PAPP: Sixth-Sense Solution for the Supply Chain

Natural disasters may be unavoidable, but the global manufacturing supply chain can limit the impact of such calamities by sharpening rather than ignoring its "nose for trouble" -- the sixth sense or perils avoidance system.

When catastrophes strike, as they have often done in the manufacturing world, the best and most efficient supply chain systems aren't always those with the most comprehensive or expensive disaster management programs. At such moments and afterward, industry executives celebrate the supply chain that most quietly continued to hum, seemingly panic-free and creating the illusion that the enterprise merely had been lucky to be spared the worst of the calamity unfolding around it.

What characterizes and separates such a supply chain from others? It's having people -- usually top managers -- who with experience have developed a finely honed sixth sense they use to forecast, anticipate, prepare for, shield, and even inoculate their companies against the havoc of natural and unnatural disasters. How can anyone predict and protect the enterprise against natural disasters? It may not be possible always to shield an enterprise from events such as the 2011 earthquake and tsunami in Japan, but with sixth sense awareness, a company's exposure could be severely limited.

Anecdotally, this represents the difference between a township that has a great fire company -- with all the bells and whistles needed to put out the worst conflagration quickly and efficiently -- and another township with the fewest such emergencies within a defined period. In other words, one community is specialized in rapid response and overwhelming-force emergency management, while the other's approach is wrapped around a more subtle, yet effective and cost-efficient, program based on a system I have named PAPP -- Predict, Anticipate, Prepare, Protect.

PAPP is not voodoo stuff. It is a system I can best describe as "premonition management," which itself is not new to the business environment. Andrew Grove, ex-president and CEO of chipmaker Intel Corp., summed it up in the phrase "Only the paranoid survive," the title of his book published in 1997. PAPP doesn't imply the belief in or a slide into the supernatural world. Rather, it is centered on the premise that an enterprise that manages its operations, facilities, and supply chain mechanism by emphasizing intelligence gathering, prediction analysis, constant awareness, prevention programs, and agility is more likely to avoid and limit the impact of business jeopardies than one that is focused purely on disaster management.

Here's how this works for best-practices companies: The supply chain at such enterprises is constantly gathering information not just about the business sector but also on events throughout the global economy and the geo-political sphere. Supply chain executives at such enterprises demand and receive constant updates on political developments in various countries where the company has operations. The data they request range from what we all would expect (such as economic status, infrastructure, availability of capital, and human resources, etc.) to information about the religious environment, geographical location, political developments, resolved and unresolved communal disagreements, natural disaster history, and potential for other disasters.

Based on the information gathered and after proper analysis, supply chain executives can then offer C-level executives intelligence padded with their own sixth sense summary to be used in deciding where to locate manufacturing facilities, what kind of support structure to put in place, how to anticipate and prepare for disasters, and minimize the impact of potential disturbances. PAPP is used to make critical decision such as where to avoid when picking sites for facilities -- notwithstanding the known cost-advantages -- and the type of security systems to install to assure safety of personnel, factories, and products.

Sixth sense supply chain management isn't about getting predictions right. Many forecasts based on PAPP will not happen. The best supply chain executives embrace such failures, and they don't crow loudly about the ones they got right either. Their goal is to ensure operations run smoothly, whether or not conditions are optimal. They aim to avoid rather than contain disasters, but they are as equally or even better prepared when catastrophe happens than companies that spend heavily on disaster containment programs.

I believe sixth sense supply chain management is about being smart in responding to what is essentially a volatile global manufacturing environment. Tim Carroll, vice president of integrated supply chain at IBM Corp., said it best in his introduction to the company's Global Chief Supply Chain Officer report:

A crisis in some far-flung country can now spread very quickly across the world economy, creating tremendous turbulence. As our supply chains have become more intertwined, none of us is immune. To deal effectively with risk and meet your business objectives, we believe supply chains must become a lot smarter.

The smart supply chain Carroll talks about, in my opinion, is predictive and not merely reactive. That means having a nose for trouble -- a sixth sense -- for what can go wrong and minimizing exposure to such situations.