CIPS News


Explosion at Evonik Industries – CIPS comment

CIPS 18 April 2012
The Toyota issue two years ago demonstrated just how significant an impact a small failure in a global supply-chain can have on a company. The explosion at Evonik Industries has the potential to impact a whole industry.

David Noble, Chief Executive, the Chartered Institute of Purchasing and Supply (CIPS), says:

"The Toyota issue two years ago demonstrated just how significant an impact a small failure in a global supply-chain can have on a company. The explosion at Evonik Industries has the potential to impact a whole industry.

Supply-chains are increasingly global, long and complex which makes them very efficient but also potentially fragile. True agility within the supply chain is crucial as the potential to switch suppliers quickly in the event of a crisis can mean the difference between success and failure.

This explosion is the latest in a number of incidents such as the tsunami in Japan and flooding in Thailand to underline the importance of supply chain to businesses. Risks to supply chains are definitely on the increase so it is crucial that businesses in all sectors have robust contingency plans in place so their supply chains are more protected and production doesn't grind to a halt when failures occur. Unfortunately, far too many don't and leave themselves dangerously exposed to supply-chain risk.

Organisations must consider a suppliers' own contingency planning when selecting them and test them regularly with scenario planning. For example, how would they ensure continuity of supply should they have an accident or be effected by a natural disaster?  Do they have alternative plants to switch to or other sources of supply?  It's about considering suppliers as an extension of the organisation.

The role of procurement in this situation is to ensure it understands its supply markets sufficiently enough to ensure minimal supply disruption, rapidly source replacement stock or it may need to find alternative materials if possible and even potentially recommend the reengineering of products."

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