Equipment Failure As A Supply Chain Risk

Because of  the supply-chain disruptions in the past few years, many companies have learned the need for planning ahead and having contingency plans in place if key parts, merchandise or other inputs fail to show up at their doorstep.

However, many businesses also face internal supply chain risks, and one of the biggest is machinery or equipment breaking down.

Knowing the right steps to take in advance can save you from making a bad situation worse or significantly delaying the resumption of operations.

Preparing for failure of a key piece of equipment or machinery, can keep you from scrambling to figure out your next step in times of internal disruption or crisis. Making decisions at such times can often lead to more problems and added costs.

Your risk management plan to deal with such failures should include:

A list of key equipment

  • Production machinery, including gear sets, motors, compressors, belts and fans.
  • Boilers and pressure vessels.
  • IT and communications systems, including wiring and cables.
  • Electrical equipment or systems, including transformers, switch boxes, cables, wiring and motors.

 An inventory of spare parts

Optimally, you should keep all the key spare and replacement parts for your main systems on-site. You can ask the manufacturers or service companies of those systems to assist you in having an emergency inventory on hand.

Still, it may not be feasible to have all items on-site. In that case, you should compile a list of the other parts that could break and need replacement, and how to quickly order them from the correct supplier. You should include on this list the cost of those items and delivery times, and update the list at least every year.

A plan for renting replacement equipment

As part of your planning, you should obtain quotes from companies that rent out the same type of equipment or machinery that you use, and update the quotes every year.

The quotes should include all pricing like transportation and set-up fees, as well as estimated time from ordering to delivery and start-up.    Don’t forget to include alternative suppliers.

Repair firms

You should also have at the ready information on the various contractors that are able to repair the equipment that’s broken down. This information should be listed by equipment item and include contractor capabilities, contact information and availability.

Again, you should update this information every year.


The dilemma for many businesses is how much inventory to carry. You don’t want to get caught short when it’s time for deliveries, and you don’t want too much of your money tied up unnecessarily in inventory that will go unused for some time.

That said, a certain reserve of inventory to help you continue to supply your customers is a smart move if you want to minimize the disruption of an equipment failure.

You need to analyze your order and delivery schedules and identify an optimum amount of spare inventory to keep on hand to fulfill orders in case of an equipment failure.

If applicable  make sure to keep in mind how perishable your inventory may.