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Supply Chain Crisis Management- Part 1

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A US airways flight took off from LaGaurdia airport which is in New York on the 15th January 2009. Soon after the takeoff, the aircraft made an emergency landing on the Hudson River due to multiple bird strikes at 3,000 feet and both engines were knocked out. The pilot, Captain Sullenberger has certainly never landed on water before. But his training made him take such a huge and sensible decision in a sensitive and difficult situation, which was successful. Similar to this incident, only a few companies will be ready to manage crises or risks.

So what is crisis? According to Merriam-Webster, crisis is an unstable or crucial time or state of affairs in which a decisive change is impending; especially: one with the distinct possibility of a highly undesirable outcome. In supply chain, crisis can be compared to a disruption where flow of goods, money and information are interrupted.

A supply chain crisis management consists of the supply chain as well as the crisis management by taking into account all important characteristics from both sides. It aims to help the company survive from any kind of risks the company has faced and that too at a company level.

There are 3 types of crisis an organization can face:

  • Natural crisis: Natural crisis are basically acts of God like flood, earthquake, etc.
  • Manmade crisis: These crises occur due to human beings like the castle Bravo fuel thermonuclear hydrogen bomb.
  • Dispute crisis: These crises are caused due to war or strike. For example the 2015 United steel workers oil refinery strike. The strike had caused undue delays in providing information, low production, etc.

Some of the ways organizations can overcome these crises and make supply chain more resilient are:

  • Multiple supplier or supplier network:
  • High dependence on a single supplier, loss of control on quality and quantity due to supply chain extension to tier2 or 3 suppliers, No compliance on health and safety standards, good employment practices, etc. are some of the risks which a company needs to de-risk by building a sturdy, reliable and transparent supply base. The crisis impact can be reduced if companies have a reliable supply network across countries, thus reducing recovery time.
  • Establish an early warning system:
  • Risk indicators like sudden management changes at supplier level, significant price increase requests, litigation issues, process instability, etc. should be put in place. These are ideal for determining the risk tolerance level of a company, assessing internal control and setting performance standards. Another important element is to identify troubled suppliers and correcting the issue quickly

In the next part, we will talk about the remaining ways in which organizations can overcome crises and how technology can play a significant role in supply chain crises management.

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  3. Blog – Role of Procurement in Supplier Value Chain for Business Advantage
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