Global IT outage has caused supply chains to collapse – we need to be better prepared next time

Friday’s global IT outage — caused by a faulty software update from cybersecurity firm Crowdstrike — has thrown businesses around the world into chaos.

Major disruptions were reported in many countries, including Australia, New Zealand, Japan, India, the United States, and the United Kingdom. Many businesses were unable to access critical systems and data, leading to significant delays and financial losses.

When the crisis hit, many of us were preoccupied with the immediate impact on consumers – hospitals closing, some supermarkets moving to cash-only payments, flights being delayed and news anchors reading from printed notes.

But it’s often forgotten that our supply chains—the complex networks that turn raw materials into finished products and deliver them to where they’re needed—have also become deeply integrated with technology. They, too, have been hit hard.

Over the past decades, supply chains have implemented advanced IT systems to better manage inventory, coordinate shipping and logistics, make decisions and share information.

This technology has brought enormous benefits to supply chain management. But it has also introduced serious new vulnerabilities, as we have just seen with our own eyes. We need to be better prepared to face similar crises in the future.

Supply chains are dependent on technology

Advanced IT systems now enable real-time tracking, automated inventory management, and seamless communication across global supply chains, making them more efficient, transparent, and responsive.

But to achieve such precision and speed, they have also become highly interdependent. Supply chains depend on the timely success of everyone—and all the technology—involved in them.

Now we see how quickly everything can fall apart.

Transport systems have been hit particularly hard, with both shipping companies and ports reporting disruptions as a result of the outages.

Many people have been directly affected by cancelled or delayed passenger flights. However, the courier company Parcelhero has warned that there could also be significant side effects for air freight:

“Not only will slots for dedicated cargo flights be disrupted, but many international goods and parcels are transported not only on specially designed cargo aircraft but also in the cargo holds of passenger aircraft.”

Other air travel experts suggest it could take days or even weeks for the balance to fully recover.

The financial and retail sectors also play important roles in supply chains and are also facing their own disruptions.

Many Australian banks experienced outages, as did major accounting software providers myob and Xero. Many retail operations, particularly those with extensive e-commerce platforms, reported delays in order processing and delivery.

Some of the downstream effects of the outage may not be immediately apparent. We will only see them as they spread through supply chains over time.

How can companies be better prepared?

Any one of these failures in isolation would have been a major incident. The fact that they all happened at the same time made Friday’s crisis strikingly rare. That doesn’t mean companies shouldn’t be prepared. The question is when, not if, the next global IT outage will occur.

The nature of Friday’s outage made its impact difficult to avoid. But not all IT threats are the same. To build more resilient supply chains, companies operating in them must have robust contingency plans—even if that means maintaining the ability to perform key processes manually and use paper records (which many did on Friday).

One strategy for companies is to diversify sources of key software and technology. This helps avoid over-reliance on what could become a single point of failure. Risk should be monitored proactively, with regular load testing and audits.

Investing in cybersecurity measures can also often prevent and minimize the impact of many IT threats. This includes regularly updating software, training staff on best practices, and using appropriate advanced security technologies.

Educating staff on how to identify and respond to potential IT issues is also key to reducing human error. Clear channels of communication must also be in place during outages to maintain transparency and trust. These protocols should be regularly updated.

Don’t put all your eggs in one basket

One of the most important factors to consider in supply chain management is the risk of a single “link” being broken – for example, if a key supplier is unable to produce a particular product or cannot be transported on time.

In addition to diversifying the software systems used to perform key tasks, enterprises should also diversify their sources of key inputs and logistical needs.

Diversifying suppliers reduces the risk of being dependent on a single source and means that a company has alternative options. Ideally, this allows it to continue operating as smoothly as possible when supplies are disrupted.

Moving production and logistics onshore or to a nearby country (nearshoring) can also help mitigate risks from international disruptions. And shortening the supply chain by reducing the number of intermediaries can reduce potential points of failure.

A quick recovery is important

The speed at which a supply chain recovers from an IT outage or other crisis depends on its preparedness and resilience. Many of the strategies we’ve discussed can significantly shorten recovery times and minimize operational disruption, allowing businesses to return to normal.

New technologies have been a boon to supply chain management, but they have also added vast new vulnerabilities. A proactive approach to cybersecurity and contingency planning cannot prevent all disasters, but it remains the best solution for business.

This article is reprinted from The Conversation under a Creative Commons license. Read the original article.