Despite popular belief, or what people might think, the Covid pandemic was not the biggest source of disruption for supply chains in 2020, according to the latest Annual Supply Chain Risk Report released this week by supply chain data monitoring, mitigation and risk analytics solutions provider Resilinc.
Man-made events dominated disruption in 2020, accounting for 83% of disruptions. The two greatest disruptors of supply last year were factory fires, and mergers and acquisitions.
Factory fires were up 67% year-over-year (YoY). Naturally some fires are more destructive than others. One fire at a Nittobo plant in Japan disrupted supplies of fiberglass, which caused delays for manufacturers of high-end servers, networking chips and CPUs.
Another fire in October at Japanese firm Asahi Kasei cut into supplies of sensing devices for automotive and other industries. Fires will always be a risk, but Resilinc outlines some strategies to monitor risk — avoiding combustible dust, flammable liquids and gases, and “hot work.”
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Meanwhile, M&A activity was slightly lower in 2020 than the year prior, but the survey states there were still 28,500 acquisition deals completed. The Covid pandemic shaped what acquiring companies looked for — with digital marketing and e-commerce firms looking for supply chain agility. The survey reports that although M&A deals were down, Resilinc’s EventWatch AI data monitoring technology showed a 195% YoY increase in M&A events that were labeled as potential disruptions.
“Supply chains are highly complex; there is inherent risk everywhere you look and operate,” the study writes. “There is no such thing as a risk-free world and certainly no such thing as a risk-free supply chain.
“In 2020 we experienced Covid, the black swan of black swan events; we also had climate-related disruptions and cybersecurity threats. At the end of 2020, the semiconductor shortage began brewing and has brought the automotive industry to its knees. Knowing 1) when disruptions happen, 2) which suppliers they will impact, and 3) how to react quickly to those disruptions is crucial to a resilient supply chain.”
Alongside global disruption data and insights, the report also contains a Q&A with CEO Bindiya Vakil on navigating the early days of Covid, expert perspectives on trade agreements, geopolitics and reshoring, commentary on supplier collaboration as a winning strategy, and a series of customer case studies on multi-tier mapping and predictive analytics. One of these case studies is on Western Digital, which gives a real-life example of how Resilinc helped it to develop and leverage predictive risk capabilities: “… Western Digital has been able to successfully protect goods in multiple countries,” it says. “Specific to Covid, the Predictive Risk engine was able to detect disruptions with 93% accuracy and provided critical data that helped prevent supply from being impacted. Ultimately, this enabled Western Digital to save $53 million over two quarters.”
Spend Matters’ chief research officer, Pierre Mitchell, said:
“The Western Digital case study shows the very high level of predictability that is achievable and the real savings that can come from this (although we don’t see a breakdown of where the savings have come from). Supply chain risk management is obviously a red-hot topic at the moment, and so is supply chain network mapping and visibility, alongside ESG requirements within supplier risk/compliance management that links up to corporate third-party risk management (an extension of GRC).
“We have covered Resilinc here as part of the SCRM segment of supply risk management and also its part in the SCRM Covid response. And we have a whole series of PRO (subscription) content on supply chain risk management — access the PRO content here.”