Supply Risk and Costa Rica: How Earthquakes Can Rock Western Supply Chains as Well

The 2011 Japanese earthquake and tsunami quickly became both a deadly and painful reminder about how fragile supply chains are, especially in geographic areas prone to natural disasters. But supply regions that see disasters less frequently are also at risk. Yesterday, Costa Rica was hit by a 7.6 magnitude earthquake prompting tsunami warnings throughout Central and South America. Fortunately, in this case, no material tsunami occurred, but sadly, two deaths were reported at the time of our research for this post.

The incident is also a reminder about how fragile supply chains are. Some companies that rely directly (and indirectly) on Costa Rican raw materials, foods, ingredients and finished products are likely to see delays and possible supply disruptions as a result of the earthquake. Incidentally, according to Wikipedia, Costa Rica's largest exports are: "bananas, pineapples, coffee, melons, ornamental plants, sugar, seafood, electronic components and medical equipment." Given the road damage/closures and landslides already associated with the earthquake in coastal areas, it is likely that delays and disruptions will be commonplace in the coming days and weeks.

While it is impossible to fully prepare for disasters such as this in the supply chain, there are many risk mitigation steps that companies can take ahead of time. These include:

  • Understanding the location and exposure of suppliers on a multitier level even in cases where lower tier visibility has not existed in the past
  • Taking a geospatial approach to supply chain visualization of key suppliers (direct and lower tier) to allow for the mapping of suppliers to possible disruptions based on geographic risks, from both natural disasters to geopolitical ones
  • Developing contingency models and preparing insertion plans for key suppliers from a development perspective following potential disasters. In the history of supply chain disruptions, there is an established pattern that the organizations that support their suppliers with on-the-ground resources -- which also allows the ability to survey damage and realistically understand the impact of disasters -- come out ahead of competitors in minimizing supply disruptions

- Jason Busch

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