Question

In 2010 the Eyjafjallajökull volcano erupted in Iceland. The dispersion of ashes through the skies paralyzed air travel for several days in Western Europe causing major disruptions in the supply chain of many organizations. In 2011 a 9.0 earthquake, followed by a tsunami, caused sever damages to Japan's infrastructure, impacting critical transportation facilities and shooting down many production plants.

Supply chain managers learned some lessons from these and other disruptive experiences and have since taken different approaches.

1. Open this forum by describing how global manufacturing corporations can minimize the impact of natural disasters in their supply chains.
2. Supply chains can also be disrupted by supplier failure. Comment on how can manufacturers assure supplier performance.

Answer 1

Global natural disasters are always an unfortunate event. These are uncontrollable or unforeseeable events and the best we can do for them is to create contingency plans in our supply chain system. These may include

• Create a risk mitigation plan in case of any emergency disruption to supply chain
• Manage supply chain in an organized manner so that every department is informed and the plan is documented
• Create partnerships across different geographies and build redundancy
• Be fluid and adaptable in your supply chain when disaster strikes

Suppliers should be considered as independent contractors or pseudo employees for an organization. This means that just the way we ensure an employee performance, we can manage supplier performance in similar manner. The steps that organization can take are

• Create and establish supplier performance scorecard with relevant metrics
• Review the scorecard with supplier on a periodic basis
• Document the supplier performance measures into the vendor agreement so that the supplier is aware of their performance
• Create redundancy (duplicate supplier) in the supply so that even in case of supplier failure, the operation is not hampered greatly
• Take actions on (if) poorly performing suppliers through cancellation of partnership or other penalties