Supply chain risk can hit in unexpected places. Take the fire that broke out in a chemicals warehouse in the Chinese port of Tianjin on August 12, 2015. Unaware that the site contained large quantities of unlicensed and highly dangerous materials, local emergency services attempted to quell the blaze with water. This triggered two huge explosions that devastated the facility and much of the surrounding area.
The human cost of the disaster was significant. At least 159 people were killed and around 800 injured. The physical damage was wide-ranging, too. Analysts estimate that the larger of the two Tianjin explosions was equivalent to the detonation of 21 metric tons of TNT. The blasts left a crater at the warehouse site, and damaged buildings up to two kilometers away.
The economic impact of the event reached much further. Tianjin is Northern China’s largest port, and one of the world’s busiest. Around 8,000 new cars stored at the port were destroyed, and manufacturers, including Toyota, John Deere, and GlaxoSmithKline, were forced to suspend operations at nearby facilities. Companies across China faced delays and disruption to raw material supplies, from oil to iron ore, and had to look for different export routes to get products to customers overseas.
While events like Tianjin are thankfully rare, significant supply chain disruptions are not. That’s why we launched a research effort several years ago aimed to create tools that would give companies a better understanding of the risks in their own supply chains, and improve their ability to monitor and respond to potentially disruptive events as they happen. The result is Resilience360 – our supply chain risk management solution built on three sophisticated instruments: continuous assessment of supply chain risk and resilience, real-time incident monitoring, and dedicated logistics control towers that can actively respond to incidents and manage business continuity.
Resilience360 first maps every node in a supply chain – down to third- and fourth-tier suppliers. Afterward, we evaluate the risk level at each node with proprietary tools, including country-level risk maps and our unique Supply Chain Risk Exposure Index. We then build a picture of the network’s resilience, based on the criticality of parts supplied, the availability of alternative sources or buffer stocks, and detailed surveys of supplier risk mitigation plans.
Supply chain risk management works best when you receive the earliest possible notice of potentially disruptive incidents. Resilience360 tracks multiple categories of risk events in real time throughout the world. Once we have built a model of the entire supply chain, sites across the network receive immediate alerts of potentially disruptive incidents.
Early warning makes it possible to contact supply chain partners and take mitigating actions, like sourcing components from backup suppliers. The tool also logs feedback from individual sites, keeping an up-to-date picture of the current state of the entire network, and helping managers coordinate cross-network responses to major incidents.
Finally, Resilience360 offers a dedicated logistics and risk control tower that evaluates the potential impact of supply chain disruptions by interacting with supply chain partners. It also identifies mitigation strategies, such as alternative transportation modes or different routes, and manages their execution in collaboration with stakeholders. Risk response provides a complete picture of available options in the event of disruption so you can pick a robust and cost-effective solution.
Between risk incidents, the control tower performs a data-gathering and reporting role – continually updating information about evolving risks, surveying supplier business continuity plans, and reviewing potential mitigation strategies.
Cutting costs, boosting agility
Resilience360 enables rapid response to supply chain disruption, delivering significant cost savings, for example, by reducing the need to rely on premium-priced expedited logistics services and minimizing the occurrence of lost production, lost sales, and brand damage. And because the system is built on a robust and flexible cloud-based platform, it is able to handle even the most complex supply chains, integrate with wider business systems, and rapidly adapt to changes in an organization’s network.
Supply chain risk is growing in importance and changing in nature. Make sure you understand your supply chain so that you can develop strategies to minimize, manage and even benefit from those risks