Supply chain risk is at the forefront of supply chain executives’ minds. Proper risk management can help supply chains navigate the complexities of post-hurricane recovery and increase productivity. Home Depot’s work in risk management served to increase profitability in the aftermath of the 2017 hurricane season. Unfortunately, not all supply chain leaders take the time to consider what may happen and how it will adversely affect productivity and the flow of products. As explained by Alexa Cheater of Kinaxis, supply chains carry a heightened risk of “black swans,” which reflect the unanticipated risks coming to fruition. However, blockchain and supply chain visibility may be able to reduce the appearance of black swans by bringing new insights and planning to risk management, helping companies mitigate losses during such events.
Supply Chain Black Swans Are Perceived as Minimal Risks
Supply chain black swans are considered inescapable threats. Supply chain black swans occur without warning, and recovery can last months. Look no further than the aftermath of the 2017 hurricane season. Supply chains struggled for months to return to operation, and in some areas, such as Port Aransas and Puerto Rico, recovery from the disastrous season is still on-going, eight-months after landfall, reports the Statesman. In these areas, small and mid-sized supply chains are still struggling to return to standard operations, emphasizing the vulnerability within today’s world. Unfortunately, supply chain black swans are rare, so leaders may not put as much work into preparing for such events as necessary. This does not mean supply chains have not created emergency and disaster preparedness plans, but these plans may not be equipped to handle the significance of a black swan event.
An Introduction to Blockchain and Its Potential Benefits and Drawbacks in Supply Chain Management
Blockchain & Supply Chain Visibility Are Poised to Reduce Black Swans
Blockchain and supply chain visibility are integral to reducing black swans. The ongoing ledger provides an inexhaustible resource for analytics to improve risk management and disaster planning. Even minor events, such as a loss of power or damaged truckload, may be considered black swans in supply chains that rarely see such occurrences. Blockchain technology increases traceability, and knowing asset, as well as inventory or freight, location, can be used to reroute supply chain processes to reduce disruption caused by such events.
Best Practices for Reducing Black Swans During Blockchain’s Adolescence
It’s easy to assume blockchain and supply chain visibility make preparation for all black swans possible, but that is not the case. Instead, supply chain executives need to take advantage of the low-hanging fruit, planning for black swans before they occur. This is best achieved by creating an effective disaster response plan early in company development and expansion. However, it is never too late to implement a disaster response plan, especially in areas where the health of others’ is threatened due to a black swan, which, according to the Centers for Disease Control and Prevention, should follow these best practices:
- Identify scenarios likely to present a hazard to employees, community members or customers.
- Develop supply-chain plans to respond to these scenarios, like shutting down utility lines or moving workers to safer locations.
- Creating an emergency medical response plan, including the placement of first aid kits and completion of first training for staff members.
- Creating a centralized source of information necessary to mitigate losses. Often, de-centralization is best, but the cloud-based centralization of blockchain and supply chain visibility achieves the same goal without increasing risk.
- Conducting practice drills among team members to ensure everyone knows how to respond to such events.
- Using data to ensure compliance with regulations and training requirements on a frequent, repetitive process.
- WRITE IT DOWN! While paper-based policies are the antithesis of blockchain, a physical copy of your preparedness plans is necessary for times when accessing information online or within the blockchain is temporarily unavailable.
Primarily, reducing black swans in the supply chain is about being ready to respond. Although designed for healthcare supply chains, the CDC’s Supply Chain Disaster Preparedness Manual, is an invaluable resource that can help all supply chain managers and leaders prepare for the unforeseen. Blockchain’s relative adolescence to other supply chain technologies makes it an ideal source for managing disaster preparedness and mitigating losses. In other words, blockchain is the best way to build a prototype plan, as noted by Deloitte, to reduce black swan impacts.
Move Into the Next Supply Chain Age Today
Supply chain black swans are an inescapable reality of today’s industry. Things go wrong, and Mother Nature has a way of challenging preconceptions. Instead of mitigating the foreseeable risks, blockchain and supply chain visibility can help organizations prepare for the worst-case scenario. It is impossible to plan for all possible risks, but blockchain’s open-sharing capacity helps companies learn from one another, and this information is key to preparing for any possible threat. Supply chain black swans may finally face their greatest threat to existence with blockchain, especially with blockchain’s ability to bridge the cultural divide between supply chains and experts around the globe.