Dive Brief:
- Reliability, not cost-effectiveness, should be the supply chain manager's priority when choosing carriers, FM Global's Kevin Ingram wrote for CFO last week.
- Various transport failures highlight the risks of putting all your eggs in one, albeit cost-effective, basket, as vehicle accidents, unpredictable weather, fire, cyber attacks, piracy and merchandise theft can happen at any time.
- Thorough risk assessments must consider cargo type, transportation equipment, time of year, route and carrier reliability through pickup, storage and fulfillment.
Dive Insight:
Lean supply chains are often a good idea, but their inherent risks are revealed when the unexpected occurs.
When the Gap suffered a devastating fire in early September, rerouting and reconfiguring the supply chain became top priority as a result of low stock within the structures damaged. Order fulfillment was moved from New York to Ohio and Tennessee and even retail stores were called upon to package and send goods to customers throughout the country. Risk was unplanned for, and as a result, the logistics chain was tasked with last minute scrambling for alternative merchandise supply sources.
It is easy to point fingers in the event of disaster, suggesting preventative methods that might have mitigated destruction. However, investing in resilience plans that include seasonally updated forecasts, severe disruption operating procedures and regular financial risk assessments by suppliers and carriers can help prevent the most extreme examples of damage or failure from unmitigated risk.
