COVID-19 Was Best-Known, But Not Only Disruptor of 2020
We can take it for granted that 2020 will be forever known in supply chain circles (and elsewhere) as the year of COVID-19. But as bad as it was, the pandemic wasn’t the only disruption of the year.
Resilinc has released data showing 83% of supply chain disruptive events in 2020 were human-caused and included factory fires, legal and regulatory actions, labor disruptions and profit warnings on supplier firms. “Looking at 2020 data, among human-caused events, two types continue to be of greatest concern:
1) factory fires and 2) mergers and acquisitions (M&A),” reported the cloud provider of supply chain resilience and risk management intelligence and analytics.
Resilinc tallied nearly 1,000 factory fires in 2020, a 67% increase over the previous year. “Assessing and mitigating fire dangers at supplier firms isn’t easy, but there are some best practices that can be deployed, starting with an assessment of where risk factors — like combustible dust, flammable liquids and gases, and
‘hot work’ — are present,” the company said. “Surveys on fire risks can be conducted, and in-house engineering staff can work with at-risk suppliers on prevention strategies.” Although it is not an option for all companies, Resilinc noted some OEMs have even funded the installation of sprinkler systems at supplier firms.
As for M&As, they might be seen favorably by investors, but they, too, can have a negative impact on supply chains, and there were 28,500 of them in 2020. “M&As, as well as business sales and/or changes in leadership at the C-level, have great potential to impact supply chains,” Resilinc explained. “While they generally don’t have immediate impacts, as merged firms implement synergy strategies an OEM customer can suffer price volatility, declines in service levels, or even complete loss of supply if its supplier exits certain business lines.”
One potential upside of the pandemic is that it may encourage organizations to take steps to better protect themselves against these much more common forms of disruption.
“I’ve started calling COVID-19 ‘The Great Educator,’” CEO Bindiya Vakil said in Resilinc’s report. “Many of us in supply chain risk management have been talking for years about the need for greater visibility in supply chains. We’ve been pointing out that supply chains have been designed to take costs out through globalization, but in the process, they’ve become exposed to greater and greater risks. The pandemic of 2020 really exposed that reality and woke people up to the fact that these risks have real consequences, and, in the future, they need to balance cost-savings and inventory reduction with risk and resilience.”