Decoding the Black Swan -Event on the Supply Chain
                     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 after effects. 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 of 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 forecast-able 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, as a manufacturing hub for 
supplying western markets. Indeed, since the 1980s, awareness of the potential for 
value creation by use of low-cost Asian suppliers has resulted in 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 benefited both suppliers and buyers and further increased trades 
but usually this are 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 built-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 are 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 build up any business strategy. It’s about right 
partnering and working towards the Vision. The conventional approach not only 
accumulates vendors who don’t merge into the vision and 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. 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 solutions. The situation can be countered better and effectively through the 
trained and experienced staff while remaining customer-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’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 an event will help us mitigate the black swan-event 
eRffajeecsth o Mne Shutapply Chain.
CCSO & ED, Liladhar Pasoo