the September 11, 2001, terrorist attacks caused the
Standard & Poor’s index to lose nearly 12 percent
over four days after the stock markets reopened following the incident. Supply chain disruptions can
have a drastic impact at the organizational level too.
A study by Singhal and Hendricks identified a considerable impact on revenue following a disruption,
with 30 percent of surveyed firms estimating losses
of at least 5 percent of annual revenue as a result of
supply chain disruptions. 2
Clearly, supply chain disruptions can have a
domino effect on organizations and on global
commerce. Natural disasters first cause disruption
at the macro level. That can then affect an organization’s supply chain as disruptions first impact
the organization itself, and then cause a chain
reaction spreading across suppliers, customers,
partners, and the shared value chain. (See Figure
2.) In addition to a direct bottom-line cost impact,
supply chain disruptions can also result in unhappy
customers, loss of reputation, civil and criminal
penalties, and even bankruptcy.
Supply chain disruptions are no doubt hard to
predict, but organizations can control the extent to
which these disruptions could impact their compa-
nies. Toward that end, it is increasingly important
for organizations to develop mature risk assessment
capabilities and techniques such as supply chain
segmentation, quantitative risk assessment, and
scenario planning. These tools allow supply chain
executives to better understand supply chain risks
and develop appropriate risk mitigation strategies.
SUPPLY CHAIN SEGMENTATION
Supply chain segmentation is both a strategic and an
operational exercise. For the purposes of this article,
it is defined as a SCOR (Supply Chain Operations
Reference model) methodology that identifies distinct supply chains within an organization based on
geography/market channel and product offerings.
It can be used to identify unique supply chains and
develop risk assessment and mitigation strategies
for each of them.
As a precursor to assessing risks in the supply
chain, it is important to first understand the unique
supply chains within the organization. This is espe-
[FIGURE 1] NATURAL DISASTERS REPORTED 1900-2010
0
100
200
300
400
500
600
1
90
0
1
90
4
1
90
8
1
91
2
1
91
6
1
92
0
1
92
4
1
92
8
1
93
2
1
93
6
1
94
0
1
94
4
1
94
8
1
95
2
1
95
6
1
96
0
1
96
4
1
96
8
1
97
2
1
97
6
1
98
0
1
98
4
1
98
8
1
99
2
1
99
6
2
00
0
2
00
4
2
00
8
2
01
2
Nu
mb
er
ofn
a
tu
r
aldis
as
te
rs
SOURCE: EM-DAT: THE OFDA/CRED INTERNATIONAL DISASTER DATABASE – WWW.EMDAT.BE, UNIVERSITÉ CATHOLIQUE DE LOUVAIN, BRUSSELS
(BELGIUM)
