Supply chain disruption is any event or situation that causes delays in the flow of goods. This can include natural disasters, power outages, supplier bankruptcies, geopolitical conflict, disease outbreaks, labor strikes, transportation infrastructure damage and raw material shortages. These issues can wreak havoc on companies’ operations, lead to lost sales and damage their brand reputation.
Supply chains are complex, making them susceptible to many kinds of disruptions. Disruptions are categorized by their severity levels, ranging from minor setbacks that can be resolved quickly to long-term disruptions that may require restructuring the supply chain to mitigate the effects.
Low-severity disruptions impact only one or two areas of the supply chain and typically don’t halt production for more than a few days. These are the kind of supply chain challenges that most businesses face on a regular basis.
High-severity disruptions cause major setbacks in multiple parts of the supply chain and can affect production for weeks or months. These are the kinds of supply chain problems that the COVID-19 pandemic triggered and that will take years to recover from.
Escalating Costs
When disruptions occur, a business must pay for expedited shipping to maintain customer satisfaction, which can significantly increase costs. This can be compounded by production backlogs that necessitate paying workers overtime. In the long run, these increased costs can eat into profit margins and erode market share. Dissatisfied customers are also more likely to turn to competitors, which can hurt a company’s bottom line and brand reputation.