Building Competitive Supply Chain Against Natural Disasters

The past few decades have been ones of dynamic change for supply chains around the world. With increasing globalization, the need to achieve cost efficiencies in functional areas grew unabated. As a result many companies moved to offshore sourcing and manufacturing in pursuit of lower labor costs as well as other cost reduction strategies such as lean practices to reduce inventory and capacity; outsourcing and single sourcing. As a consequence, supply chain became more global than ever, facing challenges and pressures on an unprecedented scale. In fact, these obstacles have the potential to severely affect the continuity of the company’s business, in particular through disruption of the supply chain. One of the most challenging supply chain disruption risks is Natural disaster events since they are unpredicted, uncontrollable and their impact can be massively destructive.Based on above facts, companies have been changing their risk mitigation approach by creating more resilient supply chain. However, it is not yet clear how to design and structure them as usually resilient is associated only with redundancy, increasing inventories which can be very costly and inefficient. Building competitive resilient supply chain is not an easy strategy to implement but it is definitely the most adequate for today’s business environment. GKN Driveline and its experience during the Japanese earthquake is a proof of this.