After a black swan hits, we often reflect that it was predictable and we should have seen it coming.
COVID-19, with its far-reaching global impact, is a black swan event. And yes, crippling pandemics have occurred and had been forecast to happen again. The next pandemic should not surprise us so completely.
A smaller, supply-chain-related black swan event played out recently in the Suez Canal, where the container ship Ever Given ran aground and was jammed between the canal's banks, causing a complete shutdown of the waterway.
Approximately 50 commercial ships transit the Suez Canal daily, and the anchored freighters and tankers were stacked like cordwood around the entrances to the canal, delaying deliveries of products around the world.
But was this actually an unexpected event? Hardly.
The construction of larger and more powerful ships like the Ever Given, coupled with aging canal infrastructure and stronger weather events caused by climate change, combined to force the ship to run aground in an area that would close the waterway.
You can bet that the management of the Panama Canal and other restricted waterways are thinking that they've dodged their own tragedy. But it certainly could happen again, at any time. And it wouldn't be unexpected.
While we may consider the Ever Given a black swan event because of its uniqueness, the next grounding will just be a standard issue disruption. And preventable.
How might procurement professionals prepare for the next large or small black swan event?
Envision the 'what if'
Every supply chain disruption is not a black swan. And to consider every truck stuck in a blizzard, or every ship that runs aground a black swan, minimizes the scope of an event like the COVID-19 pandemic.
The Suez Canal debacle, with its far-reaching impact on the global supply chain and economy, pales in comparison to the still evolving and deadly pandemic. But danger lurks between the shipping and receiving docks. Anticipate what it might look like.
As we work to build more robust supply chain risk profiles, consider additional "what if" transportation-related scenarios and their potential workarounds. Some ships blocked by the canal closure set sail around the Cape of Good Hope, like they did 150 years ago.
Supply chain managers need to pay attention to risks that are bubbling under the surface.
Don't get caught unaware, modify planning
The intricacies and dependencies of a lean supply chain are once again called into question, and it's time for changes to planning rules around inventory, lead times and production schedules.
Perhaps the pandemic, and the Ever Given grounding, will finally force us to rethink our dependence on just-in-time processing. The popular call for the domestication of supply chains will not eliminate risk; it will just make that risk closer to home.
An increase in inventory and safety stock, and some slack in lead times and production schedules, allows for a reasonable buffer to offset supply interruptions and maintain some level of customer service. It may not offset a real black swan event, but it could help to offset a black cygnet or two.
Update sourcing strategies
Create a resilient strategic sourcing roadmap, especially around sole-source and single-source suppliers.
Sole-source suppliers, far too prevalent in most extended supply chains, are ripe for mini black swan events. A sole-source supplier in any supply chain tier poses a threat. Identify them and mitigate the risk through additional inventory, until a sourcing action reduces the risk.
A dependence on single-source suppliers offers less risk, but quite often the risk profile of the supplier drifts toward sole-source. Remain aware of market conditions and the competitive landscape, and resist pressures from the sales side to increase dependence on the company.
A sourcing strategy based on resilience over relationships will give you the greatest flexibility to meet disruptions, black swan or otherwise.
Keep your fingers crossed
Sometimes you just need good luck.
Luck that your critical shipment was in the freighter sailing ahead of the Ever Given and not behind it. Luck that your key suppliers remained healthy during the pandemic and kept their production commitments. Luck that your cloud-based ERP wasn't impacted in the latest data breach. And even luck in our personal lives.
Pandemics end, ships float and life goes on. But there are a flock of black swans just over the horizon. And, just our luck, they will impact procurement and the supply chain far too quickly and deeply.
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.