5 Types of Supply Chain Disruptions

What is Supply Chain Disruption?

A supply chain is a network of people, organizations, and activities that move a product from a supplier to a final customer. A supply chain disruption is any sudden change or crisis be it local or global that negatively impacts that process. You can think of supply chains as a series of interconnected parts like, well, a chain. In complex manufacturing, you may have also seen different tiers of a supply chain illustrated as a pyramid.

5 Types of Supply Chain Disruptions

There are many different types of supply chain disruptions. When you look at disruption, there are two things you have to look at 1) what is the probability and 2) what is the severity. This will vary depending on your supply chain and your industry. Here are some of the reasons your supply chain might see an impact.

1. Pandemics: We’ve seen in recent weeks and months how COVID-19, the novel coronavirus outbreak, has impacted global supply chains. The effects of global pandemics or other public health crises can have massive supply chain impacts because of the number of people, regions, and global companies affected which can upend normal operations at every stage of the production line.

2. Natural disasters: On March 11, 2011, an earthquake struck off the Pacific coast of Japan causing a tsunami which in turn led to a nuclear disaster at the Fukushima Daiichi Nuclear Power Plant. The catastrophe affected many businesses and the global economy, temporarily shuttering those that reportedly produced 22% of the world’s supply of 300-millimeter silicon wafers (a necessary component in semiconductors) along with 60% of certain necessary auto parts.

Natural disasters like this one or hurricanes, tornados, wildfires, or floods often draw attention to supply chain dependencies in the affected areas. Even a localized disaster can have far-reaching implications in the supply chain depending on where it is.

3. Transportation failures and delays: Globalization and increased trade have made it more and more common for supply chains to include international suppliers. A result of this is increased business opportunities, but also increased strain on international and domestic transport networks which have led to congestion and delays.

4. Product problems: Quality management goes hand in hand with supply chain management, as issues with products at any stage in the chain can lead to issues and delays in the final product. No business wants to send sub-par merchandise to customers or have customers’ shipments delayed because of faulty products, so creating a good quality management system with customers' expectations in mind, and communicating that to all suppliers is important.

5. Price fluctuations: Price changes for suppliers in your chain can also create disruptions as you may have to make a decision on whether or not to switch suppliers, raise your own prices, or see your profits reduced by eating the costs yourself. Price fluctuations can be caused by any number of factors. For example, prices on commodities like crude oil are notoriously volatile and can have a big impact on the financial overhead of a number of manufacturing and transportation factors.

-Gazi Sanaul Hasan