We’ve talked about how, in a perfect world, keeping a lean inventory and having a supplier whose shipments are completely synchronized with refilling your supply as your customers order and you make shipments is optimization at its best.
We’ve also talked about how, unfortunately, this isn’t a perfect world. In our real life world, it IS possible to be TOO optimized, which happens because there are many things out of your – and your suppliers’ – control that can disrupt your supply chain.
Some industries are more likely to experience disruptions in their supply chain than other industries, but no industry is immune; that’s because the possibilities and reasons for disruptions are nearly endless. It could be as simple as a lost internet connection or as devastating as a natural disaster or terrorist attack.
Whatever the reason – and we outline more below – the reality is that you are vulnerable to disruptions in your supply chain and that the longer and more complex that supply chain is, the more devastating a disruption will be.
Here is a small sampling of the types of things that will cause disruptions.
Weather
If you are based out of Buffalo, NY, you know that winter will most likely bring snow, which you know will slow everything down or even bring it to a halt. Knowing this allows you to stock up on buffer inventory before the weather gets bad. In other parts of the country where droughts are common, it would be wise to consider how a lack of water will affect your business.
And while it may seem that weather is a relatively obvious disruption, it’s easy to become complacent about it – a few easy winters makes you forget exactly how bad the snow can be.
Political Instability
Even if you are located in a stable part of the world, political unrest in other countries could affect your suppliers and therefore disrupt your supply chain. For a relatively extreme example, if you used to import and sell Cuban cigars, the embargo between the United States and Cuba would have shut down your supply chain entirely. Other examples aren’t so extreme, but having a backup of local suppliers is never a bad idea.
Transportation Disruption
If your supplier relies exclusively on a single transportation company, problems within that company – labor strikes, equipment failures, and the like – will affect you. You could even go so far as to assume that if you live in a large city where the traffic is bad, like Atlanta, that deliveries could be delayed due to rush hour, car accidents, etc.
Overconfidence in transportation delivery systems might also tempt you into trimming away your buffer inventory, but even UPS and FedEx, who have excellent delivery records, can be affected by transportation disruptions.
Changes Within Your Supplier’s Company
A reliable supplier’s performance can change dramatically if something changes within their company. If ownership or management changes, if employees leave, if they incur fines that disrupt their cash flow for EPA violations or OSHA incidents, or if they change transportation companies, their reliability might falter, even if only temporarily.
Terrorist Attacks
No one anticipates things like 9/11, the Oklahoma City bombings, or assassinations, but such things do happen. It’s luckily a relatively rare occurrence in the United States, but when such events do occur, things shut down until order can be restored, which will affect your supply chain.
Basically, any type of phenomenon can disrupt your supply chain, and disruptions in supply chains can be devastating if they occur at peak buying seasons or if the disruption lasts too long. When you KNOW your supply chain might be at risk, don’t wait until the disruption is actively at hand to react to it – be proactive instead of reactive and order your buffer inventory in advance. For the unanticipated issues, it would be beneficial to find contingency suppliers just in case something does happen.
For more information about inventory and inventory management, please contact Acumen Information System today.
