The recent global IT outage, caused by a faulty software update from cybersecurity firm CrowdStrike, sent shockwaves through business operations worldwide. Countries including Canada, Australia, New Zealand, Japan, India, the United States, and many in Europe reported severe disruptions. Businesses found themselves unable to access critical systems and data, leading to significant delays and financial losses. While immediate consumer impacts like hospital systems going down, supermarkets operating on cash-only transactions, and flight delays grabbed headlines, the crisis highlighted a crucial point: Global logistics and supply chains, and their deeply integrated technology were hit hard too.

Business continuity plans were rolled out for a real test. Some were impressive, others failed miserably. A BCP should ensure that staff know their roles and responsibilities in the event of an unexpected incidents, like we just experienced, and respond following a recognised practiced and agreed procedures. Is your BCP ready to mitigate all the risks the business faces today?   

Lets look at the types of risks faced:

Direct Risks – Your Own Systems Failing to Measure Up:

• Hacking & Virus Attacks: Cyberattacks on your systems can cripple operations.
• IT Infrastructure Failures: Hardware or software failures within your organization.
• Critical Infrastructure Failures: Outages affecting internet, power, or other essential services.

Solutions: Prevention through robust cybersecurity measures, regular maintenance, and having fallback/contingency plans in place.

Indirect Risks – External Issues Impacting Your business:

• Payment & Financial Systems Disruptions: Banking and transaction systems going down.
• Cloud System Failures: Unavailability of cloud-based services.
• Internet Disruptions: Unreliable internet connections.

Solutions: Preventative reviews of third-party services, and having offline options to ensure continuity.

Domino Risks – Risk of Other People’s Issues Impacting You:

• Supplier Disruptions: Issues affecting your suppliers.
• Key Infrastructure Impacts: Failures in transportation, communication, or other vital infrastructure.
• Ripple Effects: Cascading failures affecting various parts of your operations.

Solutions: Preventative reviews and risk mitigation strategies, focusing on business continuity plans to keep the business running while others do not.

The Impact on Logistics and Supply Chain When IT Fails

Over the past few decades, supply chains have increasingly adopted advanced IT systems to manage inventory, coordinate shipping and logistics, make decisions, and share information. This technology has brought enormous benefits, making supply chains more efficient, transparent, and responsive. However, it has also introduced major vulnerabilities, as demonstrated by the recent outage.

1. Disruption of Transport Systems

Transport systems were among the hardest hit. Shipping companies and ports reported significant disruptions. Both passenger and cargo flights faced cancellations and delays, causing a ripple effect across global trade. Approximately 45-54% of global air freight is transported in the belly hold of passenger planes, a practice commonly referred to as "belly cargo"​ (Air Cargo News)​​ (Reed Smith LLP)​. This highlights the interdependency between passenger air travel and cargo transportation. Lessons from past disruptions, such as the 2010 ash cloud and the COVID-19 pandemic, suggest that full recovery could take days or even weeks.

2. Impact on Finance and Retail Sectors

The finance and retail sectors, which play vital roles in supply chains, faced their own disruptions. Many banks experienced outages, as did some accounting software providers. Retail operations, especially those with extensive e-commerce platforms, saw delays in order processing and delivery. Customers experienced delays, and businesses faced challenges in maintaining customer satisfaction and operational efficiency.

3. Long-term Ripple Effects

Some impacts of the outage may not be immediately visible. Disruptions in supply chains can propagate over time, affecting various sectors in unforeseen ways. For example, a delayed shipment of raw materials or critical components can stall manufacturing processes, leading to costly down time and product shortages down the line. Similarly, delayed financial transactions can impact cash flow and financial planning for businesses.

Top 5 Ways to Protect Your Business

In light of these vulnerabilities, businesses must adopt strategies to protect themselves from future IT outages. Here are the top five ways to bolster your business against such disruptions:

1. Critical review of  Technology Sources

One of the key strategies is to critically review your sources of key software and technology. Relying on a single provider can create a single point of failure, as seen in the recent outage. By diversifying, you can potentially mitigate risks and ensure that if one system fails, another can take over. Regularly conduct stress tests and audits to identify and address potential weaknesses in your technology stack.

2. Invest in Cybersecurity – but maintain control

Investing in cybersecurity is crucial. However, beyond robust cybersecurity measures, control over your cyber environment is vital. Maintain robust test and release processes to prevent untested updates from affecting your production environment. Regularly update software, train staff on best practices, and employ advanced security technologies. Implement multi-factor authentication (MFA), intrusion detection systems (IDS), and encryption to protect sensitive data. Educating staff on identifying and responding to potential IT issues can significantly reduce the risk of human error.

3. Develop Comprehensive Contingency Plans

Having robust contingency plans in place can make a significant difference during an IT outage. Maintain the ability to perform key processes manually and use paper records if necessary. Ensure that all critical operations have documented manual processes that can be quickly activated. Establish clear communication channels to maintain transparency and trust with employees, customers, and partners during outages.

4. Diversify Suppliers and Logistics Partners

Diversifying suppliers and logistics partners can reduce the risk of disruptions in your supply chain. Relying on a single supplier or logistics provider can create vulnerabilities. By having multiple suppliers and partners, you can quickly switch to alternative sources if one is affected by an IT outage or other disruption. Additionally, consider nearshoring or onshoring to mitigate risks from international disruptions.

5. Proactive Risk Management

Implement proactive risk management practices to identify and mitigate potential threats. Regularly review and update your risk management strategies to address emerging threats. Conduct risk assessments to identify critical vulnerabilities and develop mitigation plans. Monitor industry trends and stay informed about potential risks that could impact your business.

Call to Action

The recent IT outage serves as a stark reminder of the vulnerabilities in our technology-dependent supply chains. Businesses must take proactive steps to protect themselves from future disruptions.

At Problems Solved, we specialize in helping businesses review their logistics and supply chain technology stack, identify strengths and weaknesses, and develop comprehensive risk management strategies.

Contact Problems Solved today to schedule a review of your disaster readiness. Our experts will work with you to:

• Assess your current systems and processes and identify potential vulnerabilities.
• Review your cybersecurity measures and recommend improvements.
• Develop comprehensive contingency plans to ensure business continuity.
• Diversify your suppliers and logistics partners to reduce risks.
• Implement proactive risk management practices to stay ahead of emerging threats.

By taking these steps, you can enhance the resilience of your supply chain and that of your customers and protect your business from future IT outages.

Conclusion

The global IT outage caused by a faulty software update from CrowdStrike highlighted the critical vulnerabilities in modern supply chains. As businesses increasingly rely on advanced IT systems, they must also be prepared to face the risks associated with these technologies. By diversifying technology sources, investing in cybersecurity, developing comprehensive contingency plans, diversifying suppliers and logistics partners, and implementing proactive risk management practices, businesses can protect themselves from future disruptions.

The recent crisis underscores the importance of being proactive and prepared. Contact Problems Solved today to review your technology stack, identify risks, and develop strategies to enhance the resilience of your supply chain. With the right measures in place, you can ensure that your business continues to operate smoothly, even in the face of unforeseen challenges.