In 1970, crew members of the endangered Apollo 13 became overnight heroes when they safely reached home despite not reaching the moon. Today their failed mission is regarded as one of NASA’s finest successes because even though one disaster struck, a worse one was averted with the help of world-class teamwork, planning, and cooperation.
It’s a lesson that all of us who are engaged in global logistics would do well to remember because even though lives usually aren’t hanging in the balance as a result of our efforts, many other important things often are, including our companies’ sales, customer relationships, production schedules, and reputations. And various Murphy’s Law-type events have the potential to compromise them.
Like Apollo 13, we don’t always have a say in how or when such things happen. However, we do get a vote when it comes to determining how dramatically they will affect our supply chains. It’s called risk management.
When most companies engage in this practice, they tend to equate it with systems and engineering – and highly analytical, data-driven techniques. And they’re not entirely wrong. I’ve overseen the use of such techniques numerous times over the years and firmly believe they represent major breakthroughs in the quest to identify and compensate for vulnerabilities, assess countermeasures, and provide early warning.
But as NASA discovered all those years ago, even the most sophisticated of systems and designs can only take us so far, not to mention wind up being costly to implement and maintain. Just as important, our over-reliance on them can sometimes cause us to overlook many hands-on, practical tools (such as the following) that are just as important and, in many cases, equally effective.
Many disruptive events tend to start at the local level or to have very different kinds of impacts from location to location -- which is why in addition to having a big-picture, corporate-level supply chain management contingency plan, each of your company’s manufacturing sites, warehouses, and terminals should also have its own individual one.
Focusing on the risks and consequences that apply to each particular operation, these facility-specific plans should contain clear and thorough step-by-step instructions for what to do in the event of:
· life- or health-threatening events such as fires or attacks
· inclement weather like blizzards, hurricanes, or floods
· the departure of key personnel (hint: have a good succession plan in place)
· mechanical, IT, or power failures
· local events that could restrict movement to or from the operation
· local driver or labor shortages
· anything else that’s likely to impact production, inventory or service continuity.
They should also include the names and contact information for the appropriate local and corporate rapid response team — and be accessible to and executable by at least some of your personnel who work outside of that operation, because you never know when the appropriate local personnel will be temporarily out of pocket.
Even in today’s highly global economy, sometimes it’s easy to forget that many events that initially seem remote and isolated can eventually impact and even cripple operations that are closer to home. For example, in recent years alone, floods in Thailand, mudslides in Mexico, and a nuclear power plant disaster in Japan created numerous disruptions for manufacturers and retailers throughout the world, many of whom were unaware of the fact that their key components would be stranded for weeks on end due to the closure of those areas’ factories or transportation arteries.
With this in mind, you can do a better job of protecting your company’s supply chain continuity by taking the time to:
· identify the components, suppliers (both internal and external), and service providers that are truly mission-critical
· ask for copies of these suppliers’ and service providers’ contingency plans — or insist they develop such plans — and make those plans available to your company’s key stakeholders
· identify alternate sources of these components, supplies and services that you can tap into if necessary (for more on this see “looking for your next good match” further on in this article)
You also may wish to encourage these key players to do the same thing with their mission-critical vendors and suppliers. After all, the events that have an impact on them could eventually have repercussions for you, too.
Looking for your next good match
Whoever coined the term, “there’s more than one fish in the sea” probably didn’t think so at the time. But he or she was providing sage advice for any company that wants to minimize its supply chain exposure.
