Turbulence, a flow regime characterized by chaotic property changes, that occurs regularly in the earth’s atmosphere and makes for bumpy air travel when encountered, is not just restricted to air. It’s commonly found in water as well, when the oceanic currents mix, causing rough times for many a seafaring ship.
And when you consider that one of the most common causes is the rapid variation of pressure and velocity in space and time you see that it’s not even restricted to fluid dynamics. The general concept extends to the flow of physical goods and of virtual information when that flow, seemingly regular under normal circumstances, becomes highly irregular with the slightest perturbation.
Turbulence is a hidden risk in every supply chain, and one most organizations are never prepared for because, when a risk assessment is done, it is always focussed on easy-to-identify technological, economic, market, financial, organization, environmental and social risks — not random events that can temporarily interrupt your supply chain and cause temporary disruptions with serious financial or brand consequences. Temporary disruptions which, if regular in nature, can put your organization in real jeopardy and temporary disruptions, which, by their very nature cannot be planned for or even identified in an up-front risk assessment.
For example, when buying product components from China, an experienced risk team is going to identify:
- Supplier Risk
Are they financially stable? Will they adequately protect your IP? etc.
- Factory Risk
Is the quality acceptable? Are there workplace or safety hazards that could shut it down?
- Port Risk
Will the product be safe? Is there any danger of strike or overcapacity? On both sides …
- Export and Import Risk
Are all regulations adhered to? RoHS? WEEE? Has all the paperwork been completed and submitted on time?
- Technology Risk
Is the real-time product tracking and distribution system reliable? Backed Up? Integrated properly with all parties?
Is the product being made or stored in areas subject to regular natural disasters such as hurricanes, typhoons, earthquakes, etc.?
- Social Responsibility
Is the product conflict / slave labour free? Are all employees of all partners treated equitably? Is the product, and its production, environmentally friendly or at least environmentally safe? Can the product be safely disposed of?
Will the market still want your product when it is available? Is a competitor going to beat you to the market?
Will the economy maintain or improve? Or will it worsen, leading to reduced demand across the board? What is the job forecast looking like in target markets – job loss in those areas can weaken consumer demand.
and a few dozen other common risks from the risk identification and management playbook. But it’s not going to identify one-time random events such as:
- Unlikely Terrorist Attack by a random civilian who goes postal and, when trying to go postal, thanks to a gas leak, accidentally blows up a building due near the docks and causes the port to become unaccessible for 3 days
- Delayed Delivery due to Paperwork Mix-Up
One truck is scheduled for delivery of your product to your distribution warehouse, another for mid-term storage at a competitors warehouse on the other side of the continent. And because the small carrier you’re using doesn’t have real-time inventory tracking, and your product is schedule for JIT delivery, the mix-up isn’t detected until the expected delivery date when your product is half-way across the country.
- False Stock-Out due to Inventory Mis-Key
The clerk enters 8,000 units instead of 80,000 into the system, stores exactly 8,000 in the proper location in the ware-house, and puts the other 72,000 units of your hottest selling product at the back of the warehouse reserved for discontinued inventory.
Each of these events can happen, and each can cause a real, unexpected, and unpredictable turbulent impact to your supply chain. Are you ready for it? Can you react and adapt when it does?