Supply Chain Analytics
A recent supplier
snafu saw KFC’s UK
outlets run out of
chicken. The growing
use of analytics
address supply chain
By Graham Buck
It was Colonel Sanders’ worst nightmare. In February, more than half of KFC’s 900 stores in the UK temporarily closed after the fast food chain ran out of chicken. The shortage came days after the company switched its delivery contract to DHL, which blamed “operational issues.” The episode proved that even in today’s tech-driven business environment
supply chains remain vulnerable to disruption. Tech firm Resilinic reported that
U.S. corporates were hit hard in 2017, with supply chain incidents nearly doubling
from the previous year to impact nearly one in three S&P 500 companies.
Natural disasters, such as the hurricane trio Harvey, Irma and Maria, wrought
heavy damage. Around 10 percent of drugs prescribed in the U.S. and produced in
Puerto Rico were in short supply after Maria.
Supply chains were also disrupted by factory fires and explosions, as well as
corporate M&As, business sales, spin-offs and plant shutdowns.
However, last year’s losses didn’t rank with the two ‘watershed moments’ of
the past decade for supply chain management, suggests Josh Green, CEO and
founder of trade data company Panjiva, recently acquired by S&P Global.
“During the first half of 2009, when the global economy was in a tailspin,
virtually everyone realized that they had too little visibility into the financial
health of their suppliers,” he said.
“As a result, a tremendous amount of effort was put into gathering data and
developing methodologies for assessing supplier health. Then the March 2011
tsunami in Japan forced managers to look at the risks associated with geographic
concentration of their supply chains. The result was geographic diversification.
“More recent weather-related events have been less impactful and, if anything,
have demonstrated how resilient global supply chains have become. This is not
to diminish the impact of these events on the impacted communities, but supply
chains have bounced back or flexed quite quickly.”
The 2011 tsunami heralded a ‘perfect storm’ for several industries, noted
Patrick Daley, head of large property, The Hartford. Auto manufacturers lost
production due to the unavailability of spare parts — Toyota, previously the
industry’s biggest producer, temporarily fell to third place. Monsoon floods in
Thailand disrupted production by the leading manufacturer of hard disk drives,
Western Digital Corporation, and impacted the PC market.
By contrast, the Kumamoto quake in April 2016 hit Toyota, Sony and Honda.
But this time the companies identified which suppliers were impacted and
managed to source from an alternative supplier quickly.
STRIKING A BALANCE
Extended supply chains inevitably create more weakness: “For decades, supply
chain managers stretched their supply chains around the globe in search of lower
costs,” said Green. “In recent years, they have increasingly looked closer to home
in search of shorter lead times — and therefore better responsiveness to changes
in customer demand.”
Rising wage rates in previously low-cost regions and quality issues with some
products produced abroad saw some corporates consider reshoring and switching
to local suppliers. This is now being accompanied by the option of ‘nearshoring’
— sourcing from a location nearer home than halfway across the globe.
“There’s a growing acceptance by
corporates that what were once-in-a-lifetime events are becoming more
frequent and potentially more severe,”
said Mike Manzo, a director of Aon’s
property risk consulting group.
“At the same time, while technology
and automation is helping companies as
they push to drive down costs, they’re
also helping to create more risk.
“So today a company might be
dependent on a handful of suppliers
• A host of technology-driven
solutions make supply chains
• The tsunami of 2011 was a wake-up call for all industries.
• Supply chain breaks doubled in
2017 over the previous year.
“There’s a growing acceptance
by corporates that what were
once-in-a-lifetime events are
becoming more frequent and
potentially more severe.”
— Mike Manzo, director, Aon
Hope grows that analytics will help ameliorate supply chain and distribution problems like the one that bedeviled Kentucky
Fried Chicken in February.