Once you get your company on the right path and it starts to grow, almost inevitably so does the supply chain grow. However, with a bigger supply chain also comes a myriad of problems. In this article I’ll go over the 7 most common (and probably most dangerous) supply chain disruptions that you are likely to face. Hopefully, this will allow you to be more ready for them.
1. Your own Workforce
For a supply chain disruptions to appear, you don’t have to look much further than your own workforce. In fact, labor itself is the single biggest variable cost (meaning one that varies with the level of output) within a warehouse. Even a slight increase in wages can send your product price to the roof and I don’t think I need to even explain the consequences of things like work stoppage and a strike. Those will grind your supply chain and entire production to a screeching halt.
2. Wrong Forecasts
Never expect tomorrow to be like today is. If you plan your future demand based on what your past demand was, you may very likely end up with excess or short stock and neither is a good idea. The global supply chain is much too complex to be looked at this way, but this can be mitigated by a move towards a digitized supply chain that uses advanced analytics and future-oriented forecasts.
This is especially important for companies doing business internationally, but even just on the US soil, you’ll often encounter vast differences in legislation and compliance from one state to another. For example, Florida has different medical waste regulations than Michigan and Michigan has different than Washington. Not knowing these and not preparing for them can be a big roadblock in your supply chain.
4. Price Fluctuations
Price fluctuation can often lead to higher production cost and this in turn ups the risk of losing customers. This is especially prevalent in companies that make their decisions in an information silo, an information management system that is separate and doesn’t communicate with other information management systems.
5. Cyber Threats
Cyber threats are a relatively new breed of supply chain disruptions, but they are getting bigger and bigger. More and more companies are getting hacked and this causes them to lose reputation. Customers increasingly do business with you online and expect their transaction to proceed smoothly. What a lot of companies don’t realize is that most cyber security threats come not from the outside like hackers, but from the inside. That is why educating your employees on this is crucial, if for nothing else than to know which email attachments are safe to download and which aren’t.
6. War, Political Unrest
Political unrest and war are pretty obvious supply chain disruptions. In fact, they are disruptions to normal life, period. Take for instance, the war in Ukraine, which led most airlines to change their flight routes. Because of this, airlines had to change their schedules, recalculate how much fuel they need and change crew hours.
Of all the supply chain disruptions, those made by nature are the most unpredictable and often most destructive. Whether its a flood that forces you to change your transport route, an earthquake destroying a factory, a hurricane or something else, nature can stop your production in the blink of an eye.
Can you prevent these supply chain disruptions? With the exception of your labor as a disruption (and even that is on a long rope) and making better forecasts, no. But you can prepare for them and that way make more qualified decisions for when they happen.
If you have any questions, let me know in the comments below and don’t forget to sign up for early access to Purchase Order Plus software for free.