Why the Japan Disaster can help Supply Chains
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To borrow a phrase from the movie Armageddon, the Japan disasters have the global supply chain exhibiting the behavior from the worst parts of the Bible.
Despite all of this, however, one supply chain expert thinks the effects will be felt for a relatively short period of time.
“(The disaster) has been hugely disruptive from a matter of weeks and months, but I don’t think it’s going to be disruptive in terms of quarters and years,” Joe Lawler, CEO of supply chain solutions leader ModusLink, said.
“If you’d seen this happen a quarter or two later, there might have been much bigger problems with companies getting ready for the fall cycle.”
ModusLink has a branch in Tokyo, and Lawler said that “our people on the ground there have seen (the supply chain) hugely disrupted.”
According to a study by Dun & Bradstreet’s report on the preliminary implications for the three major prefectures affected, over $200 billion in sales volume is potentially impacted by the earthquake and subsequent tsunami.
Automobile and electronics manufacturers have seen shockwaves sent through their supply chain as companies scramble to find alternative sources for their parts.
WHY THE JAPANESE DISASTER WILL HELP THE SUPPLY CHAIN
But could the Japan disasters actually help the global supply chain? According to Lawler, the disaster is forcing companies to more aggressively seek supply chain solutions.
“I think this whole thing will be more positive than negative,” Lawler said. “In the long run, people will get better at developing their risk plans and disaster plans to make sure they have suppliers who will be able to flex throughout certain regions.”
Lawler thinks planning goes a long way to managing risk within your supply chain, and a good lawyer can help you and your company prepare for the worst possible scenarios.
“We certainly rely on lawyers to anticipate some of the worst-case scenarios that supply chains need to anticipate,” Lawler said. “As a technology industry, you need to spend more time on going over what we’re witnessing now, and that’s why things like the tsunami can actually help the industry in the long run.”
Lawler also relies heavily on ModusLink’s optimization modeling tools, which basically comprises system of finding the most efficient way to get a product to market. The modeling tools take into account costs associated with labor, freight, customs and handling times, among other things.
ModusLink’s optimization modeling tools also enable the company to play around with different types of hypotheticals.
“We take great pride in what we call optimization modeling tools. They enable us to play around with disaster scenarios,” Lawler said. “If a facility goes down, what will be our backup plan?
According to Lawler, ModusLink has systems in place to actually see how a company’s supply chain can flex, region to region. This feature allows companies to see exactly what would happen should disaster strike, and allows businesses to go through some of the scenarios.
“That’s what we call our disaster recovery plan,” Lawler said.
WHAT SUPPLY CHAINS NEED TO DO TO PREPARE
So what actions can you take with your supply chain to make sure you’re adequately prepared to handle the risks that go with the industry?
According to Lawler, the key to managing supply chain risk starts with having more than one supplier.
“Dual sources of supply with the ability to flex are key when one of your sources has problems,” Lawler said.
According to ModusLink’s blog Value Unchained (http://blog.moduslink.com/bid/51536/Supplier-Risk-Do-You-Feel-Lucky-Enough-to-Ignore-It), other strategies to calculate risk management include a systematic assessment of risks, an assessment of the likelihood of these risks and risk prioritization and mitigation.
MAJOR TRENDS MOVING FORWARD
Despite the major current disruption to suppliers worldwide, Lawler still sticks with his original prognosis, that the supply chain industry will turn out better because of the events that have transpired with Japan.
“I’m sure there are people affected by this who wish they’d done more to prepare,” Lawler said. “But if you compare supply chains today with what they were 10 or 20 years ago, you’ll see a much more efficient model in terms of quickly rebalancing.
“Supply chains are getting longer. People want the lowest possible cost with the highest quality and the fastest time to market, but in order to do that you’ve got to be well-prepared to deal with disasters.”
Tradeshift: Pioneering eProcurement and Digital Trade
Tradeshift helps transportation and logistics organisations digitally transform their processes. The company offers a suite of services, including spend management, accounts payable and invoice automation, eprocurement, and supplier collaboration through a dedicated B2B supply chain marketplace of more than one million businesses.
As disruption and digitisation continue to accelerate, demand for Tradeshift’s solutions has grown dramatically. The company recently announced the signing of 20 new global enterprise customers since the beginning of its financial year on 1 February, while the number of active businesses transacting on the Tradeshift platform rise by 52 per cent year on year.
Tradeshift Chief Revenue Officer Christope Bodin expects that growth trajectory to continue, as the economy begins to fully reopen and the world works towards recovering from the pandemic. “We are well positioned to support the wholesale digitalisation of business processes,” Bodin said. “For organisations looking to grow in a post-COVID economy, this is fast becoming an organisational standard.”
Tradeshift in Brief
- HQ: San Francisco, USA
- Employees: 800 located in offices in 13 countries
- Customers: 500+ in 190+ countries
- Total on-platform transaction value: $1tn
- Platform: 1.5m companies connected
Key Tradeshift customers: Volvo, Kuehne+Nagel, DHL, Air France-KLM Group
Tradeshift: From $1 to $1 trillion
The company was established with a mission to “connect every company in the world, digitally,” according to Lanng, and followed the trio's earlier product EasyTrade, a pioneering open-source trade platform.
In July 2021, just over a decade since launch, Tradeshift announced passing a new milestone: the cumulative value of transactions processed across its platform passed the $1 trillion threshold. To put that in perspective, Tradeshift said it took two years to reach the $1bn milestone.
Commenting on Tradeshift’s current and future standing, chief executive Christian Lanng said: “We’ve helped a lot of businesses to stay operational and get paid during an extremely volatile period. Every time a business joins our platform it unlocks a whole ecosystem of relationships that we can help to digitise. This sets us apart from the majority of enterprise software providers who remain preoccupied with building connections one at a time.”