It’s just another year, unless you look beyond the hype, identify true talent, give them real solutions, and then truly tackle the threats … with strategies for success.
Supplier (Plant) Shut Down
In reality, typically only three things shut down a supplier:
- Bankruptcy
- Disasters
- Governments
With respect to each of these:
- you can typically predict bankruptcy from financial monitoring, which is easily available for public companies, semi-available for private companies that survive off of international trade (just monitor the public trade data), and highly correlated with a noticeable decrease in quality or performance (which can be predicted off of your data)
- you can’t predict disasters, but based on geo-location, you can predict type and likelihood, and subscribe to news-based event monitoring services to identify when one happens that likely impacts your supplier (and then verify) so you know the minute a disruption occurs, and not three months later when the order doesn’t materialize
- governments will generally only shut down a company if it is a fraudulent enterprise or when they are taking something over that was private; your category expert consultant can let you know whether or not the country the supplier/plant is in has a history of forced public acquisition or is eyeing restrictions on the industry (and otherwise, the risk is pretty much non-existent)
Supplier Becomes Unreachable
This usually happens as a result of three things:
- sanctions
- border closings
- customs / port shutdowns due to strikes
With respect to each of these:
- sanctions are typically politically driven and hard to predict, but a sanction list monitoring service can inform you within 24 hours if a supplier or connected party has been sanctioned
- border closings usually result from trade wars or real wars, and news monitoring can indicate potential that can be monitored, and once the threat gets too high, you can proactively identify new / switch suppliers
- customs / port contracts with unions in terms of validity dates are typically public knowledge, and you can monitor when they end, and whether there is any news that negotiations have started once you get close (say 3 months) to expiry … as well as monitor statements put out by both sides during negotiations that could indicate a strike (vote) (and look at the history to see how often a strike [vote] results in a strike, how long it usually lasts, etc.)
Supplier Loses Access to Raw Materials
With respect to a supplier losing supply, they have the same risks you do with respect to supply lines, plus two more major ones and one more minor one:
- sanctions, border closings, and strikes
- mine collapse / crop destruction from a natural disaster
- government reclamations or limitations on natural resource extractions
- mine / well runs dry!
With respect to each of these risks, if you map your supplier’s critical supply chain:
- you can monitor sanction lists for sub-tier suppliers and news sources for events that would lead to border closings and strikes as you do for your suppliers
- you can monitor news sources for events that indicate a natural disaster that would threaten or destroy raw material supply
- you can research past history and monitor news sources for indications a government might restrict access to or reclaim natural resources from the private supplier in your supply chain
- you can contact environmental experts to determine when a given source a sub-tier supplier depends on might run out!
Logistic Route Cut-Off
This is pretty straightforward to enumerate. In addition to port closures above, you have:
- major carrier strikes and failures (as only public postal services can run deficits ad infinitum)
- natural disasters that take down major roads, bridges, and ports
- intermediate border closings on current routes
And the way you handle each of these is to:
- monitor the financial scores from the financial monitoring services and the union contract expiry dates to know when you need to look for negotiations and negotiation status to try and predict if you will need to lock in new carrier contracts before competitor quotes go through the proverbial roof in response to your carrier striking
- monitor news sources for natural disaster events along your major supply routes
- monitor geopolitical situations across countries on your routes
Procurement risk management doesn’t have to be hard to not only be good enough, but considerably better than your peers. Dwell on that.