Supply Chain Risk and Charles Darwin
Charles Darwin may have been talking about evolution when he said, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change.” Regardless, I think we can learn a lot as supply chain practitioners from this famous statement. To survive and thrive in today’s global supply chain the winners will be the ones most responsive to change.
In a recent report the insurance company Swiss Re estimates that in 2010 alone, economic losses across the globe resulting from natural and man-made disasters reached $222 billion. This was more than triple the losses in 2009. We had earthquakes in Haiti, Chile, China and Iran, forest fires in Russia, an oil spill off the coast of the U.S., volcanoes in Iceland, and extremely cold winter that wreaked havoc to supply chains in Europe and parts of North America.
2011 hasn’t started too well either. The uprising in Egypt and Libya threatened to halt traffic through the Suez Canal, and political unrest in the Middle East effected oil prices that have recently reached a 2 year high. The recent earthquake and resulting Tsunami and nuclear threat in Japan has thrown that country (the world’s 3rd largest economy) and the countries dependent on Japan as sources of supply and demand into turmoil.
Natural disasters and extreme weather have always been a part of day-to-day life. However, in today’s global economy, the impact is exaggerated by the interdependence of global society. If one link in the supply chain goes wrong, it can have a huge impact.
Hand in hand with complexity and risk of our networks is the need for responsiveness to change. Whether it’s changes the economy, changes in the environment, changes in the flow or breakdown of supply, changes in demand, or where and how that demand manifests itself.
Companies are looking for solutions in the area of network design to build risk strategies into their networks. Equally important are solutions that enable responsive planning and collaboration to respond to changes as they happen, and event management and visibility into where your resources, inventory and shipments are at any point in time.
A great example of managing supply chains in the face of natural disasters is Direct Relief International . When tragedy struck in Haiti on January 12, 2010, Direct Relief was there to help. During the past year, they have provided more than 700 tons of medical aid, valued at $57 million (wholesale), to help Haitians in need (See an interactive map of aid delivered). They are now actively engaged in supporting the efforts in Japan.
As Darwin may have said if he was in business today: “It is not the strongest of supply chains that survives, nor the most intelligent, but the one most responsive to change.”