Supply chain risks and disruptions were plentiful in 2021. This year promises to be the same. The only question is the number, duration, and severity of the risk your company will face.
You can’t protect your company against every single supply chain risk. So, you have to be smart about how to approach risk mitigation. Remember, mitigating risk entails a cost, and mitigation by itself is not enough. You must also address resilience. To do that you must a strategic view of supply chain risk management.
With that, here’s a list of 10 major categories of supply chain risks you might face in 2022. Assess and rank this a candidate list before updating your risk management plan.
Many supply chain risks are predictable, but most are unpredictable. So, the level of uncertainty is significant. That’s why it merits your attention to prepare for these risks.
Let’s get started.
#1 Cyber-attacks. This category of risk is unpredictable. You never know when a bad actor will strike, whether internal or external. That makes this one of the most difficult risk to prepare for. That said, you can undertake many steps to protect against all manner of cyber-attacks. One of the more malicious attacks comes from ransomware attacks. Most notable was the Colonial Pipeline breach in 2021. It halted operations for five days and resulted in millions of dollars of damages.
#2 Geo-political events/crises. This is another risk category that is unpredictable. Although, you might expect risks based on political statements and changing policies as we saw with trade relations between Canada and Mexico, and the EU and China. Today, China’s and Russia’s actions towards Taiwan and Ukraine, respectively, pose high risks.
#3 Economic. This risk category, on the whole, is unpredictable. But economic indicators can provide early warning signs of changing economic conditions. So, you might say, economic conditions are both predictable and unpredictable. Whether it’s inflation, recession, or stagflation, these can disrupt supply chain operations in varying degrees. Today, Federal Reserve tapering and rate hikes present potential threats to supply chains. If you prepare in advance, you’ll be better prepared to withstand the coming change. If you don’t prepare or take the coming change lightly, your supply chain will reflect that.
#4 Industrial accidents. As with economic risks, industrial accidents are both predictable and unpredictable. For example, you might foresee an industrial accident, but you won’t know when it will strike or how severe it will be. The explosion at the Beirut port in 2020, is an example of an issue that lingered for years without attention. That neglect resulted in a massive explosion, disrupting port operations. The Deepwater Horizon is yet another example of an industrial accident that had devastating financial and environmental effects.
#5 Infrastructure failure. Roads, bridges, dams, railheads, ports, are all subject to failure. Their failure can be estimated, but the exact occurrence of a failure remains elusive. Maintenance and diversification of infrastructure are key to the smooth flow of goods. Alternate delivery routes can mitigate disruptions caused by infrastructure failure. Due to years of neglect, U.S. infrastructure is decaying and in disrepair. That’s why the Congress passed the infrastructure bill late last year. It’s not a panacea, but it will help stem decay and modernize key infrastructure. And you likely won’t have the resources to mitigate against this type of failure. But you can address certain measures you can control.
#6 Labor. This risk category entails several categories you must take in to account. The industry suffers from a high unemployment and employee retention. Exacerbating that is a mis-match of skills to job openings. Some of these risks factors are predictable, but others are not. Strikes by unionized and non-unionized workers may be unpredictable. In either case, depending on the duration and timing of the strikes, the disruptions can be severe.
#7 Natural disasters. For the most part, natural disasters are unpredictable. Some emerging technologies give us early warning systems that may help When a tsunami, earthquake, or tornado hits, early warnings are not as effective as we would like. Oh, add flooding and landslides to this list. You might begin to see nature’s destructive effects on your supply chain .
#8 Pandemics. In 2020 and 2021, a once in a century pandemic rocked supply chains. First, we had Covid-19, then we had the Delta variant, and now were working through the Omicron variant. Each has been less destructive than its predecessor. Regardless, these were unpredictable and brought supply chains to a grinding halt. Planning for a pandemic has its limitations. But as we learned, you can take concrete steps to keep supply chain running. One key lesson is that it takes a community to manage risk. That includes government, industry, individual companies, and workers.
#9 Supply chain. Many of today’s supply chain risks are predictable and even preventable. Some examples of supply chain risks are port congestion, yard congestion, capacity shortages, rising shipping prices, and supply shortages. The rise of eCommerce and the pandemic lead to an intense rise in demand. It also led to a wild shift in demand from services to home products. Working from home contributed to this shift. Demand for automation equipment, furniture, and exercise equipment skyrocketed. No one saw that coming. No one saw that coming. In examining lessons learned, we can mitigate supply chain risk with continuity of operations plans (COOP).
#10 Technology. Disruptions from new and emerging technologies are both predictable and unpredictable. We know what technologies are on the horizon and can plan for them, so they act as positive disruptors. A few examples are AI, Big Data, Blockchain, the Cloud, 5G, Electronic and autonomous vehicles, and Robotics. This is not an insubstantial list. It suggests the industry is at a major crossroads in the planning and execution of logistics. The risk associate with these technologies lies in their adoption and implementation. Failure to adopt and adapt to new and emerging technologies can render your business unable to meet tomorrow’s demands. Also, how you implement new and emerging technologies can make or break your supply chain. A prudent way to tackle risk is with a deliberate, piecemeal, and strategic approach.
#11 Terrorist attacks. This one is completely unpredictable. This one is completely unpredictable. It’s unpredictable in targeting and timing, and location and severity. That makes this a challenge for which you can’t completely prepare. Note, this represents an international risk. So, if you engage in global supply chain operations, you should address this in your risk planning. In 2018, the British Standards Institute (BSI) estimates terrorists attack supply chains weekly. Doing business in Colombia, Egypt, India, or Turkey, exposes you to high levels of terrorism.
#12 Theft. Since theft occurs as a matter of course, this category of risk is predictable. So, you can plan for it. Piracy is one of predictable types of threat. It’s constant and unremitting. One of the hot spots is in and around west Africa. At times theft is unpredictable. We’ve seen with the rise of rampant theft in retail stores and rail yards of all places. Cargo theft is a persistent risk with theft from trucks ranking first in pilferage.
As you prepare and position your business for 2021, you should consider your supply chain risks. The twelve risk categories described above are not complete. But they should give you pause and maybe warn you of the risks you may face.
At American Global Logistics, we take supply chain seriously. More than that we plan for it.
As we head into 2022, we can help position your business for a volatile and uncertain marketplace. Contact us today to find out how we can help you.