6 Types of Supply Chain Disruptions—And How to Manage Them

Even though we've made it through the Covid-19 pandemic, its effects are still being felt throughout the supply chain. Not only that, but disasters, global politics, and the effects of climate change are also making themselves felt, as in the Panama Canal-area drought that threatens to put a hold on shipping traffic.

These certainly aren't normal times, and it's more important than ever that companies proactively plan for factors that could throw off their normal operations—especially when working with international manufacturers.

While you cannot control every aspect of the supply chain (there will always be factors outside your control), understanding the risks your company faces will help you be better prepared so you can continue normal operations.

6 factors that could disrupt your supply chain

1. Implementation of new technology

New supply chain technology has significant potential for improving the efficiency of the entire industry. At the same time, however, the introduction of this technology can create disruptions of its own, particularly when different vendors and suppliers are at different stages of the adoption process.

Analysis from McKinsey notes that automation and robotics, end-to-end performance management, and on-demand delivery are poised to have the greatest lasting impact on the supply chain in the months and years to come.

To keep your supply chain running smoothly, you should aim to be at the forefront of adopting these technologies and encourage others that you work with to do the same. Implementing new technology often requires significant organizational realignment, and can disrupt the activities employees are used to performing on a daily basis. In-depth training can help ease the onboarding process for a smoother transition.

2. Transportation issues

Transportation delays have become a major supply chain issue in the wake of the Covid-19 pandemic. New Covid outbreaks are causing shipments to be rerouted to different ports, or forcing containers to wait in port for weeks when they would normally be processed in less than a day.

A lack of transparency regarding shipment status and condition is a serious issue for all businesses, but even more so for those who are shipping sensitive or fragile items.

Performance management tools such as Logmore aim to alleviate this by offering improved data collection throughout the shipping process. Companies can not only track the location of their shipments, but also key data such as temperature and humidity. Detecting bottlenecks and inadequate shipping conditions can help brands implement changes to improve shipping quality and protect their products.

3. Natural disasters

Whether the result of a fire, hurricane, or tornado, unforeseen natural disasters can create significant disruptions, particularly when a company’s supply chain is heavily dependent on a single geographic area.

For example, an AP News report detailed how the record freeze in Texas disrupted the outdoor furniture industry. Two plants that produced foam used in outdoor furniture were forced to shut down for several weeks because of the weather disaster’s effect on the power grid. As a result, supply of the foam briefly disappeared entirely. Even by the following July, levels had not returned to normal.

Such events illustrate the need for diversifying suppliers and manufacturing partners. Even if the use of multiple suppliers slightly increases costs, this can help companies avoid losing customers when these inevitable disruptions occur.

4. Pricing fluctuations

No matter what your industry, price fluctuations in seemingly unrelated spheres can disrupt your supply chain. A supplier could raise their prices on a crucial component you use to manufacture your products. Pricing issues for commodities such as crude oil can have a direct impact on shipping costs.

A change in price for a single factor related to your business’s supply chain can create a domino effect that your business must account for. Companies must determine whether they will raise their own prices, switch suppliers, or simply endure a temporary reduction in profits by keeping things as is. “Shrinkflation,” in which companies sell products for the same price, but in smaller quantities, has been a common trend in recent months.

When faced with such decisions, brands must evaluate whether pricing fluctuations appear to be temporary or indicate a lasting shift. Business leaders must balance profit margins with how their decisions might impact customer loyalty in the future.

5. Sudden spikes in demand

In 2019, no one would have predicted that there would be toilet paper shortages disrupting the entire U.S. supply chain during Covid as customers gave in to panic buying. While this is an extreme example, it shows how businesses can be completely unprepared for a shift in demand.

There are several additional factors that can influence demand for a business’s products, such as seasonality, changing market trends, and even product cannibalization.

In addition to monitoring current trends in their industry, brands can gain greater insight into demand for their products by using demand forecasting tools like Netstock. Utilizing live and historical data insights into your company’s inventory helps you better prepare for changes in demand so you can maintain peak profitability.

6. Cyberattacks

As the supply chain becomes increasingly digitized, cyberattacks have become an ever-present threat. Your own business may have all the latest digital security measures in place, but if a partner in your supply chain has poor security, hackers could still gain access to your network.

Perhaps the most notorious example of this is the 2014 hack of Target. Hackers used information obtained from Target’s HVAC partner to eventually steal information from over 70 million of the chain’s customers (including over 40 million credit and debit cards). More recently, the Colonial Pipeline hack created massive gasoline shortages along the East Coast.

Savvy business leaders would do well to communicate with supply chain partners to ensure that those they work with are free of major vulnerabilities. Each supply chain partner that prioritizes cybersecurity reduces risk for everyone.

You can't control the factors that disrupt your supply chain

Gaining total control of your business’s supply chain is an impossible task. After all, you can’t control the weather. You can’t control conditions at a partner’s manufacturing facility. You certainly can’t control changing customer preferences.

What you can control, however, is your business’s level of preparedness to face these events. As you improve your risk management practices, you will be better equipped to weather any supply chain-related storm.

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