The Black Swan Checklist

The term “black swan event” refers to a low-probability, high-impact event capable of causing a major disruption to your business.

Preparing for these events is tricky, but it’s an absolute necessity considering how long-lasting and damaging the impact can be.

Some events are so significant that they disrupt supply chains on a global level. Terrorist attacks, pandemics, and extreme weather (like tsunamis and earthquakes) are a few examples of black swan events that can put your company’s supply chain resilience to the test.

And as supply chains continue to grow in size and complexity, the likelihood of facing a major, unplanned disruption is only likely to increase. That’s why thoughtful preparation and supply chain resilience are more important than ever before.

Companies can defend against the impact of black swan events through better internal supply chain management practices and strategic partnerships.
When it comes to internal supply chain management, it is vital to pay attention to current market conditions throughout your supply chain. 

The Covid-19 pandemic is a recent example of a major disruption that compromised global supply chains. Just months after the initial outbreak in Wuhan, China, companies as far as the other side of the world began to realize just how much their systems were lacking.

McKinsey Global Institute conducted an analysis displayed by Figure 1 which illustrates the magnitude of estimated cost of shock versus the ability to anticipate (lead time). The analysis reveals four broad categories of shocks including unanticipated catastrophes, foreseeable catastrophes, unanticipated business disruptions, and foreseeable disruptions.

Companies can create more robust supply chains to better cope with the possibility of such disasters even if black swan events are not predictable.

But many companies simply do not possess the resources to build supply chain resilience, or it’s inefficient for them to do so. At that point, they will call in external supply chain logistics and management experts.

These experts can leverage their networks to improve visibility and redundancy, as well as utilize a network of global resources to build a resilient supply chain in the face of crisis.
If you’re looking for a partner that specializes in navigating and avoiding black swan events in your supply chain, then contact the supply chain management experts at Chainlogix. They are ready to jump in and help at your toughest moments, as well as carefully handle your day-to-day supply chain management needs. 

Chainlogix provides supply chain solutions helping manufacturers design and build quality products at a lower cost without interruption.

Without supply chain resilience, your company is at risk of being exposed to limitless potential losses and vulnerabilities. Visibility, redundancy, and flexibility can act as building blocks of supply chain resilience and significantly reduce the damage caused by black swan events.

1. Visibility

Supply chain visibility is the ability of parts, components, or products in shipment to be tracked from the point of origination to their final destination. Visibility allows you to improve efficiency, limit disruptions, and mitigate risks.

According to worldwide surveys conducted by GEODIS in 2017, supply chain visibility was the third most important priority for each organization. Yet, only 6% of the companies surveyed had full supply chain visibility for their organization. According to the report, delivery and product availability were some of the highest priorities for supply chains.

Lack of visibility in the supply chain process can cause a company to lose track of their supply, meaning that the slightest disruption can catapult it into uncertainty.

By making data available and accessible to customers and other stakeholders, it can greatly strengthen your supply chain in the face of disruptions. Also, utilizing cutting-edge technology can predict demand, which can help your business avoid possessing too much or too little inventory at different points in the supply chain.

There are other reasons that companies might want to improve visibility in their supply chains. Clear oversight of the inventory and activity enables cost control, healthier inventory management, and real-time status updates during transit.

2. Redundancy

Redundancy acts as a security blanket over the supply chain by supporting weak points to maintain regular activity and functions in the scenario that a black swan event occurs. It provides a potential avenue for safety stock in case of failure or shutdown.

Redundancy is designed to reduce time, effort, and cost associated with system failure. Creating redundancies throughout the supply chain process can build resilience into the day-to-day operations.

Redundancy can even create a competitive edge over those who are underprepared during a black swan event – turning a negative into a positive for your business.

3. Flexibility

Flexibility is a measure of how rapidly a supply chain can sense and respond to sudden issues. It is vital to remain nimble. Built-in flexibility can create resilience to withstand substantial stoppages and respond to fluctuating demand. Some ways to increase supply chain flexibility include:

• Adopting Standard Procedures:

Adopting standard procedures can allow you to move production among plants. Standardized designs and processes can allow you to interchange parts, respond quickly, and switch production facilities in the event of a disruption.

• Diversifying Suppliers:

Diversity reduces risk in a global, interconnected marketplace. Partnering with suppliers in different countries or utilizing a third or fourth-party logistics company with global connections can be an effective business move.

• Incorporating Automation & Technology:

Technology and automation allow you to get infinite information about various steps in the supply chain process. Real-time data and forecasting capabilities can significantly reduce losses.

Let Chainlogix handle building up your company’s supply chain resilience. Chainlogix’s supply chain management services cover everything from product development, sourcing, and production to logistics and the information systems needed to coordinate these activities.

They work with companies and suppliers across the world, including strategic 3PL partnerships, to offer a number of benefits like global warehouse solutions and 45+ day safety stock options to their clients. Click here to find out more now!