Procurement Trend #28: Supply Chain Risk

Twenty-five trends are left
Together they are quite heft
Depriving us of deft
So let’s make another cleft
… and shred them one-by-one!

We won’t give up. We won’t surrender. We will plow through to the end. We shall expose the half-truths and the lies. We shall tackle the issue head-on and with growing confidence and clarity, we shall spread the truth, whatever the toll may be.

The goal is that, at the end of this thirty part series, you will not only understand why so many historians are still talking about the false trends we debunked in our Future of Procurement series, what you need to do to prevent staying in the past with your organizational “peers”, but what you need to do to not only stay in the present but start marching towards the future, which is coming faster than you think.

So why do so many historians keep pegging this as a future trend? There are a number of reasons, but among the top three today are:

  • Natural & man-made disasters are on the rise and will increase five-fold in next 50 years
    In Combating Supply Chain Disruptions: Lessons Learned from Japan published in
    THINK Executive, Nov 2011, the authors state that is predicted that both natural and man-made disasters will increase five times in the next 50 years! (page 18)
  • Specialization means lengthening supply chains
    as more and more companies focus on components or pieces of a solution and not the whole product or solution
  • Trade and security agreements mean more trade and economic risk
    as these agreements multiply faster than Fibonacci’s rabbits around the world

So what does this mean?

Natural Disasters are on the rise

Even more supply chain interruptions are on their way, and if your organization designed its supply chain around the ring of fire*, expect to get burned! Many organizations have not yet realized that they need to move manufacturing and storage away from the hot zones to the greatest extent possible, that they need to make sure that their facilities have multiple access routes (as one road is easily blocked by a huge sinkhole, earthquake, landslide, etc.), and that they need to have backup facilities in other locations and plans to quickly bring those backup locations online in an emergency. If the organization designed its supply chain around JIT (Just In Time), it needs to make sure that it has enough buffer stock of critical inventory to account for the expected time delay between production and shipment from a primary location and production and shipment from a secondary backup location if the switch needs to be made.


The longer the supply chain, the longer it takes for material and product to flow though the chain to the end consumer. The organization needs to focus on collaboration and technology to make sure the chain flows smoothly. (The longer the chain, the greater the chance the order will NOT be perfect.) All parties will need to work together closely and disclose issues as they arrive so all parties can provide options for resolution. Data will have to flow quickly as well, and hence the need for new technology platforms and networks.

Trade and Security Agreements

Your organization needs to keep a watchful eye on trade agreements being negotiated and on the lobby groups pushing for those agreements, since many negotiations are now, despite being led by free countries, going on behind closed doors. If something is going to drastically change the terms of trade, your organization needs to know what the potential impacts will be and have a plan in place to deal with them. If your organization doesn’t, chances are it will miss opportunities to increase market share in the best case and be locked out of the market entirely in the worst. Sad, but true.

* Not Johnny Cash’s Ring of Fire, which burned brightest with Dilana.