Companies that extend their supply chains around the globe may harness greater efficiency and secure lower costs but also open themselves to more supply chain risks that can range from natural disasters to quality control issues.
The 2011 earthquake, tsunami and nuclear disaster in Japan had reverberations in the automotive industry because of severe disruptions to global electronics production, while floods in Thailand created significant shortages in the hard disk drive market that cost electronics manufacturers millions.
Changing weather patterns could also emerge as a source of supply chain disruption and may have already affected Coca-Cola, according to a New York Times article.
Coca-Cola’s vice president for environment and water resources told the newspaper increased droughts and the frequent occurrence of what had been considered 100-year floods have disrupted Coca-Cola’s sugar cane, sugar beet and citrus supplies.
Beyond the havoc nature can impose on global supply chains, there are a number of other risks.
Companies that have shifted from local suppliers in favor of lower costs from overseas sources may face an increased risk from lapses in quality control, failure to meet rules for working conditions or environmental regulations in other countries.
Two major auto manufacturers suffered because of quality issues with parts suppliers. Toyota was forced into a $1.2 billion settlement with the U.S. Justice Department, with recalls numbering in the millions of vehicles because of allegedly defective gas pedals. General Motors encountered problems because of faulty ignition switches.
Threats from terrorist networks introducing harmful products or materials into a supply chain or actions by criminal groups were among potential risks cited in a 2012 White House report, “National Strategy for Global Supply Chain Security”.
The report acknowledged the importance of secure global supply chains and called for the country to develop strategies to anticipate potential hazards and to devise ways of making supply chains more secure.
Managing those risks will require a refined understanding of the threats through updated assessments, the report said. Continued and coordinated efforts among all federal agencies also are needed to thwart any deliberate actions aimed at undermining supply chains.
As companies face increased exposure to supply chain disruptions, they should consider additional steps to manage their risks.
When evaluating those risks, it’s important to consider the whole operation, not just its parts. In other words, companies should consider how a problem in one tier of the supply chain can affect the entire supply chain and the whole company.
Supply chain managers should take a broader look at potential risks, including those beyond disruptions from natural events such as the earthquake in Japan. Companies must consider risks that may be less obvious but have the potential for considerable impact. Those risks can include issues such as political changes, credit and financial health of suppliers and currency fluctuations.
Continuing education such as that offered through online courses in a University of San Francisco supply chain management certificate program can help professionals in every part of supply chain management learn how to anticipate and guard against risks.
In today’s business world, things are constantly changing; and to stay competitive within my field, I need to do the same. Thanks to University Alliance and the University of San Francisco, I’m doing just that. I’m very glad that I decided to sign up for Certificate in Supply Chain Management. The program costs much less than a degree, and I can complete it in a fraction of the time. On top of that, I’m earning CEUs for each course. I’ve been able to apply the learning materials and experience the rewards immediately. The instructors have an abundance of supply chain knowledge, and I feel that I’m gaining better skills than I would have through a general business course. I’m proud to add these credentials to my résumé, and I’m already planning to enroll in another online program through University Alliance.
Marsha Van Schoyck