Immunizing your supply chain network from terrorism

With the unfortunate rise of terrorism in the last couple of decades, it is imperative that companies incorporate immunizing their supply chain networks as part of their core risk mitigation strategies.

I have listed down some of these mitigation techniques below:

1. For starters, you must opt for transportation insurance. This will protect them from other disasters or shortfalls as well.
2. You must look to distribute the risk by avoiding total dependence on any one particular transport medium (railways, airways or waterways). In case any one of these mediums is disrupted, they can still rely on the other one.
3. You must maintain adequate buffer inventory. An optimized point must be found between just-in-time principle and the just-in-case principle. Use of predictive and prescriptive analytic techniques can help you achieve this.
4. You must shorten their supply chains in terms of distance and the number of parties involved. This will reduce the vulnerability of the network as the attackers will then have lesser points of attacks. Conversely, it also reduces the complexity and is easy for the company to manage the supply chain.
5. You must build a strategic alliance with your suppliers and logistics providers and not just a business relationship. This will ensure that if need be they prioritize your consignment and the entire model stays stable (at least for your company).
6. You must collaborate and educate your suppliers and logistics providers about the associated risks and the mitigation techniques so that the strategies are deployed across the entire network.
7. Lastly, you must also collaborate with your customers (to whom you are the suppliers) so that they understand risks of the supply chain. If collaboration doesn't work, then you must incorporate clauses in your agreements to avert dire consequences.

Reference: http://spendmatters.com/2010/11/01/terrorism-and-the-supply-chain-strategies-for-coping-with-a-form-of-supply-risk-we-cant-ignore/

Flooding in Thailand Disrupts Global Supply Chain, But Not Often

Recent flooding in Thailand has interrupted the supply of a large number, and wide variety, of that nation's exports. Early predictions are that these floods will disrupt hundreds of supply chains in industries all over the world, from the United States, to Japan, Taiwan and beyond.

Several industries have been hit particularly hard. In the electronics sector, for instance, computer manufacturer Asutek has publicly stated that they only have an inventory of hard disk drives to last through the end of November. And by some estimates, the United States gets around 1/3 of its imported hard drives from Thailand.

This year has been particularly difficult for supply chain managers, between a volcano eruption in Iceland, an earthquake, tsunami and nuclear disaster in Japan and now flooding in a major industrial area of Thailand.

But in Thailand's case, supply chain managers should not necessarily look at this latest disruption as a case of poor decision making, but rather an example of risk management in supply chain planning. Joseph Sternberg of the Wall Street Journal has an excellent article that discusses this very idea.

While some armchair supply chain analysts may wonder why some companies might decide to build factories on a known flood-plain, Sternberg makes the point that Thailand actually offers many advantages that make it an attractive location to source elements of a supply chain, and that these advantages outweigh the relatively rare instances of natural disasters in the area.

I feel that in light of the fundamentals of supply chain management that we discussed last week, this is a particularly good example that remind us that risk management strategies do not eliminate risk entirely, but advance planning can allow a company to mitigate these disruptions when they do occur.