India’s Energy Crisis May Have Impact on Global Supply Chains

While the full impact of India’s massive power outage has yet to be measured in the global supply chain, analysts say it won’t be long before significant disruption is felt.

According to Linda Conrad, Director of Strategic Business Risk Management for Zurich Services, the breakdown of peak-hour power in Asia’s third-largest economy is certain to be a drag on goods and services.

“The power grid failure can have a ‘domino effect’ on businesses, communications and IT systems,” she said. “Furthermore, this will weaken supply chain infrastructures including all forms of transportation, which could have a major affect on multiple industries.”

With emergency workers and energy professionals still searching for clues to India’s electricity grid collapse, supply chain leaders should consider risk mitigation strategies now, said Conrad.

“As we learned with natural disasters in Japan and Thailand just a few years ago, the ripple effect can be devastating on second- and third-tier suppliers,” said Conrad. “Companies that are over-exposed in India now might consider some supply chain alternatives for 2013.”

Conrad noted in an interview that many countries including – the United States – outsource call centers and IT services to countries like India. She said an outage like this can cause serious damage to businesses that rely on those services such as hotel chains and technical support.

“It should also give us pause to consider what might happen if a similar shutdown occurred in the U.S.,” said Conrad. “What if there was a terrorist attack on our power grid that mirrored the situation in India?”

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