When supply chain disruption hit, do you know how long your company could ride it out without shutting down? What if your entire industry is facing a disruption-related shortage? Do you know how quickly you could recover?
These questions are especially relevant now, having spent the last two years struggling with global supply chain disruptions and massive shortages of everything from toilet paper and baby formula to electronic components. Most industries are still recovering from the consequences, while the risk of further disruption lingers. Moving forward, understanding the risks and preparing for them to avoid the consequences is critical to managing supply chain disruptions.
Pinpointing the Causes of Supply Chain Disruption
Supply chain interdependence is a fact of life. Unfortunately, there is no single root cause of supply chain disruption. Because our global supply chain has become a hugely complex network, it doesn’t collapse because a single link in a linear chain fails. But when many links are forced to respond to rapidly changing conditions, that’s another story.
The Covid-19 pandemic shut down manufacturing and took key workers out of the workforce. At the same time, consumer demand for home office technology skyrocketed. Demand outstripped supply, and the supply chain disruptions began. The same kind of chain reaction can happen at any time due to a natural disaster, international conflict, or shift in government policy that impacts any means of production.
Understanding the Risks
The truth is, hardly any company has the capability necessary to produce everything it needs itself. We all rely on the supply chain to get what we need, from sticky notes to semiconductors. That makes it even more critical to understand the risks of supply chain disruption.
In addition to the shortage of key goods, disruptions cause longer lead times and shipping delays. The shipping delays may lead to unfulfilled contracts, financial losses, and layoffs. The tech industry is particularly vulnerable to fraud and counterfeit electronic components during major disruptions in the supply chain. The risk is even greater if you’re relying on a single supplier for a crucial component they no longer have the capacity to produce.
The Consequences of Supply Chain Disruption
It’s not just individual consumers or companies that feel the impact of supply chain disruptions. As we’ve seen recently, whole economies can take a hit. Economic shutdowns, inflation, and supply shortages seem to go hand in hand.
Additionally, already tenuous international relationships can take a turn for the worse. Some countries may choose to protect their supply chains from further disruption by attempting to produce everything they need at home. Further, this form of economic nationalism can increase conflict and greatly reduce global supply chain cooperation.
Understanding your supply chain vulnerabilities and assessing your risks before disruptions strike helps you weather the storm. We advise reassessing your supply chain strategy, diversifying your supplier base, and partnering with Velocity to mitigate the risks and consequences of a shutdown. With access to over 92% of electronic component inventory worldwide, proprietary sourcing tools, unmatched quality inspection certification, and 27 locations across the globe, we are ready to keep your supply chain agile and uninterrupted, even in troubled times.