Vendor Management Lessons from the Japan Earthquake

More than six months have passed since the massive earthquake and tsunami in Japan wreaked havoc with worldwide supply chains.  Manufacturers and suppliers alike suffered as a production and distribution were disrupted, and many found long-standing business relationships permanently damaged.  While such catastrophic events are mercifully rare, there are still some important lessons from the Japan earthquake that all manufacturers should be embracing.

1)      Having two sources for critical parts is only good if those two sources aren’t relying on the same source to make those parts.  How deeply do you know your supply chain?

2)      Just like in real estate, location matters.  But in the supply chain, the key is to make sure your parts aren’t all coming from the same location.  If all your alternate suppliers are in the same region, you are at risk if that region is impacted by disaster, political unrest, or a simply a currency fluctuation.

3)      What’s your disaster plan?  Have you critically assessed the risks and vulnerabilities that your business may face?  And have you made a detailed strategy to tackle them should they arise? Keeping your fingers crossed is not a sound business strategy.

Of course, you are far more likely to suffer a disruption in your supply chain from a vendor failing to complete their contract.  Especially in our current economic climate, you have to know your vendors intimately.  If you are not doing regular vendor background checks, even on long trusted vendors, you are taking on unnecessary risks.  Call us today to get started on a vendor risk reduction plan.