Category C · Supply & Currency · Scenario 5
Supply Disruption
You can't get the products, materials or services you need. That can stop sales, delay customer orders and push costs up as you scramble for alternatives. The impact depends on how much stock you hold and how quickly you can find substitutes.
Trigger
A critical supplier, route or facility becomes unavailable.
First move
Map your exposure, identify substitutes and protect your most essential operations and customers.
Immediate first response
List which products and customers depend on the disrupted supply and how many weeks of stock you hold.
First 24 hours
- Confirm current stock levels and weeks of cover for affected items
- Contact the supplier for a realistic recovery timeframe
- Identify which customers and orders are affected
- Start contacting alternative suppliers
Next 7 days
- Prioritise limited stock for your most valuable customers
- Communicate honestly with affected customers about timeframes
- Assess the cost of alternatives — freight, price, minimum orders
- Check insurance cover, including business interruption
- Update the cash forecast for delayed sales and higher costs
Next 30 days
- Qualify at least one alternative supplier for critical items
- Review safety stock levels for critical inputs
- Build a supplier risk register
- Document a continuity plan for future disruptions
Typical causes
- Supplier financial failure or capacity problems
- Shipping, port or freight disruption
- Natural events, weather or infrastructure failures
- Quality failures or product recalls
- Single-source dependency on one supplier
Early warning signs
- Supplier lead times getting longer
- Partial or late deliveries
- Supplier asking for faster payment or deposits
- Industry news of shortages
Trigger indicators
- Lead times increase by more than 25%
- Stock of a critical item falls below a set number of weeks' cover
- A supplier misses two consecutive deliveries
Financial implications
- Lost or delayed sales reduce revenue and cash receipts
- Alternative supply and expedited freight increase costs
- Holding more safety stock ties up cash
- Penalty clauses with customers may apply
Questions management should ask
- Which items do we rely on a single supplier for?
- How many weeks of stock do we hold for critical items?
- Which customers would be affected first?
- What does an alternative supply cost, and how fast can we get it?
- Are we covered by insurance for this event?
Common mistakes
- Over-ordering in a panic and tying up cash
- Keeping customers in the dark
- Failing to check supplier contracts and insurance
- Returning to single-sourcing once the crisis passes