We’re in an era of supply chain crises. The latest frontier is the semiconductor shortage, particularly a scarcity of chips needed in new car electronic systems.
How bad is it? A staggering 93 percent of carmakers think the shortage will have a severe impact on the auto industry. Ford’s CEO even thinks it’s “perhaps the greatest supply shock” he’s ever seen. Of course, the semiconductor shortage won’t be the last such shock.
Semiconductor shortage part of a larger supply chain crisis
The first step is to understand the scope of the challenge. The ongoing semiconductor shortage follows any number of other, major supply chain crises, including Brexit, the COVID-19 pandemic, and the Suez Canal blockage.
If anything, the accumulation of these crises vividly illustrates the risks inherent in modern manufacturing practices, dominated as they are by just-in-time networks.
For instance, surveys taken from the years just before COVID-19 found that only six percent of companies had complete visibility over their supply chains. Meanwhile, seven in ten companies admitted that their supply chains were either very or extremely complex.
Three measures to improve supply-chain resilience during the semiconductor shortage
How can companies achieve visibility over their complex supply chains? The following measures should help to improve supply-chain resilience:
- Develop a supply chain crisis scenario. The best place to start is to develop a crisis management playbook for the supply chain disruption scenario. But aren’t these crisis scenarios reserved for risks that are likely to develop into incidents? We’d say that by now supply chain disruptions meet that threshold – and then some.
If business leaders query, why start now? Well, it’s best to start when crises are still top of mind. As mentioned, supply chain volatility didn’t just begin with the COVID-19 crisis (or even Brexit) – there was ample evidence of supply chain risk beforehand.
- Perform due diligence on your supply chain. What, then, should the effort look like? The short answer is it depends. Key factors include location and type of business you have, as well as exposure to global trading trends. The best way to go about determining what your supply chain risk looks like is performing regular due diligence exercises on your entire supply chain. The updated findings then get fed into the supply chain disruption scenario.
- But avoid this major pitfall. These exercises, however, aren’t a cure-all. Why? The interconnectedness of modern supply chains means you can’t just limit your supply chain assessment to tier-one suppliers. These suppliers are reliant on their own set of critical suppliers.
It became clear during the pandemic that supply chain disruptions were exacerbated by a lack of visibility into a given company’s wider supply chain. Many organisations couldn’t determine the locations of their tier-two suppliers and beyond. They also hadn’t obtained or shared updated business continuity plans.
The lesson, here, is your organisation needs to know how its critical suppliers will act in the event of a semiconductor shortage or other keen supply chain disruption. What to do with that information? It’s imperative to store your suppliers’ crisis playbooks and other major plans in your own crisis management software. Now what should those solutions look like?
Download our Crisis Management Software Buyer’s Guide to learn more: