DECODING THE BLACK SWAN - EVENT ON THE SUPPLY CHAIN - LILADHAR PASOO
                     DECODING THE BLACK SWAN - 
 EVENT ON THE SUPPLY 
CHAIN
The term “Black Swan” was coined by renowned finance professor Nassim Nicholas 
Taleb in his
2007 book “The Black Swan”. He defines black swan-events that are impossible to 
foretell due to  their extreme rarity yet having disastrous aftereffects. He advocates 
that it is important for people to  always assume a black swan event is a possibility, 
whatever it may be, and to plan accordingly.
Countries with advanced industrial economies and their technologically advanced 
companies are
linked by globalized customers and supply networks together with finely honed 
transport strategies  that deliver JIT(Just-in-time). Normally, the existing system 
functions very effectively. Unfortunately,  the system is also susceptible to events that 
are either not forecastable or is able to forecast but not  able to prevent it. The usual 
planning models and forecasting do not seem to or cannot capture  disruptive 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, asa manufacturing hub for 
supplying Western  markets. Indeed, since the 1980s, awareness of the potential for 
value creation by using flow-cost  Asian suppliers has resulted in the growth of high 
traffic while encountering different dynamics  phased across the supply chain.
Supply systems increasingly demand effective forecasting, accurate and reliable 
logistics, and very  flexible 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 
value  creation also benefitted both suppliers and buyers and further increased 
trades but usually this is  best for stable conditions.
Analysis of the full cost of a black swan event whose likelihood can only be an 
estimate but whose  outcome is so severe and so difficult that it calls for strategically 
bold and leveraged action. The  company must gauge the impact of such black swan 
event and try to build up a cost to shield itself
from such a business crisis. It has to work out cost-benefit analysis before such cost 
factoring is
incorporated into business strategy.
Though it is impossible to plan for this black swan event, in a way one can never be 
able to create a  plan for every single imaginable scenario but if the response to such 
scenarios is well-planned you  can put the pieces back together promptly. Clearly seeing 
that you have a problem, or even a  potential one, is the first step to solving it while 
having a unified view of your entire supply chain,  both upstream and downstream.
We at LiladharPasoo encourage supply chain solutions that re looks at its risk profiles as 
a potential  profit opportunity.
Understand the context and impact of the problem and possible solutions so you 
can make an  informed next step:
1.Collaborate freely– Identify which suppliers and customers are impacted, and then 
bring  together the necessary people to collaborate on possible resolutions. As I always 
say collaboration  is the first step to building up any business strategy. It’s about the 
right partnering and working  towards the Vision. The conventional approach not only 
accumulates vendors who don’t merge into  the vision and goals, but also spend huge 
cost to manage such vendors performance.
2.Be Agile– The ability to react quickly to any developing supply chain situation is 
critical. But  beware, it’s not just about the speed of implementing a solution. It’s also 
about how quick one can  understand the situation and its consequences and respond 
faster with solution. The situation can  be countered better and effectively through the 
trained and experienced staff while remaining  customer-centric and building 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’re  using.
In conclusion, with a few key changes to your supply chain risk management strategy, 
you can help  minimize potential risks, and maximize the effectiveness of your 
response, in case the totally  unexpected event really does happen. Hence,being aware 
and preparedness on occurrence of such  event will help us black swan-event effect on 
Supply Chain.