No business is an island. While many new entrepreneurs receive tips about business matters. They can control, like their marketing strategy and their cash flow. Beginners often overlook issues that happen outside the business but have a profound effect on profitability. Perhaps the best example of this is the supply chain. Supply chain disruption happens, and it is all but impossible for business leaders to predict them or control them. Still, leaders should strive to understand what they can about disruptions. Which includes the common causes and the best ways to respond.
Short-term disruptions tend to be caused by events that lack severity and occur with relative frequency. As a result, members of the supply chain have devised methods for recovering from such events with some speed. So businesses are unlikely to experience significant disruptions. And if they do, disruptions should persist for only a matter of weeks. Some examples of short-term disruptions include:
Physical products must be transported from where they are harvested to where they are manufactured to where they are sold. Though logistics has radically improved thanks to the advancement of delivery-related digital technology. There are some transportation-related failures that continue to occur. Such as cargo theft, damages from shipping and traffic delays.
Typically, businesses can avoid the most severe transportation-related disruptions with research, analysis and monitoring of their supply chain partners. However, sometimes a severe transportation event causes long-term disruption. As occurred in 2021 when the Ever Given ran aground in the Suez Canal.
The prices of raw goods always set baseline costs within the supply chain. Unfortunately, many businesses fail to account for the fluctuation of raw good prices. And as markets shift unpredictably, businesses can succumb to supply chain risk.
Fortunately, recovery from unexpected price increases can be straightforward. Businesses should conduct careful research and analysis to develop strategies surrounding the prices of materials in their supply chain.
A type of disruption that is becoming more and more common, cyberattacks are also becoming more and more severe. As long as businesses are able to detect a cyberattack and respond rapidly.
Most cyberattacks should result in only temporary interruption of service, which means a short-term disruption within the supply chain. For example, the 2021 cyberattack on the Colonial Pipeline resulted in a disruption of fuel along the U.S. East Coast for less than a week.
It is possible that the future could bring cyberattacks that result in long-term disruptions. Businesses should research and analyze the cybersecurity solutions and strategies employed by partners in their supply chain and bolster their own cybersecurity to reduce vulnerabilities as much as possible.
When a disruption to the supply chain continues to have impacts for months or years. It is a long-term disruption that will have major ramifications on a business’s annual financial reports. Typically, the type of event that causes a long-term disruption is uncommonly severe.
Affecting not just supply chains but the health and safety of large populations of people. Though businesses cannot avoid long-term disruptions with 100-percent certainty. As these events tend to be rather unpredictable. They can strive to reduce the risk of sustained damage.
Volcanic eruptions, floods, earthquakes, droughts, wildfires, hurricanes, tornados, tsunamis — natural disasters like these can disrupt supply chains for months if not years. Some natural disasters result in damage that requires intensive repair to infrastructure like buildings, roads and bridges.
While other natural disasters obliterate the productivity a region previously enjoyed. For example, the California drought has impacted farmers’ ability to deliver certain kinds of produce. And further, dry conditions have permitted the proliferation of devastating wildfires.
Unfortunately, some natural disasters are likely to increase in frequency as a result of global warming. Businesses can try to diversify, so if one region succumbs to natural disaster, they have another region to fill the gap in their supply chain.
Only a handful of countries are considered politically stable — and the United States isn’t one of them. Civil unrest comes in many forms, from weak protests to military coups. But severe instability can cause long-term disruptions to supply chains.
Some of the most insecure regions also tend to be vital to global supply chains; in 2010, Egypt was a prime destination for business outsourcing, and in 2011, the Arab Spring forced businesses to suspend operations in Egypt and eventually relocate to more stable zones like Europe.
Political events that can impact the supply chain usually have warning signs. So businesses need to pay close attention to the political activity around regions through which their supply chains run.
A business’s supply chain is its lifeline, so when the chain experiences a disruption, businesses need to fight to survive. Business leaders should strive to mitigate the risks to their supply chains, which means doing due diligence.