Why do supply chains collapse?
With the world becoming a global village day by day, the supply chain serving international economies are becoming increasingly interlinked and interwoven with the effect that if one link is severed, then it causes a collapse of the entire chain. The causes for the collapse of the supply chain are many. Some of them cam be listed down as:
With the cut down in consumer spendings, the supply chains suffer due to deprivation of global economies of credit financing. Financial services industry continues to be impacted by the global economic crisis — impacting all aspects and areas of the business and supply management.
Another factor which can lead to the collapse of a supply chain is when a particular supplier decides to go out of business when it cannot weather the storm. Loss of key vendors in the supply chain disrupts the entire chain.
Geopolitical situations like collapse of a government, change in government policies or may be an attack by a terrorist organization to a major seaport, all could lead to the collapse of a supply chain.
If damage is caused to product reputation or a brand connected to a global supply chain, due to unlawful business practices (such as child labor, or poor labor and environmental practices) can lead to the disruption of a supply chain.
Natural disasters like a hurricane or earthquake can have a destabilizing impact on a manufacturer’s ability to procure vital raw materials and meet customer orders. This can lead to a collapse of a supply chain.
Collapse of supply chains can be prevented by taking steps such as quality control, reviewing current practices and identifying areas of potential exposure to risk, adhering to safety stocks of finished goods to minimize the impact of demand variability, managing available capacity within the manufacturing location, and the ability to standardize operations in any location where a manufacturing organization is sourcing the same parts from the same vendor or multiple vendors.
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