You would have to have been isolated in a bunker for the last few years to have missed the number of natural disasters that have happened. It can be debated whether they are becoming more frequent or more violent, however, what is indisputable is that the impact of these natural shocks is of greater significance and impact on global trade particularly driven by the recent earthquake/tsunami chain of shocks around Japan that impacted many companies and continues to do so.
One of the quickest impacts, which you may or may not have seen, was on the shininess of new cars. Many of the paints used on cars contain Xirallic pigments which produce “a stronger glitter effect than with all the other pigments”. The only plant that produces these pigments just happens to be located near to Fukushima and was shut down temporarily in the aftermath of the earthquake and tsunami. The result was that certain colours of paint such as black and red were temporarily unavailable.
Whilst the unavailability of certain colours of cars isn’t itself life threatening, from an economic impact perspective the costs were high.
Having recently spent a few days at the ProcureCon conference, one of the topics of discussion was around supply chain resilience and risk management. A great example, which brought the risks and opportunities into focus, was again in relation to the Japanese events. One technology company had a well planned supply chain continuity approach and understood their whole supply network, not just their tier 1 or 2 suppliers, but much deeper. This enabled them to rapidly assimilate the potential affect on their company within 24 hours.
Another player, who hadn’t invested in such a knowledge base, relying on their supply chain to ‘self manage’, were still trying to understand the impact and options weeks if not a month later. I’ll let you surmise which company managed to sew up alternative supply sources and turn the risk into an opportunity.
This example brings into focus the need for companies to truly understand their supply networks. Whilst most people think that this is a topic for the large global players, with natural disasters such as localised floods, whether in Australia or UK, able to knock out supply sources, that can be called into question. There is an importance for any company that is a part of a supply network no matter how small their role to understand where they fit in the scope of the overall network.
Often what makes the market leaders in this field, is not just having access to the data but also having the ability to quickly bring together the collective knowledge and stand up an ability to assess the impact and put in place mitigants. Such a task is often more complex than the teams are used to and required at a time when the team is under the pressure.
Having listened to the various examples and stories of success and failure, it highlights a potential area of functional innovation.
Taking a lateral view, then other areas that have a similar problem, are people such as: first responders; security services at large events; and airlines coping with adverse weather. For these groups it is more of a regular occurrence and they can justify investment in fixed infrastructure, however, increasingly there are technologies that are more virtual in nature.
So if there are potential tools that could be ported across with a small amount of investment, then the other side of the coin is the data, information, & knowledge. With a few small tweaks to the data and information that supply chain management teams capture they could create a rich picture of their supply network relatively simply.
So in summary the inputs are improved information, skillsets, and toolsets and the outcomes better, quicker, decisions.