Businesses are continually being threatened by random unexpected events including natural disasters, violent political uprisings and even organized crime. Unless these factors are managed effectively, they can have a devastating impact on operations.
To combat the potential consequences of these unexpected events, businesses have been making increasingly bolder moves to protect their supply chains. Given that the next major disaster could strike at any moment, the mentality required by modern logistics managers is defined perfectly by Oscar Wilde.
“To expect the unexpected shows a thoroughly modern intellect.”
As part of this ideology, logistics professionals have reshaped their supply chains to encompass a wider spectrum of suppliers. Through sourcing products from a wider variety of global suppliers, businesses spread risk and support continuity even in the event something unthinkable happens.
Although adding diversity to the supply chain sounds like a very logical approach to mitigate risk, for many businesses, employing an effective globalized sourcing strategy can be fraught with difficulties. This is especially true if suppliers have their own highly complicated network of international sub-contractors.
The horse meat debacle highlights the reality of this issue. When the scandal stomped across Europe at the start of 2013, the food sector was unable to explain how horse meat had contaminated so many beef products without anyone noticing. Given the complexity and scale of the multi-sourced food supply chain, the true source of the scandal remains a mystery even today.
Likewise in the fashion industry, some of the leading fashion brands have had their reputations tarnished as it became apparent they were manufacturing some of their products in substandard factories. Sadly, the true extent of the issue only emerged after a number of devastating factory disasters scarred the Bangladeshi textile industry. In many cases, retailers were completely unaware that the factories even existed, let alone formed an integral part of their supply chain.
In both examples, the global scale of the respective supply chains clouded transparency. As a consequence, effective supply chain management became an impossible task as operations were left at the mercy of entirely new sources of risk.
While both examples highlight the heightened levels of uncertainty associated with global supply chains, businesses should not immediately dismiss the importance of supplier diversity. Through developing a solid network of international suppliers, businesses can benefit from a more flexible supply chain. For instance, should a supplier in one territory be disrupted by a sudden storm or earth quake, products can be sourced from alternative suppliers based in unaffected locations: thus supporting continuity in supply.
Just take a look at Nokia: when a freak lightning strike ignited a fire at their main micro-chip supplier’s factory, the telecommunication giant responded by switching to alternative American and Japanese suppliers. This enabled Nokia to maintain smooth supply of critical components while the disruption caused months of anguish for competitors. No doubt, Mr. Wilde would agree, Nokia’s use of global sourcing was “modern intellect” at its absolute finest.
While adapting the supply chain to encompass a broader range of international suppliers undoubtedly helps spread risk, sourcing on a global scale comes with its own problems. In order to ensure that global sourcing is effective in mitigating the impact of risk, businesses must adopt tools and technologies that support supply chain visibility.
Although we will never have complete control over uncertainty, developing a more flexible supply chain not only offers protection from risk factors, but also enables businesses to more readily take advantage of new opportunities which may emerge from uncertainty. After all, as Wilde also noted, uncertainty is not necessarily always bad:
“It is the uncertainty that charms one. A mist makes things wonderful.”