Most firms do their best to manage supply chain risks, but every so often, supply chains still get disrupted by unforeseen events that can have dire effects for the supply chain and its participants
A recent study conducted at the University of Pretoria, investigated the supply chain disruptions faced by third-party logistics providers and their clients and the strategies they employ to manage these disruptions.
The disruptions faced by South African 3PLs were categorised into three general areas: 1) Intra-organisational disruptions stemming from within the organisation, 2) inter-organisational disruptions which are considered to be those that stem from sources external to the organisation but internal to the supply chain, 3) extra-organisational disruptions that stem from outside the supply chain but have a significant effect on the supply chain.
Intra-organisational disruptions experienced by 3PLs and client firms in South Africa often stem from labour strikes, manual labour errors, absenteeism and high levels of employee turnover. Systems and processes were found to be a major source of disruptions, especially with regard to IT systems downtime and the temporary failure of systems. Rigid processes were found to limit the flexibility of organisations in dealing with disruptions stemming from these sources.
Organisational changes, such as changes in strategies, or mergers and acquisitions were also found to have a significant effect on the supply chain as employees would often have to play ‘catch-up’ with the changes in processes.
Inter-organisational disruptions stemmed from logistics service providers themselves when agreements between the service provider and client were not met, when priorities of the two firms were misaligned, or when firms decide to change service providers entirely. Transportation breakdowns and traffic accidents were also found to contribute to the supply chain disruptions these organisations face.
In the South African context, crime often plays a role in the disruption of the supply chain, where theft and hijacking were found to be the most significant contributors to supply chain disruptions. Some firms report hijackings taking place on a weekly basis.
The researchers found extra-organisational disruptions related to weather conditions to be a factor, especially considering the droughts that the country is experiencing. Government regulations were another source of disruption from an extra-organisational point of view, especially when new regulations of legislation are passed and firms have to respond by making changes to their business processes.
A major external factor in the South African context that contributes to disruption is the lack of infrastructure which often affects the transportation routes of the firms operating in certain areas.
Even though not as common in South Africa as in other African countries, organisations have reported that terrorism has caused supply chain disruptions in the past when working cross-border in East and West Africa.
Other sources of disruptions that were found to be of interest included political instability and currency volatility.
The study found that the majority of participants mentioned inter- and intra-organisational disruptions most frequently, which may indicate that supply chains are generally better prepared for external disruptions as risk management efforts tend to be focused on external sources of risk, or that external disruptions occur less frequently than disruptions internal to the supply chain.
The organisations that participated in the study reported various methods for managing disruptions, ranging from formal disruption management techniques to dealing with disruptions on a case-by-case or ad hoc basis.
The majority of participants in the study made a particular distinction between how their organisations managed frequently recurring disruptions compared with disruptions that occur less frequently. Disruption management techniques tend to be more formalised and specific for recurring disruptions, whereas disruptions that occur less frequently only have vague plan outlines.
Some participants reported that their firms do not use formalised disruption procedures at all, but rather that the disruptions are dealt with on a case-by-case basis as they occur. This finding lends itself to the idea that disruption management practices could be generic and as such be applied to a variety of disruptions.
An interesting finding of this study was the degree to which the end-user was the point of focus in disruption management strategies. Only a few of the participants noted that their disruption management efforts were end-user focused, which is a cause for concern as supply chains’ overall goals should be geared toward delivering value to the end-user.
When managers are aware of the risk of various disruptions within the supply chain, they are better able to select the best mitigation strategy for each disruption, leading to more effective disruption management.
By categorising disruptions according to type and severity, planning and communication between the different parties involved could be enhanced, which leads to faster and better decision making. Insight into the specific disruptions firms are exposed to help managers to be better prepared, as they can develop management strategies for specific disruptions.
Wesley Niemann, University of Pretoria