Expecting your supply chain to be perfect isn't a tenable solution. A more realistic plan for the future may include preparing for certain types of common accidents while labeling others as less likely or more extreme. Since problems will arise no matter what, complex companies that manage major supply chains should know the difference between major disruptions and their more manageable counterparts.
The phrase "normal accidents" appears in a recent Supply Chain Management Review article about adapting to possible crisis. It used this as just one piece of its larger advice to companies, which is to avoid panicking when some sort of catastrophe strikes. Understanding the potential costs of different disruptions and their lasting effects could allow plans to be more effective.
First, it helps to think of all the different potential events which could affect supply chains, not just the most dramatic ones. Triple Pundit listed several "risks," and several of them might sound innocuous on the surface.
For example, market growth and revenue base diversity are apparent benefits, but also represent possible changes to the status quo. Over the years, businesses have faced abstract internal issues, proving that the cause of a disruption isn't always as concrete as a storm or criminal activity.
"Disruption isn't always as concrete as a storm or criminal activity."
Writing for the Harvard Business Review in 2014, David Simchi-Levi, William Schmidt and Yehua Wei begin by distinguishing the "low-probability, high-impact events" from the more regularly seen ones.
According to them, this latter group contains such instances as "poor supplier performance, forecast errors, transportation breakdowns, and so on," but can usually be predicted using historical data and "traditional" managing methods.
The new normal trends
When a formerly rare threat becomes more common, supply chain managers may have to treat it with new seriousness. One example of this is the rise of cyber attacks and digital threats, something which may appear in the news more frequently given the increasing business and government attention toward it.
Depending on where supply chains operate, businesses may also find increased geopolitical problems making their supply issues difficult. Although situations like this can be unstable by definition, long-lasting disruption risks can prompt companies to choose flexible solutions to keep their supply systems more adaptable. Raconteur addressed this in an article last year, noting the pressure put on businesses to work faster while still managing ever-more complex types of supply chains.
As such, we've seen a two-pronged development, the source said, calling for new technology to reduce the strain of incessant demand.
Acknowledging all risks
The authors of the Harvard Business Review piece also acknowledged the influence of what they called "hidden risk," which may run counter to the traditional ways of calculating the largest possible problems for businesses. This specifically refers to suppliers that seem to have low cost but actually pose a higher risk later on due to unforeseen factors.
With strategic sourcing, businesses may be able to build a plan around the best suppliers for their brand, taking all possible risks into account. If they expect some disruptions and have the tools to work around them, companies may avoid making future mistakes.
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