fourth industrial revolution (Industry 4.0) and big data in their production and delivery ecosystems can succeed in creating responsive supply streams.
Inaccurate Forecasting and Planning
Last but not least, miscalculated planning and forecasting is a major cause of supply chain disruption. When enterprises fail to plan for future demand, they make themselves vulnerable to supply chain failure. Similarly, the absence of dynamic planning concerning yard management, facility capacity, container, and transportation management also leads to disrupt a regular supply chain.
From the above discussion, it is evident that an experienced and proactive supply chain and logistics manager has to be stationed to prevent supply chain disruption and minimize its effects. When an enterprise has seasoned supply chain executives, it acquires the ability to reduce or even neutralize the fallout of external factors of disruption.
On the other hand, poor supply chain management can even create issues out of thin air that eventually leads to sever a smoothly functioning supply stream.
If you want to make sure your organization doesn’t undergo supply chain disruptions due to internal issues and failings and can withstand external factors of failure, get in touch withCompass Business Development. From helping you with your supply chain network to logistics management, the company ensures results that lead to better business growth and increased enterprise value.
