Posts categorized as 'Supply chain risk management'

The Cost of Climate Change on Your Supply Chain

AlexaCheater

The impact of climate change changing green grass to dry desertOn the heels of the United Nations Paris Climate Change Conference, now seemed like an appropriate time to revisit an often talked about supply chain topic. The impact of climate change on your supply chain operations.

Natural Disasters

Tumultuous weather is perhaps the most commonly thought of supply chain risk related to Earth’s climbing temperature. Undoubtedly, the impact of wild weather is substantial. An increase in the number of devastating hurricanes, earthquakes, wildfires, floods and droughts should be worrying to everyone, not just those concerned for their supply chains. In 2014, three of the top five biggest supply chain disruptions were related to natural disasters. Typhoon Halong in Southeast Asia capped the list, causing a 41-week disruption at a cost of more than $10 billion for companies doing business in the region. Are we looking at a future where Mother Nature is responsible for the majority of disruptions?

Companies will need to evaluate the risk of losing a supplier in a specified geographic region, and whether there’s a case that needs to be made to diversify where raw materials are coming from, having multiple suppliers, and how far to take contingency plans. The same can be true for evaluating different transportation options. Severe weather can cause substantial delays, or even total shutdowns, of certain routes or modes of transportation. Supply chain managers need to have backup routes and options available and at the ready, and need to be able to quickly and effectively run scenario simulations to determine which course of action will allow for the smallest overall impact.

Another thought I had is whether these severe weather phenomenon will cause shortages of certain raw materials, like what we’re currently seeing with cocoa. What will that do to already unstable price fluctuations in some global commodity markets? Will supply chains be able to cope with the potential added costs? Can we expect to see an increase in civil unrest (and the associated supply chain challenges) as communities fight over dwindling resources? A good supply chain risk plan should take into account all of these factors.

Read the full story

How Prepared Are You Really? Supply Chain Black Swans

AlexaCheater

Supply chain black swanSupply chain risk. It’s a topic that just never seems to go away (nor should it!). Everyone and their uncle has probably read at least one article, blog, research report, etc. on the topic. We’ve covered it here extensively on the 21st Century Supply Chain blog, and Kinaxis has even produced a great infographic about it. There’s no denying it’s a very important subject when it comes to good supply chain management.

Recently however, I’ve been thinking about supply chain risk in a whole other light. Thanks mostly to a fabulous guest post by MIT’s Yossi Sheffi on the Wall Street Journal, which I had the good fortune to stumble across. In it, Sheffi talks about the concept of a ‘black swan’, no not the risk of slightly unstable ballerinas invading your supply chain, but rather a term popularized in 2007 by Nassim Taleb that’s used to describe occurrences that are thought to be impossible.

At first blush, it all sounds a bit familiar. Make sure you prepare for the unexpected. Got it. We’ve long been proponents of making sure your supply chain risk management strategy targets three key areas: anticipated risk, uncontrolled anticipated risk, and unanticipated risk. Surely this concept of a black swan fits squarely into the third category, which is characterized by an event that is entirely out of our control and hard to anticipate and plan for. And it does.

Read the full story

El Niño May Have Your Supply Chain Partying Like It’s 1997

KirstenWatson

El Niño phenomenonIt’s not often that a weather phenomenon becomes part of the pop culture zeitgeist. But that’s exactly what happened in the late 1990s, when El Niño became a household name—and even a character played by Chris Farley on Saturday Night Live.

El Niño is a blanket term for the effects of an unusual warming of water in the Pacific Ocean that occurs once or twice a decade. A massive El Niño occurred in 1997-1998, unleashing record rains in California, deadly tornados in Florida, and a brutal drought in Indonesia, thus landing the term firmly on the radar (no pun intended) of millions of people around the globe.

With its whimsical name, El Niño became a punchline—the cause of anything and everything that might be going wrong (hence that Chris Farley sketch on SNL). But El Niño was no joke then. And it still isn’t, despite the headline of this post. That liberal paraphrasing of a classic Prince song refers to particularly strong El Niño conditions predicted by the National Weather Service for winter 2015-2016—the likes of which haven’t been seen since 1998.

Read the full story

3 Ways Crowdsourcing Is Revolutionizing Supply Chain Management

KirstenWatson

Visual representation of crowdourcing using heads made of mechanical gearsThe term crowdsourcing—the process of obtaining ideas, services or information by soliciting feedback from a large group of people—has existed since 2005. But its fundamental concept predates the name by centuries. In 1714, the British government offered the public a monetary prize to the person who created the best solution for measuring a ship’s longitude.

As has been this case with so many concepts, the internet has given crowdsourcing phenomenal reach and influence. We’ve already seen the significant impact that crowdsourcing has on modern business product development, production and delivery, and that effect will undoubtedly only grow over time. Here are three ways that crowdsourcing is revolutionizing supply chain management today—and in the future.

Crowdsourcing increases on-time, cost-effective delivery.

Amazon consistently ranks on or near the top of lists touting the best supply chains—and for good reason. It drives an innovative fulfillment strategy through its vast distribution center network and independent delivery fleet that enables it to guarantee two-day delivery. Amazon’s achievements in supply chain management have led consumers to establish an incredibly high bar for timely and accurate product delivery. The Amazon customer satisfaction standard has changed the game for every retailer of every size.

