Even when your supply chain is running smoothly, even when you have a contingency plan in place, there’s no predicting natural disasters. And when disasters happen, you may discover that your company is not as well prepared as you thought.
Look back three years to the devastating earthquake and tsunami that slammed Japan and crippled not only their economy but the supply chains of many businesses. The double disaster exposed critical weak points in the supply chains of multiple global businesses, including electronics and automobile manufacturers.
At the time, Japan dominated the market for many electronics supplies. They accounted for roughly one-fifth of the world’s supply of silicon wafers used to make semiconductors and about 90% of the world’s supply of a chemical used in making circuit boards for telephone handsets. Japan also provided a key material used in liquid-crystal-display panels for a large number of manufacturers. When those businesses were unable to function, so were many supply chains.
General Motors had to close a factory because of the crisis in Japan, because it couldn’t get enough of a part that was largely made in Japan from any other sources. Boeing also suffered, because nearly one-third of the parts for its 787 Dreamliner, as well as parts for their other in-production commercial airplanes, came from dozens of Japanese suppliers.
So how can you keep a natural disaster from crippling your business?
Yogesh Malik, a partner at consulting firm McKinsey & Co, offered a great analogy: “What good companies do is look at a supply chain as a movie, rather than as a photo.”
Basically, instead of looking at your supply chain exactly how it exists right now, in this moment, you need to look at a number of factors to decide whether the chain will hold for the next five years. You have to consider factors like rising oil prices, environmental activism and regulatory risks. “It’s not a matter of if, but when, something goes wrong,” Mr. Malik stated.
To do so, you have to familiarize yourself with the entire length of your supply chain. Know whether the companies you deal with buy parts from a producer that relies on raw materials or smaller components that come from yet another location. These hidden bottlenecks can back up your supply chain if you don’t know about them and don’t have an alternative.
Have a Plan
Preparing for natural disasters and creating backup plans require experience and expertise. Does your company have the type of supply chain talent that can help you anticipate crises and put action plans in place?
ZDA Supply Chain Recruiting knows where to find the supply chain professionals who can keep your company afloat after a natural disaster – or anything that causes a breakdown in your supply chain. Contact us any time you’d like to talk about how to hire the people you need.