One of the major changes in company supply chains over the past twenty years has been the adoption of ‘lean’ manufacturing processes and ‘just in time’ distribution methods to trim excess cost. This has often meant the elimination of redundant suppliers, the use of fewer warehouses for ever-shorter periods of time, and shorter production cycles. It’s clear, especially after the recession forced companies to further cut costs that lean supply chains are here to stay. While these leaner processes can certainly save money, they can also exacerbate supply chain disruptions when natural disasters or man-made disasters strike.
Initially conceived as a method to reduce waste within a single factory site, lean processes have since been adapted for all parts of today’s outsourced, decentralized, and globe-spanning supply chains. As a result, temporary disruptions to a single supplier can cripple entire production lines if no alternate supplier is available. Communication difficulties can compound this problem. For example, a German third-party logistics provider is likely to have difficulty contacting their sub-contractors in the event of major storms or strikes in Europe, delaying shipments for their United States-based client.
These types of problems are not restricted to developed markets. Countries such as China are seeing consolidation in previously fragmented sectors such as logistics, while more companies in the country are adopting lean manufacturing processes to compete with lower-cost countries such as Vietnam. While this will undoubtedly enhance efficiency, it risks exposing these businesses and suppliers to more severe interruptions when disruptions do occur.