Securing the supply chain is a constant challenge
March 07, 2011
In an era of globe-spanning operations, multiple events over the past year once again underscore the critical need to develop comprehensive business continuity plans in light of supply chain vulnerabilities.
That’s the conclusion shared with LM by Insight, Inc., a provider of supply chain planning applications in a recent interview.
“Heightened risks and outright disruptions are coming at us at a furious pace and it is absolutely critical that firms be prepared with detailed contingency plans,” said Dr. Jeff Karrenbauer, president of Insight, Inc. “For example, over the past year we have witnessed significant crop failures which roiled commodity futures. We now have strong evidence that the Chinese are stockpiling rare earth metals, substances critical to a host of industries. They have also put into place or proposed onerous local content and ownership restrictions, such as those in the automobile industry.”
Karrenbauer, who also teaches at the University of Notre Dame, told Supply Chain Management Review that the United States is unprepared for a national security emergency that would transfigure procurement and distribution models.
“At Notre Dame, we ‘war game’ this scenario, determining how many DCs we should have, and where they should be located,” he said.
Economic instability and political unrest are increasingly commonplace across the globe, calling into question the survival of governments and economic policies which underpin critical planning assumptions: cost and availability of raw materials, energy and labor, duties, taxes, exchange rates, licensing and local content restrictions, and so on. And now we are in the early stages of witnessing the impact of the real elephant in the room, turmoil in the Middle East. Oil prices were already consistently rising, even during the recession, but this clearly exacerbates the problem.
What was unthinkable two months ago is now commonplace, added Karrenbauer.
“But what has occurred thus far is a mere stroll in the park when one imagines the impact of major supply disruptions in the Persian Gulf, either in the oil-producing countries themselves or in the transit lanes. Energy prices affect every aspect of the supply chain, from source of raw material acquisition, through manufacturing, to final distribution.”
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