Supply Chain Failure

Primary reference(s)

Waters, C.D.J., 2007. Supply Chain Risk Management: Vulnerability and Resilience in Logistics. Accessed 10 November 2020.

Additional scientific description

There is no single best definition of the term supply chain (UNECE, 2016). Supply chains have been defined as a network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users (Worldwide Supply Chain Federation, no date).

The Sendai Framework calls for more dedicated action needs to be focused on tackling underlying disaster risk drivers, such as the consequences of poverty and inequality, climate change and variability, unplanned and rapid urbanisation, poor land management and compounding factors such as demographic change, weak institutional arrangements, non-risk-informed policies, lack of regulation and incentives for private disaster risk reduction investment, complex supply chains, limited availability of technology, unsustainable uses of natural resources, declining ecosystems, pandemics and epidemics (UNDRR, 2015: para 6).

The Sendai Framework identified priorities for action (Priority 3: Investing in disaster risk reduction for resilience) for disaster risk reduction:

c. To increase business resilience and protection of livelihoods and productive assets throughout the supply chains, ensure continuity of services and integrate disaster risk management into business models and practices (UNDRR, 2015).

Failure of supply chains reduces resilience in disaster risk management. In today’s highly competitive global manufacturing industries, the reality facing most prime or focal manufacturing organisations around the world is one where resources have been reduced, inventory has been drained, technology spending curtailed, and processes that are not core to an organisation’s business have been scaled back and/or outsourced. In competitive global marketplaces prime manufacturers cannot afford to have any area of their operations compromised. Supply chain operations need to be robust and resilient in order to retain and increase market share. Supply chain failure is a phenomenon that can potentially cause major issues for many organisations, especially when failure becomes persistent (Karsten, 2018).

International trade is vital to the world economy. Businesses that trade internationally are supported by interlinked global supply chains, which are vital to their competitiveness. But as some recent events highlight, these dynamic, complex systems are vulnerable to numerous risks. Because of their interconnectedness, even small, localised events can escalate rapidly and cause significant disruptions (WEF, 2014). Supply chain performance is critical to business success; hence, supply chain disturbances could have a significant effect and include panic buying which leads to a sudden increase in demand, having the potential to disrupt entire supply chains (Dulam et al., 2020).

Critical infrastructure relies on supply chain supplies in order to provide essential services for community, national, regional and global resilience. This includes water, transportation and telecommunications infrastructure, educational facilities, hospitals and other health facilities that ensure all remain safe, effective and operational during and after disasters in order to provide lifesaving and essential services.

Metrics and numeric limits

Not identified.

Examples of drivers, outcomes and risk management

Over recent decades, supply chains have globalised, specialised and become leaner or just-in-time. They are more efficient, less risky in certain areas, but potentially more exposed to a breakdown of cooperation. In the last decade or so supply chain managers have encountered many shocks such as the Great East Japan Earthquake and tsunami, Thailand’s flooding, the Eyjafjallajökull volcano in Iceland, the maritime piracy upsurge, and the E. coli-infected vegetable outbreak; all these shook supply chains across entire regions (Doherty and Botwright, 2020).

A 2012 World Economic Forum survey of supply chain professionals ranked disruptions most likely to provoke significant and systemic effects on supply chain networks. The list included pandemics, natural disasters, extreme weather, conflict, demand shocks, ICT breakdowns, and export/import restrictions such as export restrictions currently being placed on medical supplies. Triggers of supply chain disruption are hard to predict, and sometimes neither controllable nor influenceable. The robustness of networks is paramount to ensuring demand can be met with supply even in extraordinary times (Doherty and Botwright, 2020).

It is clear that a supply chain problem can harm a company’s reputation, while proper supply chain management can improve a company’s reputation. The Sendai Framework has a strong emphasis on disaster risk management as opposed to disaster management. The scope of disaster risk reduction has been broadened significantly to focus on both natural and man-made hazards and related environmental, technological and biological hazards and risks (UNDRR, 2015).

Following large-scale and catastrophic disasters, local organisations integrate with other responding organisations to form hastily developed disaster relief supply chain networks. Unfortunately, even where sound supply chain management practices are used, supply networks have encountered diverse levels of resilience and adequate disaster relief performance has remained elusive (Day, 2014).

The private sector is a critical participant in the creation of risk-resilient societies. ARISE, the Private Sector Alliance for Disaster Resilient Societies, is a network of private sector entities led by the UN Office for Disaster Risk Reduction (UNDRR). The Philippine Disaster Resilience Foundation (PDRF) provides an example of how ARISE and the impact of its work on supply chain support after the 2013 typhoon. The PDRF reported on a public‐private partnership for a livelihood seeding program in a post‐disaster context working in a post‐disaster scenario in the Province of Leyte:

• The PDRF designed an early recovery programme with national government agencies, local government units, and international non-governmental organisations – leveraging the capabilities of each organisation in support of micro- and small enterprises and the normalisation of the local supply chain.
• The Post Disaster Needs Assessment provided programme partners with a way forward to support affected communities and livelihood outside of relief packages of ‘starter kits’ including items such as kitchenware, gas stoves and cooking equipment for food business owners and grocery stocks, bags of rice and weighing scales for sarisari storeowners. In helping to jumpstart early recovery, people were provided with the opportunity to help themselves and regain their businesses. They also reported that another benefit of this early recovery activity was the stabilising of market prices for basic commodities and deterring opportunists that prey on the vulnerability of the community’s situation.
• Two months after the Post Disaster Needs Assessment beneficiaries were able to group into clusters/sectors (dressmaking, eatery/carinderia operations, delicacy making, and food vending). Sub-sector members were able to gather, discuss updates on their businesses, identify potential markets, and update themselves with market trends (UNDRR, no date).

Risk managers reflecting on previous disruptions highlighted five priority strategies to improve control measures further: risk quantification, scenario planning, data sharing, trusted networks, and multi-stakeholder input to legislation (Doherty and Botwright, 2020).