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Chopra, S., & Sodhi, M. (2014). Reducing the risk of supply chain disruptions. MIT Sloan Management Review, 55(3), 72–80. https://goo.su/VTH8K

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KEY POINTS

1. Over-reliance on a single overseas supplier.

2. Lack of supplier diversification.

3. Limited risk assessment in disaster-prone areas.

4. Ineffective communication with suppliers.

The disruption at MABE Retailers was primarily caused by its heavy dependence on a single overseas supplier for key electronic products. This supplier was located in a region highly vulnerable to natural disasters, which made the company’s supply chain fragile and exposed. The absence of alternative suppliers meant that when the earthquake occurred, MABE had no immediate backup to maintain its inventory. Additionally, the company had not conducted a comprehensive risk assessment that considered the geographical and environmental risks associated with its supplier base. Finally, the lack of strong communication channels with the overseas partner delayed crucial updates, leaving MABE unable to respond quickly to the crisis.

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The supply chain disruption had both immediate and long-term consequences.

1. Operational Impact: Production schedules were interrupted due to delays in receiving essential components. Some warehouses faced shortages, and in extreme cases, certain product lines had to be paused entirely. This directly affected the efficiency of MABE’s operations.

2. Financial Impact: The company had to source emergency supplies from alternative vendors at significantly higher prices. Transportation and logistics costs increased because of expedited shipments. The revenue declined due to late order fulfillment, penalties from distributors, and reduced sales during peak demand periods.

3. Customer Impact: Customers faced product unavailability and delays in deliveries, which created frustration and reduced overall satisfaction. Some consumers switched to competitors, damaging brand loyalty.

4. Strategic Impact: MABE’s competitors who had diversified supplier networks were able to maintain steady product availability, gaining a competitive edge. The company’s reputation and market share suffered, showing the strategic cost of not investing in resilient supply chain structures.

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To prevent or minimize such disruptions, MABE Retailers should implement a combination of the four main risk mitigation strategies:

1. Risk Avoidance: The company must avoid single-source dependency by establishing supplier bases in regions with lower exposure to natural disasters. Entering agreements only with suppliers located in risk-prone areas must be avoided.

2. Risk Reduction: MABE should diversify its supplier network across multiple regions, ensuring redundancy. Regular supply chain audits and advanced risk assessment tools must be applied to identify vulnerabilities before they escalate. Implementing digital technologies like real-time tracking and AI forecasting would enhance responsiveness.

3. Risk Transfer: Insurance policies against natural disasters and business interruption can shift part of the financial burden to third parties. In addition, outsourcing logistics operations during emergencies could help sustain operations with limited internal disruption.

4. Risk Acceptance: In some cases, small-scale risks—such as minor delays—may be tolerated if the cost of prevention exceeds the potential loss. However, this should only apply to non-critical areas of the business.

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The MABE case demonstrates the urgent need for companies to invest in supply chain resilience. Businesses should recognize that globalization increases exposure to risks, and reliance on single suppliers can become a vulnerability. A proactive approach—through diversification, digital integration, and continuous risk assessment—ensures agility and competitiveness. Strong supplier relationships, clear communication, and contingency planning should be treated as strategic priorities. Companies that learn from this case will be better prepared to protect their customers, financial stability, and reputation when disruptions inevitably occur.

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YouTube. (2020). Assess the Impact of Supply Chain Disruption. https://www.youtube.com/watch?v=fDHSmT57jyc

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YouTube. (2020). Four Risk Mitigation Strategies. https://www.youtube.com/watch?v=IGhnLkyW6Zk

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What Are The Four Risk Mitigation Strategies? - SecurityFirstCorp.com