Question

1.    Discuss a recent example of an unknown-unknown risk that proved damaging to a supply chain. (Hint - Coronavirus could be a good one to use.) Explain how each of these could have mitigated this risk:

1.    Investments in redundancy

2.    Increase velocity in sensing and responding

3.    Creating an adaptive supply chain community

Answer 1

Coronavirus is a great example of unknown-unknown risk. Its knowledge and event were both unknown and as a result it came as a shock to the overall system. The pandemic has been sudden and came pretty much out of the blue. Naturally mitigating such risk is usually difficult. However, we could look at the options mentioned below.

1.

Investment in redundancy: The pandemic affected supply chain in a way that various sovereignties have shut their borders and ports. This has affected global supply chain and has also affected local supply chain to a great extent. Investment in redundancy could have done through increasing the level of inventory. In that case the local supply would not need to depend on the global supply. For example, the situation with PPE and masks in USA. There are not enough of them. If the hospitals would have stocked their supplies or had the policy to hold large inventories, then the shortages could have been tackled to some extent.

2.

Increase in velocity in sensing and responding: The only solution that seem to be able to contain the pandemic now seems to be social distancing and locking down a region. Countries which have responded quickly by locking down the entire state has done better. South East Asian countries have fared decently well. On the other hand USA has been slow in responding and right now it has the highest number of fatality due to Coronavirus.

3.

Creating an adaptive supply chain community: The challenge with this mitigation plan is that when the risk is unknown-unknown, it is difficult to be prepared for the event. The definition of adaptive supply chain may vary. We can take example of Amazon’s Drone Delivery system. That could be a logistics solution for the last mile delivery and as a result be labeled as adaptive supply chain component. However, sourcing, procurement and production have all taken a beating in this lockdown and as a result, it is nearly impossible to create an adaptive supply chain system beforehand.