Key Points:
- A supply chain disruption is an event or circumstance that impedes the flow of goods between manufacturers, suppliers, merchants, and customers
- According to FEMA, up to 60% of businesses hit by natural disasters never reopen their doors
- According to a Supply Chain Insights report, computer attacks and cybercrime accounted for the majority (52%) of the disrupting events to the world supply chain
The global supply chain only operates as well-oiled machine some of the time. After all, the supply chain is a complex system with nearly infinite inputs. So when enough force is applied, the flow of goods between manufacturers, suppliers, merchants, and customers is disrupted. Whether its COVID or a natural disaster, a labor strike or a cyber attack – it’s best to anticipate the occasional slowdown in the supply chain.
Planning for supply chain disruptions is the best way to mitigate their effects. This risk mitigation process is so important to logistics professionals that it even has its own name: supply chain risk management. This blog will help you understand the most common types of supply chain disruptions, five supply chain disruption examples, and how to work around them.
Easyship is a global team of supply chain experts. Our all-in-one shipping platform is backed by 24/7 support, plus includes a suite of international inventory and shipment management features to help you sidestep any headaches that arise in the supply chain.
Table of Contents
5 Common Supply Chain Disruptions
A supply chain disruption is an event or circumstance that impedes the flow of goods between manufacturers, suppliers, merchants, and customers. Here are the five most common supply chain challenges, and what you can do to avoid them.
1. Natural Disasters
When natural disasters hit, they hit hard. Floods, wildfires, hurricanes, earthquakes...even a minor natural disaster can upset air freight, sea freight, and ground transportation for weeks.
According to FEMA, up to 60% of businesses hit by natural disasters never reopen their doors. Imagine if your supplier was one of these businesses. How would you cope? Alternatively, a hurricane might shutter the port which processes your imports, effectively halting international deliveries for perhaps a week. Or, as happened in 2020, a raging wildfire closes roads in California resulting in serious delays in regional domestic deliveries.
No one knows when the next natural disaster will arrive, but we know it’s coming.
Solution: Broaden your network of logistics partners and suppliers. If you source inventory from a single supplier in a single region, you’re more vulnerable to natural disasters. In other words, when you diversify the regions from which you receive shipments, you're less vulnerable to a local natural disasters. Having access to backup suppliers is a great way to mitigate risk from environmental hazards and get competitive rates.
2. Geopolitical Instability
Geopolitics has a direct impact on shipping and logistics. When countries don’t play nice in the sandbox, or countries face internal strife, the supply chain can break down.
Volatile politics lead to policy decisions that may increase the cost of doing business for shippers. These conditions can also halt the export of raw materials, or just manifest as travel hazards or delivery delays.
The most recent example is the trade war between the US and China, complicated further by Trump taking office. According to the Cato Institute, over 200 companies in the US were significantly impacted by Trump Tariffs imposed on Chinese imports in 2017. The ensuing tariffs and counter-tariffs raised the costs of many products while impeding the flow of goods between the two nations.
Other common geopolitical events that impact the supply chain include protests, governmental intervention, and eco-terrorism.
Solution: Research the political climate in regions that host your supply chain network. If possible, try to avoid areas that suffer from ongoing civil unrest, or are opposed politically to your home country.
As the China-US example illustrates, it’s best to do business with partners in stable political relationships. You can source your product from China – but what about India? Forging new relations with Indian suppliers could help you push past any forthcoming price-hiking tariffs that emerge from the standoff with the US and China.
In short, pay attention to the politics in regions that host your supply chain. If things go south, transitioning to backup partners could translate to a real competitive advantage.
3. Transportation Breakdowns
A lot happens between the supplier's warehouse and the customer’s doorstep. Extreme weather, container shortages, and machine breakdowns can all prevent the timely delivery of your shipments. It’s important to work with reliable logistics partners that have resilient systems in place. Otherwise, you may end up paying the price for delays outside of your control.
Solution: Research and work with reliable logistics partners. With new players entering the space every year, it’s important to do your homework. Look for partners with a proven approach to end-to-end transport infrastructure. Agility is another trait in a quality partner, as it means you can expect a workaround for any issues in short order.
As a partner with global logistics providers worldwide, Easyship can help you connect with trustworthy warehouses and 3PLs in any country. Our helpful team of global shipping experts is here to help with any questions.
4. Cyber Attacks
Disruptive supply chain technology like automation is streamlining operations for logistics companies. With more data held in logistics software daily, though, supply chain systems are increasingly the target of cybercriminals.
According to a Supply Chain Insights report, computer attacks and cybercrime accounted for the majority (52%) of the disrupting events to the world supply chain. For example, the global courier TNT was the target of a ransomware attack in 2017. The company’s computer systems were severely impacted, resulting in a disruption in delivery operations and up to $300 million in financial loss.
Cyber attacks are expected to increase in frequency, given the trove of valuable information within shipping platforms.
Solution: Audit the security of your supply chain network, and implement cyber security best practices. In other words, it’s important to identify data security vulnerabilities both inside and outside your business.
Partner only with companies that observe cybersecurity best practices and can produce a clean record of data security. Also important is to verse your employees with cybersecurity best practices. This way, you can mitigate the risk of phishing emails, password breaches, malware, and other common forms of cybercrime on your side.
5. Supply & Demand Fluctuations
Oh, the cost of doing business. Fluctuating supply and demand dynamics can majorly upset the supply chain ecosystem. During COVID, for example, the upsurge in online commerce led to steep hikes in shipping costs. Ports were clogged and container space was in short supply. The world over, prices for shipping rose even as delivery times slowed.
One year later, shipping and logistics companies are still grappling with the pandemic monkey wrench. Meanwhile, the shift to online commerce continues to reshape how the industry operates. More irregularities in delivery speeds and prices are expected for 2021 and beyond.
Solution: Monitor and respond to market trends. Refer to historical data to understand price cycles in shipping and logistics, then work to anticipate future supply chain disruptions. This can give you insight into when to buy more inventory at low prices in anticipation of an impending spike in demand or prices.
Supply Chain Disruptions and COVID 19
The pandemic exposed the risks inherent in regional supply chain dependencies. When COVID hit, supply chain disruption proliferated because most supplies were trapped in the virus hotbed of China. Here are three ways COVID shook the global supply chain:
- Inability to source inventory: Most US retailers went months without inventory because of supply chain challenges around access to China.
- A sudden spike in demand: When demand spiked for essential products like toilet paper, canned goods, manufacturers and retailers were left scrambling to fulfill orders.
- Lockdowns: Lockdowns and other restrictions made it hard for shipping companies to deliver goods, and there were unprecedented shipment delays.
Overcome Supply Chain Challenges With Easyship
Supply chain disruptions are inevitable, but the impact of supply chain disruptions is lessened for well-prepared businesses. You can build resilience into your logistics operations by anticipating supply chain challenges in the future. Following a plan for an expected-case scenario can translate to gaining a competitive advantage in the wake of a disruptive event.
Managing supply chain disruptions is easier with Easyship. As part of a global logistics network, we connect merchants of all sizes to trusted warehousing and logistics partners in different areas worldwide. Our all-in-one shipping platform integrates with eCommerce platforms, warehouse management solutions, and more to give you full visibility and control over your supply chain.
Create a free Easyship account and take advantage of our logistics expertise to forge a more resilient approach to logistics.
