With the devastating storms in the past few years such as super-storm Sandy and the devastating earthquake and resulting tsunami that hit Japan in March 2011, is it time for supply chain risk management to become a higher priority in operations strategy for all companies around the world regardless if they’re on the coast or not? Natural disasters can be unexpected and cause immeasurable damage to a country’s infrastructure thus impacting the transportation of goods and knocking out the useful capability of office buildings, warehouses, and distribution centers.
The resulting question can best be summed in assessing risk as this, from a supply chain expert Adrian Gonzalez:
“Supply chain management is about managing risks…And since risks are dynamic in nature, with new ones emerging all the time, companies must continuously study the landscape and determine which risks are worth addressing now and how. Simply put, what costs and other tradeoffs are you willing to incur today to avoid a much costlier scenario tomorrow?”
The threat of natural disasters is one that looms heavy every minute of every day, supply chains are exposed and need to take action today to avoid the pitfalls tomorrow. Foresight in supply chain risk management such as diversifying supply routes and sourcing parts from more than one supplier with great capacity and flexibility will help remedy these ever-present risks in transportation management. Reducing the overall risk level of your supply chain is different for every single company, recurring analyses of risks and solutions is needed to remain prosperous and vital in the 21st century battle for supply chain optimization.
A careful and prudent analysis between tradeoffs in regards to risk management can be a determinant of a large loss or small loss in the event of a natural disaster.
Wieland, A., Wallenburg, C.M., 2012. Dealing with supply chain risks: Linking risk management practices and strategies to performance. International Journal of Physical Distribution & Logistics Management, 42(10).