DECODING THE BLACK SWAN - EVENT ON THE SUPPLY CHAIN - LILADHAR PASOO
                     DECODINGTHEBLACKSWAN-
EVENTONTHESUPPLYCHAIN
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
opletoalwaysassumeablackswaneventisapossibility,whateveritmaybe,andtoplanaccording
ly.
Countries with 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 
forecastable 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?
OneaspectofglobalizationhasbeentheriseofAsia,asamanufacturinghubforsupplyingWeste
rnmarkets. Indeed, since the 1980s, awareness of the potential for value creation by using flow-costAsian suppliers has
resulted in the growth of high traffic while encountering different dynamicsphased 
across the supply 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 benefitted both suppliers and buyers and further increased 
trades but usually this isbest 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. 
Thecompanymustgaugetheimpactofsuchblackswaneventandtry 
tobuildupacosttoshielditself
from such a business crisis. It has to work out cost-benefit analysis before such cost
factoring isincorporatedinto business strategy.
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 is 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.
WeatLiladharPasooencourage supply  chainsolutions thatrelooksatitsriskprofilesasapotenti
alprofitopportunity.
Understand the context and impact of the problem and possible solutions so you 
can make aninformed 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 collaborationis the first step to building up any business strategy. It’s about the right partnering and 
workingtowardstheVision.Theconventionalapproachnotonlyaccumulatesvendorswhodon’t
mergeintothe 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. 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 solution. The situation canbe countered better and effectively through the 
trained and experienced staff while remainingcustomer-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’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 
sucheventwill help us black swan-event effect on Supply Chain.