There is a trifecta of supply chain vulnerabilities, disruptions, and risks creating volatility, uncertainty, complexity, and ambiguity (VUCA) in the business environment. From supply chain vulnerabilities like the ones exposed in the Middle East war to the heightened risks that emerged with Hurricane Helene to the disruptions occurring with labor unrest and strikes, the supply chain is in a constant state of volatility. Proactive companies are taking control of their end-to-end supply chain to mitigate these issues and successfully serve customers.
In the Middle East, attacks occurred where hundreds of pagers used by Iran-backed Hezbollah exploded, exposing extreme vulnerabilities in the supply chain. Most clients do not have a full understanding of their end-to-end supply chain and their dependency on certain countries, risky suppliers, etc. For example, if you produce in China, pass through the South China Seas or the Panama Canal, or need critical minerals, if China gets into a conflict with the U.S., you might not receive your goods. China could stop production, not allow passage through the South China Seas, stop passage through the terminals at both ends of the Panama Canal, and/or threaten countries that supply critical minerals such as Africa since they are dependent on China’s belt and road initiative.
Hurricane Helene showed the risks associated with being dependent on a sole supplier or region as your supply could simply be cut off. For example, the Baxter manufacturing plant for dialysis solutions and IV fluids was flooded during the hurricane, immediately stopping supplies to 60% of U.S. facilities. Similarly, the East Coast and Gulf Coast port strike shut down goods movement to the east half of the country, creating shortages, production interruptions, and concerns across a wide spectrum of industries.
Immediate action must be taken. Successful companies are performing supply chain assessments to identify high probability and high impact vulnerabilities, prioritize them, and put corrective actions in place. Since these risks can be severe, there is no time to waste in diversifying and expanding your supply base, sourcing backup suppliers, and formalizing relationships with your best suppliers. Similarly, identify risks with your key customers and their supply chains as you are only as strong as your weakest link in your supply chain.
Near-term and medium-term priorities must also be pursued as triage plans alone will not be sufficient. Proactive companies are friendly shoring and reshoring production, expanding regional manufacturing facilities and capabilities, and vertically integrating to regain control to ensure the timely delivery of quality products. For example, Medical Murray, a privately held medical device development and manufacturing company that specializes in complex catheters, implants, and single-use devices is expanding its plant in North Carolina. It provides greater control and expands capacity of critical product lines.
In addition, process and technology upgrades are critical to address these supply chain vulnerabilities. SIOP (Sales Inventory Operations Planning) programs are becoming a critical necessity to stay on top of changing customer and supplier conditions and proactively optimize demand and supply plans to ensure profitable growth while mitigating risk. Similarly, ERP upgrades and advanced technologies such as artificial intelligence (AI), predictive analytics, and advanced planning systems are the lynchpin to optimizing the supply chain, reduce costs, and increase productivity. All these improvements are to no avail unless you also prioritize cyber security.
Since supply chain vulnerabilities, risks and disruptions are commonplace, the successful companies must pivot from reactive to proactive. Instead of being dependent on unknown or risky supply chain partners, smart executives are taking control of their end-to-end supply chain. Assess, diversify, reconfigure, and digitize your supply chain to ensure customers and markets are served as vulnerabilities are exposed and risks come to fruition. Proactive companies will thrive as disruptions occur and the prepared are ready to leverage the opportunity.
Originally published in Brushware Magazine, November/December 2024