Suddenly, a crisis comes along that disrupts the smooth running of your supply chain. By following a number of measures, you can lessen the consequences and potentially anticipate a new crisis.
The vulnerability of companies to crises impacting the supply chain is greater than ever. That is why it is increasingly important to take various measures to strengthen the supply chain, both in weakening and preventing crises. Setting out a number of emergency scenarios is the most important, but even if these are not available, there are some short-term actions that can be of help.
Supply chains have become more vulnerable
Several factors have made companies more vulnerable than before to crises of all kinds that affect the proper functioning of their supply chains. Globalization is one of them: there is a greater presence in, for example, Asia or Latin America, which makes the chain longer, more cumbersome and also riskier. But the element of competition has also played a role here. This puts pressure on the cost, which also reduces the reserves. Therefore, when a disruption occurs, it is more severe. That often means the scope of the damage is bigger.
A few examples
Goods are a typical example of this. From an accounting point of view, a stock of goods is an asset on the balance sheet, it is cash that is stuck and cannot be used for other purposes. Given the pressure on prices, many companies are starting to reduce stocks, which makes them more susceptible to a crisis. Another illustration is working with different suppliers to supply critical materials. Limiting this to one supplier is cheaper but increases the risk when that supplier ends up having difficulties delivering.
Appointing a Crisis Management Team
Does it need saying that crises can take on different forms? Natural disasters of all kinds, political instability, social unrest or the latest example: the coronavirus. Prevention is better than cure, but that does not mean that measures cannot be taken in the short term. Setting up a fully-fledged crisis management team usually offers great added value. One condition is that it is composed of people who, in terms of workload, are given sufficient room to fully discharge their duties. In other words, this team is given priority over everything else.