Supply chains form the basis of a successful business and companies need to ensure they have a contingency plan should something go wrong. Often an event affecting a select number of suppliers can severely delay the production process of an entire company or even industry.
Recently, a factory fire in a small town in Germany caused great concern within the car manufacturing industry when it emerged that the plant manufactured a rare chemical component. The factory is thought to have produced up to half of the global supply of a chemical essential for the production process of braking and the fuel systems.
The event, which is still having repercussions across the car manufacturing industry, shows just how lean supply chains have become. Ford Motor Co. is another recent example of a company which has suffered due to failings.
Ford Supply Network Stalls Growth
Despite an increase in sales and aggressive plans for expansion in Asia, Ford is struggling to ensure a stable supply chain. The car manufacturer made a first quarter pre-tax loss of $95m, compared to a profit of $33m last year, partly due to the delayed launch of the new Ranger model.
Production of Ford’s latest vehicle was postponed when Thai component suppliers were unable to meet deadlines after flooding set back production by several months. Joe Hinrichs, Ford Motor’s president for the Asia-Pacific region, described fragile supply chains as one of his biggest challenges; “In Asia-Pacific, there are so many people, so much density of population there is more volatility of things that happen.”
From large scale flooding to factory fires, businesses must implement contingency plans if they are to effectively manage risk. Investing in solid supply chains and flexible business models, will allow companies to emerge from disaster relatively unscathed and also to take advantage of their competitors lack of preparedness.