DECODING THE BLACK SWAN -EVENT ON THE SUPPLY CHAIN - Liladhar Pasoo
                     DecodingTheBlackSwan-EventonTheSupplyChain-LiladharPasoo
The term “Black Swan” was coined by renowned finance professor Nassim Nicholas 
Taleb in his2007 book “The Black Swan ''. He defines black swan-events that are 
impossible to foretell due 
totheirextremerarityyethavingdisastrousaftereffects.Headvocatesthatitisimportantforpe
opletoalwaysassumeablackswan-
eventisapossibility,whateveritmaybe,andtoplanaccordingly.
Countries of advanced industrial economies and their technologically advanced 
companies are
linked by globalized customers and supply networks together with finely honed 
transport strategiesthat deliver JIT(Just-in-time).Normally, the existing system functions
very effectively. Unfortunately,the system is also susceptible to events that are either 
not forecast-able or is able to forecast but notable to prevent it. The usual planning models and forecasting 
do not seem to or cannot capturedisruptive black swan-event.
The Challenge is how do we plan, factor and mitigate the black swan-event damage?
One aspect of globalization has been the rise of Asia, as a manufacturing hub for 
supplying westernmarkets. Indeed, since the 1980s, awareness of the potential for value creation by use of low-cost
Asiansuppliershasresultedingrowthofhightrafficwhileencounteringdifferentdynamicsphas
edacross thesupply chain.
Supplysystemsincreasinglydemandeffectiveforecasting,accurateandreliablelogistics,and
veryflexible production models to ensure goods are available when and where needed and more
importantly swift response to service the demand of the market or demographic.
Adoption of Just-In-Time (so-called JIT) quality and supplier partnership philosophy for 
valuecreation also benefited both suppliers and buyers and further increased trades 
but usually these arebest for stable conditions.
Analysis of the full cost of a black swan-event whose likelihood can only be an 
estimate but whoseoutcome is so severe and so difficult that it calls for strategically bold and leveraged action. 
Thecompany must gauge the impact of such black swan-event and try to built-up a 
cost to shield itselffrom such a business crisis. It has to work-out cost benefit analysis before such cost factoring is
incorporatedintobusinessstrategy.
Though it is impossible to plan for this black swan-event, in a way one can never be 
able to create aplan for every single imaginable scenario but if the response to such scenarios are well-planned youcan 
put the pieces back together promptly. Clearly seeing that you have a problem, or even apotential one, is the first 
step to solving it while having a unified view of your entire supply chain,both upstream
and downstream.
WeatLiladharPasooencouragesupplychainsolutionsthatre-
looksatitsriskprofilesasapotentialprofitopportunity.
Understand the context and impact of the problem and possibleSupply chain 
maangementsolutions so you can make an informed next step:
1. Collaborate freely– Identify which suppliers and customers are impacted, and then 
bringtogether the necessary people to collaborate on possible resolutions. As I always 
say, 
collaborationisthefirststeptobuildupanybusinessstrategy.It’saboutrightpartneringandwor
kingtowardstheVision. The conventional approach not only accumulates vendors who don’t merge into the visionand 
goals, while also spending huge costs to manage such vendors' performance.
2. Be Agile– The ability to react quickly to any developing supply chain situation is 
critical. Butbeware, it’s not just about the speed of implementing a solution. It’s also 
about how quick one canunderstand the situation and its consequences and respond 
faster with solutions. The situation canbe countered better and effectively through the 
trained and experienced staff while remainingcustomer-centric and building a strong 
partnership base. Do not just let the machine push the button!The human element is still a very 
important one no matter how sophisticated the technology you’reusing.
In conclusion, with a few key changes to your supply chain risk management strategy, 
you can helpminimize potential risks, and maximize the effectiveness of your response, in case the totallyunexpected 
event really does happen. Hence,being aware and preparedness on occurrence of 
suchanevent will help us mitigate the black swan-event effect on Supply Chain.