Recent headlines have left everyone feeling like members of the disaster of the week club, as hurricanes then earthquakes then forest fires have left a wake of devastation. Usually, the headlines don’t mention the supply chains that have been disrupted as component makers, electronics manufacturers, and their partners work to keep products in production. Disasters aren’t new, but recent events should have everyone thinking about how to prepare the processes, people, and technology in the supply chain to be ready for whatever Mother Nature brings.
“The reality with natural disasters is that it’s not a case of if it will happen but when and where will it happen and how will you get ready for it,” Richard Howells, vice president, solutions management for supply chain at SAP told EBN. “It’s really planning for the unexpected but not completely unimaginable. We need to prepare with the understanding that we plan in the perfect world but execute in the real world.”
Disaster is real
It’s important not to underestimate the potential impact of natural disaster. You may be affected if you have suppliers in that geographic area, whether your operations are located there or not. “The closer you are to the suppliers in the region, the sooner the disruption will hit your supply chain,” said Bindiya Vakil, CEO and founder of Resilinc, which provides a risk management service and recently sponsored a webinar on the topic. “If these suppliers are in your sub-tier supply chain, and if you have not mapped your supply chain dependencies, the capacity and material constraints will be realized in the weeks to come.”
Consider Hurricane Harvey. The storm, which formed in the Gulf of Mexico as a tropical storm on August 24, evolved into a massive Category 4 Hurricane. The storm covered Houston, dumping as much as 52 inches of rain, which flooded many business. The is responsible for almost $600 billion in economic activity and is home to ports that trade with many countries around the world.
“Resilinc has mapped almost 800 factories, warehouses, distribution centers etc. to the region of Texas that was affected by Hurricane Harvey, and 300 of them are in the Houston vicinity,” said Vakil. “Even if a supplier’s factory is not flooded, the infrastructure (power, water, transportation etc.), needed to operate is not going to be there for weeks.”
Resilinc gathered information from tens of thousands of suppliers about the potential impact of the storm, and discovered that in the wake of this level of storm, recovery times would average ten to 20 weeks, with full recovery taking up to a year. “If the roads leading up to the factory are damaged, that is a two to four week disruption, but if the factory is flooded, then equipment procurement or repair time, setup and qualification time, production lead time and transit times, all become critical path to recovery,” said Vakil.
Good sourcing, always good business
Following good procurement practices is a solid place to start when trying to address potential problems caused by natural disaster. For example, continuously be considering alternate sources for critical components and materials, said Howells. Further, consider the amount of inventory that the organization is holding.
This is not a once and done activity but something that should be considered continuously. “At uncertain times of year, you may change inventory policy, when there is a higher risk of something going wrong,” said Howells. “You can also look at where you keep inventory, and perhaps move it closer to the actual manufacturing facility to avoid shipping problems.
Think beyond your own locations and the locations of first tier suppliers. “I would also remember that suppliers who are not located in the affected area could be relying on materials that come from this region – knowingly or unknowingly due to the supplier being many tiers downstream – and therefore could get disrupted in the coming days or weeks,” said Joe Carson, chief strategy officer at Resilinc.
Get the people & processes ready
Preparation of people is critical to success, but unfortunately, organizations often neglect this area. Not uncommonly, organizations create a plan and put it on a shelf, rather than testing it and regularly updating it. “Before anything happens, you can start to plan,” said Peter Edlund, senior vice president, Global Product Marketing at DiCentral. “Figure out which people are tasked with getting on the phone with customers and suppliers, who will get a war room up and running…divvy stuff up. Otherwise, people know how to talk about a disaster plan but not how to execute it.”
Make sure the plan reaches as deep into the supply chain as possible. “Get your internal stakeholders and partners together, work closely with suppliers, verify supplier impact assessments and prepare for a months’ long recovery effort that spans multiple supply chain tiers,” said Carson. “Second sources may also be overwhelmed with business and shifting customer priorities. First-movers, who know all their supply options and obstacles, and who can work with speed and precision will get parts that their competitors and those in other industries will miss out on.”
In addition, consider easy steps that can be taken if a disaster, such as a storm, is imminent, Edlund suggested. For example, ask employees to take computers home so that they can work remotely if the office is impacted. Or, perhaps request that equipment be placed on top of the desk to potentially put them above the level of the water in a flood. “Don’t let the disaster happen and be the victim,” Edlund added.
Further, after an incident, businesses should do a post mortem and look at what went well and what didn’t. “By figuring out the business impact, we can come out stronger and more resilient,” said Edlund.
Go to redundant & intelligent technology
Technology is another keystone to successfully navigating disasters. By leveraging digital technology, organizations can gain real-time insight into where products and materials are in the supply chain. “I’m sure phone calls are made but a digital signal help down line in the supply chain to ensure that other aspects of your business are understood by everyone involved,” said Edlund. “All of the data is available, but the question is whether you have the systems in place to put it all together.”
Innovative technologies, including mobile, cloud, big data, and Internet of Things (IoT), offer tools that allow organizations to keep going in the event of problems. “A lot of these technologies are building in inherent redundancies,” Edlund said. “From a natural disaster perspective, without those kinds of technologies, you are at a disadvantage from a recovery standpoint.” DiCentral, located in Houston at the heart of recent storms, gave Edlund a bird’s eye view of the impact that a major storm can have.
Visibility and collaboration are the watch words of disaster preparedness. “Predicting and responding to change are key elements to getting ready,” said Howells. “When a disaster hits, you want to have visibility into all of your inventory, whether it is in a store, warehouse or distribution center or even that which is in transit. You might be able to reroute from point A to point B. If you can’t see it, can’t monitor it, and can’t measure it, you can’t make a decision.”
Informational accuracy, and access to both structured and unstructured data, are also critical components of success. “By getting information as early as possible, you have more time to react to the pending occurrence,” said Howells. For example, weather data and social media traffic might point to an impending weather event that could impede the supply chain. “The key is having control center site in place to pull that data together to make the right biasness decisions,” he added.
Finally, organizations should invest in tools to allow for information visualization. It’s important to bring together data from many parts of the business into one place. Start with getting a tool in place where you can visualize the information. “You always want visibility, but it becomes higher value when a storm hits or an earthquake happens,” Howells said.
The right hardware is as critical the right software. Organizations should ensure that the servers running critical applications and storing or accessing data are robust. “When it comes to awareness around notion of being prepared, it’s important to think about systems that are capable of self-healing and continuing after a failure,” said Edlund. Further, critical systems should be capable of handling triple the traffic load, because in an emergency traffic patterns can change drastically.
When it comes to natural disasters, the risk is real. Organizations need to invest before the problem occurs or risk losing business or even total business failure.
“The reality is that many companies have been lagging in adequately investing in risk and resiliency technologies, processes and tools, and are woefully manual and highly inefficient in their procurement and supply chain organizations, relying heavily on people and Microsoft Excel tools,” said Vakil. “We are concerned that suppliers may not have invested in the necessary capabilities such as multi-tier supply chain visibility/mapping, proactive risk mitigation, and 24×7 monitoring and disruption response planning.”
What has your organization done to get ready for potential disaster? Let us know in the comments section below.
— Hailey Lynne McKeefry, Editor in Chief, EBN