A well-functioning supply chain is a vital part of a successful business. A disruption can disrupt production, shipment and inventory levels, ultimately impacting sales and customer satisfaction. Disruptions can be caused by many factors, such as natural disasters, pandemics and economic fluctuations.
Regardless of the cause, supply chain disruptions can lead to transportation delays, higher costs and shortages of raw materials and finished goods. Whether the result of an unavoidable external event or internal factors, businesses need to develop robust risk assessments and contingency plans to mitigate the effects of these disruptions.
Supply chains are intricate, with different parts of the chain relying on various other suppliers and operations. Therefore, companies must diversify their supplier base and invest in flexible logistics solutions that support multiple modes of transport and storage.
Raw material shortages are one of the most common causes of supply chain disruption, resulting in production delays and higher prices for customers. This is especially true for specialized, high-demand products.
The COVID-19 pandemic showed how health crises can wreak havoc on global supply chains, closing international borders, trade restrictions, factory shutdowns and labor shortages. The resulting economic ripples impacted everything from restaurants to airlines, as consumers bought different food and other products.
In the future, business leaders must be prepared for more frequent and severe supply chain disruptions, with the potential for lasting impacts on consumer confidence, revenue and reputation. As such, it’s crucial that directors understand the risks and actively work to create resilient supply chains, by monitoring and requiring regular reports of management on how their companies are responding to supply chain disruptions.