In a perfect world it is possible to have everything needed to keep products flowing smoothly. In the real world, contracts dictate each step from the purchase of raw materials through delivery at the point of purchase. Completed materials must be moved quickly from one point to the next to avoid a bottleneck. What happens if the supply chain breaks?
The sophisticated technique of forecasting uses analytical and quantitative methods to pinpoint possible problems and acknowledge improvements in performance. Planners, project managers, and analysts first search the data. Then they apply the findings to reduce the consequences of a broken supply chain.
Natural disasters disrupt the forward progress of supplies to the next customer only when one or the other is in an affected area. Earthquakes, tsunamis, hurricanes, floods, and tornadoes damage or destroy farmland, warehouses, and human life. Air, sea, and/or road access is disrupted. Rebuilding and repair are expensive in terms of time and money. If the company or organization has no formal process to evaluate risk, forecasters and managers have two ineffective choices:
- Find and list all risks that apply to businesses in their chain, and design ways to deal with each risk.
- Acknowledge that they are overwhelmed with no idea of where to begin the research.
Supply chain barriers consist of things that result in late or prohibited delivery. Examples include actions like border delays and corruption and situations like substandard roadways and outdated complicated regulations. What happens if the item being supplied is only available in that area and the product is not forthcoming? The next recipient can task engineers to find or develop a substitute for the product. That causes the non-compliant company and area to lose trade and economic prospects.
Any party in a supply chain can lose a contract or incur penalties for failure to deliver. Reputable carriers are a valuable asset to any company because of their records for timely delivery. They also have professional relationships with other respected carriers who will handle cargo when there is a problem. Before performance decreases or rates accelerate to an uneconomical amount, forecasters will recommend experimental shipping of small deliveries with alternative carriers. Your business benefits when tested backup transportation is in place.
Be proactive with businesses in your chain to avoid adversely affecting your company’s reputation. Is it within your power and economic ability to help third world, small, and midsized companies get needed equipment, training, facilities, and connecting roads? Avoid a broken supply chain and achieve a win-win result.
Understand the terms, conditions, and company rights for each contract. Check for non-competition clauses. They may prevent other businesses in the area of a current customer from dealing with any business in the supply chain. Know the extent of liability and risk regarding the ability to enforce the terms of the contract in case a supplier defaults. Being well-informed and making decisions based on an understanding of the risk greatly reduces the damage caused by a broken supply chain.
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