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  December 15th, 2016 | Written by

Handling the Supply Chain Butterfly Effect

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  • Disruptions are a given in global trade and they come in many forms.
  • Damages, late shipments, and quality issues are the most prevalent supply chain issues.
  • Crossborder shipments add another level of complexity to supply chains.

Experiencing supply chain disruptions these days is like watching the butterfly effect at Mach speed. One delicate wing flap in any part of the process and the whole supply chain erupts into chaos across the globe.

This year alone, supply chains were riddled with unexpected disruptions. In January, analysts predicted big trade upticks but the forecasts fell short because global trade has been hit with multiple, unforeseen interruptions, sending importers and exporters scrambling to stay on course.

Disruptions are a given in global trade and they come in many forms. According to Aberdeen Group’s October 2016 report, damages, late shipments, and quality issues are the three most prevalent. Yet these are just the tip of the iceberg. Crossborder shipments add another level of complexity with potential failure points being customs entry requirement screenings, port congestion, and labor strikes.

While there are typical disruptions, supply chain leaders must have a backup plan in place for completely unplanned or unforeseen events. Even though they don’t know when or where a disruption might happen, supply chain leaders must always be thinking one step ahead. Here are two disruptions that we experienced this year.

Hanjin Meltdown

The recent crisis surrounding Hanjin best exemplifies an unforeseen event. When the bankruptcy hit the ocean shipping giant, a combined $14 billion in goods were held on Hanjin vessels at various locations around the world. With shipments held at bay and no certainty of potential release dates, the only hope a company had was damage control.

Visibility into which customer orders and products were floating in the legal limbo allowed importers to advise waiting customers of the status of their orders. Without detailed, granular data which includes manufacturer and product level information, corrective action was all but impossible.

In the case of Hanjin, online visibility into in-transit shipment status was enough information to get companies moving in the right direction for recovery. This is where retailers might want to get controls in place for their incoming supply chain at the global trade level.

The Retail Squeeze

It is commonly understood in retail that little investment is made in supply chain execution capabilities and more largely in product lifecycle management solutions. Not for a lack of need or want, but in order to keep overall costs lower through less technology investment. Consequently, many global apparel companies operate with a limited view of their inbound supply chains.

As a result of disruptions and the subsequent financial losses, the time has come for retailers to take ownership and control of their supply chains. The key to preventing issues from turning into crises is visibility of the upstream supply chain. This visibility allows supply chain leaders to alter the outcome of a rare event. With on-going monitoring, adjusting, course correction, and random heroics, they can keep a plan on track.

Lack of visibility into supplier quality and manufacturing processes is a serious point of weakness for any company. As cited in the Aberdeen report, best-in-class companies are more that two times as likely to have this in place.

For retail, solving quality and manufacturing issues before a product is made and shipped is a lot cheaper than trying to fix it after the fact. Forward thinking companies recognize the value in working with suppliers and solving issues at the source before they become problems that are prohibitively expensive to resolve.

Visibility: The Best Time is Now

Aberdeen reports that the most effective companies leverage all the tools to establish a complete visibility profile for their inbound supply chain. It provides them the time and speed to react to an unforeseen disruption, and becomes a competitive advantage.

Disruptions happen at all levels in a supply chain, yet best-in-class companies are more likely to have the inbound supply chain visibility to combat them. Compared to their competition, they excel at every level of engagement with suppliers, partners, and logistics providers including international suppliers and shipments.

Visibility pays off in the form of on-time shipments and lower costs, as reflected in their performance metrics. The Hanjin situation and retail squeeze on supply chain execution improvements are examples of how visibility can be the difference between an issue and a disaster. Visibility doesn’t solve every problem, but it does enable your organization to know sooner and act now.

Gary Barraco is director for global product marketing at Amber Road. Download the full Aberdeen report Supply Chain Visibility: Know Sooner, Act Now for free.