Learn about supply chain disruption with examples, its causes and effects, and how to proactively respond
Published 13 Mar 2023
Supply chain disruption is an interruption in the flow of process that involves any of the entities associated with the production, sales, and distribution of specific goods or services. A systematized supply chain is crucial in maintaining the quality of products from start to end, and ensure that all resources utilized are of the best quality.
Supply Chain Disruption
Bottlenecks or any congestion in the production system often result in delays and higher production costs. Supply chain disruption is also one of the many challenges brought about by the Covid-19 pandemic.
China’s strict “zero-Covid policy,” introduced early in the pandemic and aims to control the spread of the virus by strict travel restrictions and lockdowns, impacted international supply chains but was a win for China’s economy as the country was eventually able to ease local restrictions and became the only major economy to grow in 2020.
The new and highly-transmissible Omicron variant might change that though.
According to this recently published article from CNBC, economists say that the policy could pose another threat to the global supply chains and may further weigh on consumer consumption and economic growth because, whereas other countries are learning to adapt and make their supply chains more resilient to disruptions, China is still counting on the ‘zero-tolerance’ policy.
This in turn can impact the supplies around the world as a great number of manufacturers are situated in China.
Sample of Supply Chain Disruptions by Sector in 2021
Just like any other factors in the socio-economic industry, supply chain disruption has various causes and effects that may impact the economy and the process of turning raw materials to final goods.
The origin of supply chain disruption in different industries can be caused by internal or external factors. Below are the usual aspects that might cause these disruptions and that companies and organizations should be aware of:
Global cost of disruptions such as those brought about by the pandemic have been enormous. These disruptions greatly impact the whole chain and cause several repercussions that will most likely materialize eventually. Below are the known effects of supply chain disruptions:
The impact of disruptions in various industries substantially affects the global supply chain and the global economy. A survey of 200 supply chain executives done by Ernest & Young LLP in the United States, shows that 72 percent of the companies reported that these disruptions adversely affected their operations and that only 2 percent responded that they were prepared for the challenges.
Supply chain disruptions can come in many forms but can mostly be categorized into two factors; probability of occurrence—which refers to the likelihood of it happening; and severity—which can be classified in three levels, they are as follows:
The unprecedented Covid-19 pandemic affected innumerable industries and disrupted major supply chains globally. Known for its significant economic effects, different industry disruptions were experienced worldwide.
People started working from home and this created a higher demand for electronic gadgets, therefore shifting the demand for semiconductors to consumer electronics which heavily affected the Automotive Industry. This shortage also recognized the opportunity for expanding chip supply chains, and production need not only heavily rely on a few manufacturing sites that produce the majority of the world’s semiconductors.
In relation to the above mentioned industry, the Electronics Industry is also experiencing a supply chain disruption for various reasons1) there was an increase in demand for semiconductors for the automotive industry; 2) covid-related manufacturing disruptions; 3) logistics/transportation concerns for the supply; and 4) increased demand for electronic gadgets itself.
The infamous 2021 Suez Canal obstruction by Ever Given cargo ship is an example of a possible human error in cargo consolidation and disruption. The cargo ship blocked Egypt’s canal for almost 7 days and disrupted global trade, which cost almost $10 billion in losses per day. In response to this, an expansion project for the canal is expected to be completed by July of 2023, according to the Suez Canal Authority.
The Retail Industry was also considerably affected by the pandemic. Just in 2020, a record number of 12,000 stores closed in the United States as consumers turned to e-commerce and avoided brick-and-mortar stores.
One other example of a supply chain disruption cause is Brexit. This geopolitical move created implications on how manufacturers source, transport, assemble, price their products, and make them consumer-available.
The effects brought about by the pandemic in the economy, various industries, government bodies, and societies are continually materializing — so it won’t be far-fetched to say that they are here to stay.
In order to keep up with evolving situations, companies need to make their supply chains more resilient and strategic. Listed below are some aspects enterprises could consider in addressing disruption:
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A supplier audit checklist used to examine your supplier’s facility, inspect if they meet the criteria, and determine if they’re suitable to be your supplier.
Use this to evaluate if the Context of the organization, Planning, Operation, Quality control, and Product improvement complies with the ISO standard.
This general warehouse safety checklist aims to evaluate potential risks observed during warehouse operations. Start by providing general information about the business then proceed with an evaluation of warehouse location, dock areas (exterior and interior), equipment, and sanitation.
This heavy vehicle inspection checklist can be used by a certified technician to identify problems and mechanical issues of heavy vehicles and to prepare for the DOT annual vehicle inspection.
This retail store operations checklist can be used to evaluate the following: employees’ product knowledge, facility cleanliness, product and window display’s appeal to customers, and safety of item storage.
Jaydee Reyes is a content writer and researcher for SafetyCulture. Her six-year experience in the field of data research and media monitoring adds expertise and quality to her work. She is also a champion of leveraging technology to promote a culture of safety in workplaces around the world. As a content specialist, she aims to help companies adapt to digital changes through interesting and informational articles.
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