Supply chain disruption refers to any event that disrupts your company’s normal production process, causing delays and lost time. A disruption can occur at any level of your supply chain, from raw materials to finished products. Events that affect only one area of your business could be considered low impact, while those that interfere with multiple processes are categorized as medium or high impact.
Oftentimes, supply chain disruption results from unpredictable demand or weather events. However, geopolitical conflicts and restrictions on trade or the closure of shipping routes can also cause supply disruption. In recent years, the COVID-19 pandemic, port lockdowns and the 2021 blockage of the Suez Canal cost billions in lost cargo and brought global shipping to a standstill for weeks, creating shortages of parts and delays for companies from Apple to Nintendo.
These unexpected costs can add up quickly, resulting in price increases passed along to customers. For example, the recent hike in grocery prices is due to the increased cost of diesel fuel, which powers semi-trucks that transport food from farms to processing plants, warehouses and then to grocery stores.
A disruption can also result from unanticipated changes to legal, environmental or safety standards. Shifting laws require companies to alter their production practices, which can lead to costly delays and rework. For companies that rely on lean production and just-in-time inventory models, a disruption can put a major dent in revenue growth and stock returns, with effects lasting for years.
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