The global supply chain faces risks every day. A natural disaster may strike, a government may tighten its regulations, or incorrect paperwork can all cause varying disruptions to your supply chain. While some risks can be avoided, many are out of a supply chain professional’s control. So, while you can’t control every possible disruption to your supply chain, how can you work to mitigate the risks and respond to the delays?
Evaluating risks in the global supply chain
When evaluating your supply chain risk and developing a plan to mitigate it, it’s important to understand the different approaches and know which is right for your product and role in the supply chain.
To evaluate and handle supply chain risks, there are generally two approaches: atomistic and holistic. An atomistic approach looks at a specific or limited link in the supply chain. You’ll often see this approach used for simple, highly available materials that have low value. When little is to be lost, it’s easier to take this atomistic approach. It takes less time and effort, but it also comes with less of a payoff if things go wrong.
Alternatively, there’s the holistic approach to evaluating supply chain risk. This approach looks at the supply chain as a whole, rather than at specific links in the chain. It’s more complex than the atomistic approach and is typically reserved for higher value materials that may be rare or complex. A disruption with these materials would have a much bigger effect on the entire supply chain than simple, available materials.
Once you’ve established your base approach, there are a number of different subsets to handle risks. Whereas the base approach focuses on your materials in the supply chain, subsets are based on the type of risk. Some experts divide risks into two main categories: quantitative and qualitative.
To determine quantitative risks, consider any problems in your supply chain dealing with numbers or quantity. This could be an overstocked or understocked inventory, a shortage of materials, or a change in demand. Qualitative risks are risks with the quality of the supply chain. This is related to the reliability, visibility, and accuracy of the components in your supply chain.
Other risk management experts take the division a step further. Instead of simply qualifying risks as quantitative or qualitative, they will categorize risk as physical, analytical, and financial. No matter how you categorize the varying risks or disruptions that can impact a single link or an entire supply chain, the important thing is to plan ahead. While not every disruption can be avoided, careful thought and planning can help mitigate risk and reduce losses.
Risk management is no simple issue, especially in the context of the global supply chain. When shipping internationally, there are many areas and opportunities for disruptions to occur. Every added link in the chain provides one more opportunity for something to not go as originally planned. Today, let’s take a high-level look at the different risks that can affect your chain, so you can plan ahead and mitigate the risk.
Common disruptors in the global supply chain
When you take your logistics to the international level, you’re no longer dealing with the rules and customs of your home country. You’ve introduced new laws, regulations, customs, work cultures, and political climates into your supply chain. All of these variables can have an impact. Become familiar with the political climate in the areas where you’re moving goods to understand its effect on your operations.
While you can’t control the actions of political leaders or the feelings other countries may have as a result, what you can do is plan ahead and anticipate the changes you’ll need to make if and when politics affect your supply chain.
We’ve discussed the large ramifications of the ELD mandate, including the driver shortage on this blog and while this mandate regulates truck drivers in the U.S. only, its impact can be felt around the world. Additionally, a violation of SOLAS-VGM (Safety of Life at Sea- Verified Gross Mass) regulation could cause traffic jams and delays at ports. Whether international or defined to a specific country, regulations can shake things up and cause delays in shipping. Stay in tune with national and international laws and regulations to help account for shipping delays or other disruptions to your global supply chain.
When a natural disaster strikes, its effects are felt worldwide. One hurricane can cause disruption across the global supply chain. From shut-down airports to closed roads to damaged warehouses and factories, one obstacle can cause a series of delays—not to mention the spike in prices. To help alleviate the disruptions from natural disasters, work with an international logistics partner with a large global network that can quickly adjust routes or carriers in order to keep your supply chain running smoothly in times of disaster.
A terrorist attack at an airport can cause major delays, sometimes shutting down airports completely for several days. When assessing risk in international shipping, terrorism cannot be negated, though mitigating this risk is complex. Work with an international logistics partner who is certified with the Customs Trade Partnership Against Terrorism (CTPAT), a significant part of the U.S. Customs and Border Protections (CBP) multi-layered cargo enforcement strategy. Through this program, CBP aims to “work with the trade community to strengthen international supply chains and improve United States border security.”
Theft and piracy
Like terrorism, increased security is an important factor to protect against theft and piracy when shipping internationally. Train employees implement security technologies that can protect both your data and your product. And they canbe vigilant when screening logistics partners and carriers. Work with a logistics partner who has a good reputation, and remember that the cheapest option isn’t always the best.
Beyond the traditional elements of logistics management, international shipping adds a whole new layer of complexities. Establishing responsible contracts, understanding International Commercial Terms (Incoterms) defined by the International Chamber of Commerce, attaining robust insurance policies, and paying exquisite attention to detail are all important factors in running day-to-day international shipping operations.
Partnering with a novice operator or a company trying to make a quick buck by consistently underbidding the competition can result in thousands of dollars in fines, delays, and other otherwise avoidable disruptions in your chain. It’s not just crucial for your team to understand your supply chain; it’s equally important that you work with an experienced international logistics partner who can help keep your supply chain operations running smoothly and react quickly to volatility in the market.
Lack of visibility
A lack of visibility into your supply chain is one of the biggest risks you will face. Without visibility into the workings of your supply chain, it will be nearly impossible to prepare for all the aforementioned disruptors. Partnering with an experienced logistics provider that has an established international network will help give you end-to-end visibility and reduce your risk of delays, disruptions, or human errors.
No one can control everything, and even the best-laid plans can change in an instant when you consider the risks your global supply chain faces daily. Taking a holistic approach to understanding your end-to-end supply chain takes time and thoroughness. But when disruptions occur, you’ll find yourself grateful for the effort you put into keeping operations moving.
Working with an experienced and agile 3PL is one of the best ways to mitigate risk in your global supply chain. As an international logistics partner, we utilize our experience and long-standing relationships with carriers, suppliers, and haulers to offer creative solutions and additional options when things don’t go as planned—whether by ocean or air. Don’t wait for the disaster, plan ahead, and start your partnership with an experienced logistics provider today.