March 15, 2011 Leave a comment
The current crisis in Japan underscores the need for proper contingency planning in supply chain management. Far too often companies are unprepared for major supply disruptions, causing product and service shortages and leading to significant price spikes. Supply chain managers should consider these risks, however remote they may be, and develop contingency plans that can be put into action quickly to reduce the impact of localized supply disruptions.
To be effective these back-up plans should consider the levels of impact that are possible depending on the scale of the emergency. Additional sources of supply should be found in geographically separated locations. It does no good to have alternative suppliers if they are all faced with the same natural disaster, as appears to be the case in the electronics industry at present. It is also important to test your contingency plan in advance to ensure that it will be an effective response and adequately maintain your continuity of supply.
How your supply chain responds in moments of crisis and supply shortage can provide signifcant competitive advantage around price and availability. It’s worth the long-term investment in some emergency preparedness planning.