Don’t Get Blinded by Black Swan Events: Everyday Supply Chain Incursions Kill Brands
The highly publicized issue of the collapse of Hanjin Shipping has again reminded us that the average person only thinks of the supply chain when there is a problem. Most often, they think of the supply chain when there is a major catastrophe somewhere, a so-called black swan event. But statistics show that the bulk of supply chain quality incursions are not black swan events. They are usually relatively trivial matters, like an inaccurate delivery promise or a factory line shutting down because of a raw material supply problem. It is very important to not lose sight of the importance of managing the day-to-day while putting risk mitigation processes in place for the unpredictable catastrophic event.
Black Swan Events in the Supply Chain
The term “black swan” was popularized by Nassim Nicholas Taleb in his seminal book, “The Black Swan: The Impact of the Highly Improbable”. Speaking from his experience as a Wall Street trader, he postulated that because black swans are highly unpredictable and quite disastrous when they occur, risk managers and others should plan against them. The term extended into the supply chain world and has been used to group a range of highly visible, totally unpredictable disruptions that supply chains have had to endure. These have included natural disruptions like the Higashi-Nihon earthquake and subsequent tsunami in Japan in 2011, or Tropical Storm Bill that in 2015 caused extensive disruptions to rail traffic due to flooding in the Texas-Oklahoma region. They also include geo-political issues such as terrorist attacks, and the occasional business crisis like the recent and unfortunate fire in a Gap Distribution Center complex in upstate New York.
Crippling Supply Chain Incursions that were NOT Black Swan Events
Black swan events are commonly understood by consumers at large. The business impact can be very significant, but the brand is often not affected because the customer is aware of the situation and expects some uncertainty. But consider everyday issues and quality incursions such as:
- Ensuring product quality
- Enforcing supplier compliance
- Meeting availability promises
- Maintaining products in-stock
These challenges occur behind the scenes, hidden from the everyday customer. When these issues escalate and become evident to the outside world, damage to the brand is direct. There is no accommodation for the supply chain complexity the brand owner is grappling with.
Major disasters make headlines. But the run-of-the-mill problems that occur every day are the ones that cause the greatest damage. Supply chains designed and built for resilience to everyday quality incursions are trained and ready when a major issue, such as the bankruptcy of a major player like Hanjin Shipping, occurs.