In many cases, that can be true. But let’s take for example, the Thailand flood of 2011. The natural disaster had perhaps the most severe supply chain impact to the disk drive and storage industry as reports followed months after, even up to a year, regarding some of the manufacturer’s difficult bounce back to the economy after its impact. But because of the country’s annual monsoon season, some manufacturers such as EMC were more than prepared to act on any impacts to its supply chain.
“The Thailand flood wasn’t a surprise,” confirmed Steve Cleary, Vice President of Supply Chain and Chief Procurement Officer, EMC. “Of some of the natural disasters that occur in the world, the tsunami was certainly unpredicted. But the Thailand flood built over the course of two or three months. As we saw the crisis start to emerge, we got in extra orders and we ended up relying on very strong partnerships we have with our key suppliers that really helped us through that event. We had weekly reports of where the water was and what the water was doing and whether we thought it was going to hit the factories. I can’t say that we had zero disruption as a result of that Thailand flood. We had shipment delays in the beginning of the quarter as a result of this, but by the end of the quarter we had satisfied all of our system-level demands. The industry recovered a lot quicker than most people thought.”
While Cleary confirmed EMC did grow through that quarter and had record revenue shipments, still a number of its peer groups in the area did announce shortfalls and shortages.
“I think what was a surprise and what we have done differently going forward with some of our partners is we’re more involved in getting into second and third tier aspects of our supply chain,” added Cleary. “Where we were looking at direct components that we use in the manufacturing of our products, what we weren’t doing necessarily as aggressively as we are now is with some of the second and third tiers to the component suppliers. So we are much more focused on having folks take us through their business continuity plan as it relates to a motor in a product or perhaps even the magnetic in that motor that might have been single sourced. So what are the plans? What are the mitigation strategies, should there be a disaster, that the second tier or third tier supply chains are protected? That is something we have put more focus on as a result of the flooding,” he said.
While natural disasters play a large part in a supply chain’s disruptions, other factors come to light as mitigating supply chain disruptions must become a natural part of a company’s business blueprint. Conflict and political issues, labor strikes, cyber risk, rising insurance, trade finance—companies are starting to put more all-encompassing strategies in place to mitigate against such economic and regional issues.
“It’s not just enough to say that something ‘is risky,’” explained Bindiya Vakil, Chief Executive Officer and Founder, Resilinc Corp., a cloud-based solution provider for proactive Supply Chain Risk Management (SCRM). “There is a risk tolerance level that a company has. And any kind of tool that is existent in that space needs to be accounting for exceptions that fall outside the company’s risk threshold. When we say high risk, high recovery time and high-revenue impact—that high is set by the company. And this is why you have to go down to the products and parts level because typically, risk threshold companies think about those in terms of products or revenue and suppliers always think about that in terms of spend. There is an inherent gap in how companies or people think about risk or risk threshold and risk acceptance levels and then decide what to choose to mitigate,” she explained.
While a majority of its focus is around factory and transportation issues related to the supply chain, Resilinc continues to address the industry’s challenges within the sub-tier supply chains through a number of technological capabilities, such as a developed C-TPAT compliance capability within its platform.