When a natural disaster strikes, companies need to do more than prepare for the impact to supply chain shipments in the short term, as often the effects of a major disruption will be felt long after the event has occurred.
Businesses that need to track shipments and supply routes across international borders should have an automated data collection system in place to track all components in the event of a natural disaster, according to Supply and Demand Chain Executive. Regardless of whether it is a somewhat predictable event like a hurricane or a blizzard or a more unpredictable occurrence such as a tornado or an earthquake, a thoughtful enterprise will have a plan in place for how to mitigate any detrimental effects in the short term, whether it means diverting shipments through new ports or turning to other locations for sourcing key materials.
However, the news source reported that businesses are often not adept at using logistics software to determine the long term effects of a disruption in the supply chain. For example, say a natural disaster temporarily shuts down a major shipping port a company relies on. While the business may be able in the short term to divert its supply chain to other ports, those same locations may not be able to handle the increased demand should a critical component of the supply chain be down for long. Quality supply chain software can help a company determine both short term and long term effects of a disruption.
Case study: 2011 Japanese tsunami
A recent CAPS Research study used the 2011 tsunami that hit Japan as an example of how one event can have a far-reaching global impact. The natural disaster affected supply chain resources centered in Japan in the short term. However, because of the level of devastation involved, the ripple effect meant disruptions were more far-reaching and longer-lasting than some companies may have anticipated. Additionally, because of the interconnectedness of global supply chains, even businesses operating far from Japan's shores had to cope in some ways with the tsunami's effects.
"While the disasters had evident effects on Japan’s supply chain - such as the interrupted import and export of goods and services creating backlogs of companies and affecting companies globally - they serve as important lessons learned in also initiating supply continuity planning (SCP), which must focus on a stable supply of materials and components in the supply in order to formulate solid suggestions for good practices," the Supply and Demand Chain Executive article said.