I’ve been harping about Risk Management a lot lately, but that’s because I know that your supply chain will be disrupted (and in the case of Imperial Oil, as pointed out by David Rotor in his recent post, it already has). It’s a statistical certainty outranked only by death and taxes. The only things I don’t know is when, how bad, or how much it will cost you. Hopefully it won’t be the result of a natural disaster that shuts you down temporarily, but it could be, and that’s why I’ve talked about Disaster Recovery Planning in the past and taken efforts to make sure you understand that Your Supply Chain is NOT Secure in my efforts to drive home the importance of good planning.
Recently, the Supply Chain Management Review published a great article titled Disaster Management: Private Lessons for the Public Sector that reviewed best practices used by private industry to weather the storm and included a great Disaster Management Checklist that is worth repeating.
According to the article, successful organizations weather the storm by working closely with suppliers, customers, and even competitors. Moreover, effective supply chain management is critical to disaster planning and response. Organizations need to understand the resiliency of their suppliers, identify their downstream points of vulnerability, and collaborate across internal and external organizational barriers in order to protect assets and deploy supplies in the face of a disaster.
Furthermore, disaster-management supply chain processes can be segmented into three primary foci: (1) sourcing, (2) warehousing and asset protection, and (3) staging and distribution. You need to determine what items you need to stockpile and where they should be stored. You need to set up standing agreements for emergency services with a resilient base of contractors. And you need to identify alternate sources of supply and supply networks for flexibility, especially for items that cannot be stockpiled. You also have to prepare for power loss and the resultant cash economy.
You need to find the balance between stockpiling in anticipation of the surge in demand for critical supplies against the cost of maintaining inventory and storing it in a potentially vulnerable location. You also have to consider how you will protect assets in potentially exposed area, balancing the cost of added protection against the value of the goods. You have to figure out how you are going to get stockpiled supplies to an affected region quickly. You need to have processes in place for operating in an offsite location if necessary, often shifting your entire operation out of a potential disaster zone before the disaster hits. You need to be prepared.
The disaster management checklist provided is very handy. In short:
- strengthen supplier relationships
- collaborate with suppliers
- diversify suppliers
- plan for power loss
- plan for a cash economy
- build backup plans
- find inventory equilibrium points
- distribute resources
- batten down the hatches
- locate disaster-recovery staging areas