Written by: Griffiths & Armour on: 30 Jun 2021
Building Resilience into your Supply Chain
In March 2021 an unprecedented event took place when the Suez Canal was completely blocked for nearly a week by the Ever Given container ship.
A combination of human error and weather have been highlighted as most likely factors and this blockage resulted in significant supply chain impacts that are still being felt across the global supply chain and numerous industries.
In May 2021 a sophisticated ransomware attack managed to disable the Colonial Pipeline in the USA which carries 2.5 million barrels of fuel a day – 45% of the East Coast of America’s supply of diesel, petrol and jet fuel and triggered widespread fuel shortages and panic buying.
Like the Suez Canal incident, this has had a significant impact on many sectors, not least because it resulted in petrol stations running out of fuel across many states, impacting the transfer of people and goods in those areas.
Global supply chain disruption incidents like these hit the headlines because they are hugely significant and costly, but thankfully rare. As most businesses understand, irrespective of the size of the disruption to their supply chain, when they do occur, it can have serious implications for those organisations that have not prepared for supply chain issues.
Closer to home, according to a recent report by the Business Continuity Institute a large proportion of businesses are suffering significant supply chain disruptions. Cross border land transport has been the primary cause of logistics disruption in 2020 with more than three quarters of organisations surveyed confirming they had experienced disruption in cross border land transportation.
In addition to the Suez Canal blockage and Colonial Pipeline Cyber-attack, issues such as COVID-19 and BREXIT have in some cases put huge pressure on supply chains with little prospect of early resolution.
Source of statistics: BCI Supply Chain Resilience Report 2021 (available to download above)
How can I build resilience into my supply chain when so many factors are outside of my control?
Here are a number of useful tips that your organisation should consider to help build as much resilience into your supply chain as possible;
- Auditing suppliers to ensure they operate to best practice and to investigate suppliers at Tier 2 and beyond.
- Sourcing from a supplier or a number of different suppliers that operates in a number of different territories, such that an interruption in one area is unlikely to cause a disruption. If possible, use suppliers that have the capability to access multiple modes of transport (road, rail, air and sea).
- Establishing supplier contracts, which detail a variety of performance and risk management standards. Where a high dependency exists, contracts should ideally include preferential terms of supply over other customers.
- Ensuring that commitments given to customers reflect the potential for supply chain disruption, for example avoiding contract penalties for short delays in supply.
- Identifying other potential alternative suppliers and likely lead-in replacement times.
- Considering the introduction of in-house facilities to replace outsourced services.
- Determining the extent of spare capacity that is available from suppliers and/or in-house arrangements.
- Increasing own stock holdings to match lead-in times from alternative suppliers.
- Where appropriate, negotiating reciprocal agreements with competitors.
- Arranging suitable and adequate business interruption and supply chain insurance cover.
- Following an incident, maintain effective communication with customers and suppliers, prioritise orders and services for key customers.
At Griffiths & Armour we work closely with our clients to help them understand not just their primary (first level) suppliers and customers, but also second and third layers where appropriate.
It is not always obvious how certain events could impact your organisation, but you can take measures to better understand where your key relationships lie and what could impact these.
If you would like to discuss how Griffiths & Armour can help with insurance cover or risk management advice regarding your supply chain, please get in touch by contacting Greg Street (below) or your usual point of contact at Griffiths & Armour.
Guidance on supply chain risk management is also available within RMworks, our online risk management portal available to all clients. If you are a client at Griffiths & Armour you can access the RMworks portal here.