The Volcano Eyjafjallajoekull Threatens to Rewrite the Global Sourcing Rulebook

The Volcano Eyjafjallajoekull Threatens to Rewrite the Global Sourcing Rulebook

Posted by Pete Loughlin in Vendor Risk Management 18 Apr 2010

As the mass grounding of aircraft across most of Europe is about to enter its 5th day, the consequences to business of the major eruption of the volcano Eyjafjallajoekull in Iceland are just beginning to be contemplated.

The priority thus far has been to get stranded European passengers home. For some, it’s been a welcome extension to a holiday, for others a travel nightmare without precedent. But now the focus is moving to the economic consequences of the disruption to supply chains and the possible consequences of further disruption. Buyers and sourcing and supply chain managers across Europe are likely to be burning the midnight oil in the coming weeks trying to ensure that supply disruption is kept to a minimum.

The first consequence is likely to be a shortage of some fresh fruit and vegetables imported from outside Europe. Christopher Snelling, head of global supply chain policy for the Freight Transport Association, has been quoted as predicting shortages if the grounding continues. “There are no shortages yet, but we may start to see certain ranges affected if this carries on”

Global sourcing, low cost country sourcing as well as global labor arbitrage, all of which have been part of the sustained economic growth of the developed world over the last 20 years, all depend on reliable means of global transport. What the events of the last week has taught us is that local contingencies and risk management and mitigation in respect of global sourcing is crucial.

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