Crowdsourcing transportation presents a solution for smaller enterprises to compete in this environment. One such service provider is Cargomatic, who connects local shippers with carrier companies who have extra space in their trucks. The “last-mile” phase of the traditional fulfillment process is often the most expensive (accounting for as much as 50 percent of a company’s logistics costs), but crowdsourced transportation can sometimes enable same-day delivery at the cost of standard shipping. And crowdsourced traffic apps like Waze are helping a multitude of delivery drivers find the most efficient routes with real-time help from other drivers.

Read the full story

Modern Slavery in Today’s Supply Chains

AlexaCheater

A farmer represents part of the agricultur supply chainI used to think slavery was, for the most part, a thing of the past. An abhorrent practice that was abolished for very good reason, and a constant reminder that human life has tremendous value and as such should be respected and honored. I used to think there was no way slavery would ever have a place in modern society, that no one would allow such a practice to exist outside the most desolate and desperate places on Earth. I used to have my head buried in the sand.

The sad reality is that slavery, in all its unpleasant forms, exists much closer to home and in much greater numbers than I ever expected. Traces of it can be found virtually everywhere. In the clothes on your back, the shoes on your feet, the food that you eat, and even the computer, tablet or smartphone you’re likely reading this blog on. How? Through the supply chain.

Modern slavery is one of the supply chain industry’s dirty little secrets, but thankfully, governments in the US and UK are attempting to wash it clean, working to put a stop to a problem that should never have been allowed to exist in the first place. Or at least, they’re trying to.

As the Wall Street Journal (WSJ) reports, new rules recently announced by British lawmakers will require companies “to give an annual disclosure detailing efforts to root out slavery and human trafficking in their global supply chains.” The new provision, which is part of the broader Modern Slavery Act enacted in March, will impact more than 12,000 UK companies whose global revenues each total more than 36 million pounds. It’s based on California’s Transparency in Supply Chains Act, which was passed in 2010.

The problem is, both laws only require companies to disclose their use of slave labor, not actually put an end to it. So how is this going to solve the supply chain slavery issue?

Read the full story

From Grower to Garden: The Complexities of the Nursery Supply Chain

AlexaCheater

A woman holding a plant brought by the nursery supply chainToday is ‘Take Your Plant for a Walk Day’ (yes, apparently that is a real thing), and in honor of houseplants everywhere I thought I would look at the supply chain of an industry that has long fascinated me – the nursery industry. What exactly goes in to getting all those lovely shrubs, trees and flowers from the grower to the garden?

Let me start by saying that I personally do not have a garden. Why? Because while I love plants, they do not love me. No matter how enthusiastically the very knowledgeable staff tell me that this plant or that one can survive anything, the sad truth is none has survived my very, very black thumb, despite years of trying.

That of course does not stop me from visiting my local nursery to see what they have in stock. From seeds to shoots to seedlings and fully-grown shrubs, trees and flowers – the complexities of getting these plants to the end consumer are many.

Read the full story

The Fashion Supply Chain: Unraveling the Reality

AlexaCheater

Racks of clothing represent one stop on the fashion supply chainWhether you’re a fashionista or overly fond of the frumpy look, chances are you’re buying into the multi-billion dollar clothing industry. And whether you realize it or not, the garment industry supply chain is changing – both for the better and for the worse.

Cambodia, China, Taiwan, India – look at the ‘made in’ labels on your clothing and you’re likely to find these popular clothing manufacturing countries. A recent Wall Street Journal article reveals African nations such as Ethiopia may soon be added to that list thanks to their lack of minimum wage regulations. Apparently, the $67 a month workers make in Bangladesh was getting to be too costly. This represents what many feel is wrong with the industry – large companies willing to sacrifice human dignity and safety to save on their bottom line.

There have been countless examples of big fashion brands finding themselves caught up in controversy thanks to their supply chain, and the use of factories that pollute, employ child labor, mistreat workers or worse. Sadly, it took a major tragedy to open the eyes of millions to see exactly what goes into making the clothes on their backs.

Read the full story

A Chocolate Addict’s Plea: Know Your Supply Chain Risks!

AlexaCheater

Cocoa powder represents a supply chain riskHi, my name is Alexa and I am a chocoholic. It’s been less than a day since my last indulgence.

There’s no two ways about it. When it comes to the cocoa-laden confectionery, I’m hooked. It doesn’t matter if it’s milk, dark or white. Anything with even a hint of chocolatey goodness will suffice – and sadly for my waist line, one little taste is never enough.

What’s even more unfortunate than the effect on my figure is that it’s about to get a whole lot more difficult to feed my addiction thanks to a lack of insight into supply chain risk. The Wall Street Journal (WSJ) recently posted an article about the huge shortfall in the cocoa crop in Ghana. Dry weather coupled with the late application of vital pesticides to cocoa trees has caused the crop to shrink significantly, and sparked fears growers may not be able to deliver enough cocoa to fulfill their contracts. That means manufacturers will likely be scrambling to find enough cocoa to satisfy their chocolate producing needs.

Skyrocketing prices aside, this latest news is enough to send any chocolate lover to the store to stock up, and really puts the spotlight on a major supply chain risk in the $7 billion cocoa-futures market. As the WSJ points out, there is a drastic over reliance on the Ivory Coast and Ghana when it comes to the global cocoa supply chain. Together they account for more than half of the world’s cocoa supplies!

With that much of the world’s supply coming from one region, it’s no wonder the price and availability of chocolate fluctuates as wildly as it does. Natural disasters, poor growing conditions, pandemics, war, political and social unrest, terrorism and accidents can all have huge consequences on supply chains relying on either a single supplier, or suppliers who are all in the same geographic region.

Read the full story