The NEW Definition Of Supply Chain Disruption
It has become a daily occurrence: Supply chain pros choking on their morning coffee as they absorb the overnight changes impacting their plans and results. Then begins another day of scrambling and recovery. Personally, as I have been reading the news over the last months, I have reflected on an interesting question – or at least it is interesting for us supply chain geeks: What exactly constitutes a supply chain disruption?
In the old days, meaning up to year 2018, most supply chain professors would have simply answered that a disruption occurred when product was not available where needed due to a break down in the supply chain. What gives me pause now, is that most products almost always are available – but during a disruption at a much higher cost. So, in our minds do we still consider a cost increase of, say, 25% to be a disruption?
The next question is then whether a 25% tariff might be a disruption? Or even a 5% tariff hitting a cost conscious supply chain. It doesn’t matter that the tariff may be “man-made” or government-made. Nobody would dispute that the prohibition from using Huawei products in certain areas constitute a disruption nor that is “man-made” or government-made. But it may matter that the cost increase is prohibitive for the supply chain owners.
If that is correct, then we are seeing a record number of disruptions now, and so far with no end in sight.
Why get hung up on semantics? Over time, supply chain pros have learned to do risk assessments for disruption. But very few have been done for tariffs; however, if tariffs constitute de facto disruption, then we should include shift in tariffs in our risk analysis going forward. I bet it is a lesson that is hard learned in some organizations this year.
ALOM has followed the tariff situation closely for over a year. This has allowed us to save our customers millions of dollars by being able to navigate the tariffs on their behalf. The key to success in an uncertain supply chain environment is to be set up for change. Planning for agility and being vigilant as well as having excellent supplier relationships.
2019 continues to be a year of unprecedented uncertainty. It is still too early for 2020 predictions. But agility and vigilance will be success factors for many years to come.
This blog first appeared on Alom