5 Cautionary Tales of Failed Supply Chain Risk Management
As procurement professionals, our job is often one of managing risk. Balancing increasingly global supply chains means those risks are perhaps now more diversified than ever.
In ensuring appropriate supply chain risk management it’s good to remember what happens when things go wrong. It might not just be a bad day in the office, things could become a whole lot more uncomfortable indeed. Here are 5 cautionary tales to show you what happens when your supply chain risk management procedures are caught short.
McDonald’s – Chicken Failure
People like chicken. That means if McDonald’s run a promotion to devour their devastatingly delicious Spicy Ayam Gorend McD, you can be pretty certain people are going to get involved. Smart supply chain management means you need to be ready. The promotion which was held in April 2017 saw Spicy McD chicken running out throughout Malaysia, causing a social media meltdown and a fair bit of customer resentment.
The lesson? It’s a tough balance between overstocking supplies and under stocking for demand, especially when it comes to perishable goods. Make sure you’re properly assessed what demand might be, and put in place measures to react quickly if it exceeds your expectations.
Boeing – Every Bit Counts
The Boeing 787 Dreamliner marked a new frontier for the iconic aviation giant, the pinnacle of long-haul aircraft. Of course that pinnacle is hard to reach if you run out of essential supplies. What’s quite essential for aircraft? The bolts that hold them together.
Due to a significant supply chain backlog, the 2007 world premiere of the new aircraft actually involved temporary bolts holding the frame together, which then had to be replaced by permanent bolts at a later date. This supply chain failure saw Boeing postpone test flights and put at risk delivery times with their customers.
The lesson? Even the smallest parts matter. Boeing might offer an extreme example, but it’s important for us to remember that even something as simple as making a pair of socks can be held up if you forget to order the thread.
Hersheys – Timing Matters
People in America love Halloween. It’s quite literally scary the lengths that people go to embrace this strange holiday season. A key part of that holiday spirit comes in the form of candy. That means if you’re an iconic US candy manufacturer like Hersheys, Halloween is really quite a big time of year. Unfortunately 1999 was a Halloween to forget for Hersheys, a stuttering new IT system and failure of supply chain software meant Hersheys were unable to deliver around US$100 million of candy. Quite the Halloween nightmare.
The lesson? The real problem for Hersheys was timing. In-house IT systems can be notoriously fickle to implement, so it’s probably best not to schedule it to potentially overlap with your busiest time of year. Sometimes supply chain risk management is as much about when you do something, as how you do it.
Japan – Disasters and Supply Chain
The 2009 earthquake and tsunami in Japan were a huge human tragedy, and a devastating blow to the country. It also revealed the reality about how intrinsically interlinked global supply chains are today.
Japan is a major supplier of essential parts for industries as wide ranging as automotive to consumer electronics, and the infrastructure devastation caused by this tragic event painted a stark reality of how reliant we are internationally on those parts. The resultant disruption of supply chains saw manufacturers across the globe ramping down production due to the simple issue of scarcity of materials.
The lesson? Natural disasters are unpredictable and tragic events, and it’s impossible to plan for them in a specific sense. What they do however highlight is the importance of supply chain resilience, both your strategic plans in place to react to disaster, but also the inventories you have secured and alternative supply routes that you’ve researched for key goods in the event that you are exposed.
Australia – Transparency Tells
Our final example revolves around the fashion industry in Australia. The global fashion industry has been reflecting heavily on supply chains since the tragic case of the Rana Plaza collapse in 2013. This not only delivered a terrible catalyst for industry self-reflection, but an increasing awareness in consumers of the global supply chain that delivers their fashion.
A 2016 report on fashion supply chains highlighted the stark reality for some Australian companies today, with luxury brands such as Oroton and Seed publically denounced for their failure of transparency.
The lesson? As consumers become more informed, so too are their understandings of the impacts of their decisions, and the credentials of the companies they do and do not buy from. With 8 out of 10 Australians influenced by ethics in their consumer decisions, it’s clear that transparency is becoming an increasingly important part of supply chain risk management.