Although there’s certainly nothing wrong with having a small, select group of suppliers, carriers, and routes, it’s always important to remember that the A in Plan A isn’t necessarily synonymous with agility — particularly not if you never deviate from it. The most successful supply chain contingency planners tend to be the ones who are always thinking in terms of Plans B, C, and D and diligently laying the groundwork for their execution by:
· choosing and prequalifying back-up suppliers (hint: you may wish to give them at least a bit of your business from time to time to see how they perform and to establish a working relationship)
· having Bills of Material with robust component substitution rules
· practicing route diversification
· using multiple modes; in light of the ongoing truck driver shortage, this could become increasingly important in the years to come
· practicing geographic diversification in terms of both manufacturing and warehousing inventory
· paving the way for rapid on-boarding of these alternatives by adopting industry-standard systems interfaces with robust plug-and-play functionality
Having this kind of flexibility will provide your company with considerably more options for working around — or even avoiding — disruptions quickly and cost-effectively. It’ll probably help you sleep better, too.
Much like a car is only able to drive if it has gas, a good contingency plan is only as effective as its ability to be mobilized quickly and thoroughly, which is why it’s wise to map out a clear, consistent contingency communications protocol long before anything goes wrong.
The level of detail and work you’ll need to put into this protocol will largely depend on your company, industry, and ownership status. However at the very least it should:
· designate a key communications liaison (be it a department or individual)
· provide step-by-step instructions about how and when various stakeholder groups should be contacted (and by whom), preferably stratified by contingency
· contain up-to-date names, titles, phone numbers, and emails of all key stakeholders, including how they can be reached after hours if necessary
· provide a list of the phone call scripts, emails, news releases, texts, letters, or other messages that will need to be developed — or actual drafts of the same
· involve key suppliers as well as your company; it’s important to find out if they have the same kind of protocol in place and to ascertain whether or not it’s been tested
Putting these things together may feel like a colossal case of putting the cart before the horse — and like something your corporate communications department should be doing instead of you. But ultimately you’ll be glad you had a hand in the planning and that you have a plan ready to go, because when mishaps or disasters occur, many professionals tend to become so focused on tending to operational details that they forget to worry about “peripheral” things like notifying customers and employees. And such neglect often comes back to haunt them.
No matter how thorough or imaginative your contingency planning teams are, your supply chain inevitably will encounter a few Black Swan events that no one could see coming.
Whether these events are major, minor, or somewhere in between, having the right kind of visibility can be a game-changer because it can help you assess and respond to the challenges at hand far more quickly and rationally.
In light of this, consider doing an IT pulse check to make sure you have adequate technology-enabled access to key decision-making data such as:
· your products’ Bills of Material and knowledge of which can be reworked with component substitutes
· a list of your company’s and/or your suppliers’ manufacturing points
· a snapshot of how many days of component and finished goods inventory you have and where it’s located
· a list of alternative suppliers and service providers
· a network model of your supply chain that can be used for optimization purposes
It’s important to note that not all of these data-enabled capabilities have to come from your company. In fact, I’d highly recommend doing a similar IT pulse check with your key product and service suppliers in case you need to put their data into play.
Working the plan
On a final note, allow me to offer a recommendation that may seem obvious but is all-too-often forgotten. If you want to truly protect your supply chain from the worst impacts of disasters — be they natural or manmade — make it your personal mission to maintain and periodically refresh all of the above.
Just as the crew members of Apollo 13 and Mission Control were far better equipped to deal with adversity because they’d spent considerable time training, rehearsing, and preparing for worst-case scenarios, your risk management initiatives will be much more likely to work if they’re treated as an integral part of your company’s day-to-day operations and organizational DNA.
Among other things, this means that you should:
· include risk management action plan reviews and updates in your regular supply chain staff meetings
· schedule frequent risk management compliance reviews with your logistics departments and operations
· add a risk management compliance component to your supplier scorecards and in your managers’ PMPs
It also means that you should continue to keep the possibility of contingency — and the importance of funding risk management initiatives — top-of-mind, even if the “why” behind such initiatives isn’t something most people like to think about. We all hope we won’t ever need to actually use our contingency plans. But at the end of the day, hope won’t help us when a disruption strikes. Preparation will.
Dave Frentzel is a partner with New Harbor Consultants. A 25-year supply chain professional, he currently focuses on helping companies to improve business outcomes with more effective supply chain and logistics strategies and operations.