Global Logistics and Supply Chain Strategies - March 2008 - (Page 55)

When Disaster Strikes, Will Supply Chains Be Ready? BY ROBERT J. BOWMAN Despite storms, port closures, congestion and the possibility of terrorist attacks, many companies are placing disaster-recovery plans on the back burner. W hen it comes to assessing the likelihood of a disaster that can seriously disrupt a supply chain, corporate memories can be remarkably short. It has been less than seven years since the terrorist attacks of 9/11, less than six since the West Coast ports shutdown, and less than three since Hurricane Katrina. Yet many companies still don’t have comprehensive programs in place to keep their supply chains running in the event of a disaster, natural or otherwise. Maybe it’s a case of executives being caught up in day-to-day crises, or the difficulties of maintaining global supply chains in an era of outsourcing. Whatever the reason, “industry is placing the biggest bet in the history of Las Vegas—that nothing will happen,” says Jeff Karrenbauer, president of Insight, a provider of supply chain technology and consulting services based in Manassas, Va. “It’s amazing how hard it is to get traction with this issue.” Companies are finding it tough to make the case for spending time and money on disaster response programs, says James B. Rice Jr., director of the Integrated Supply Chain Management Program at the Massachusetts Institute of Technology. “The trick question is, what happens when somebody makes a successful security investment? Nothing. It prevents things from happening.” In a sense, having a good disaster response plan is like buying insurance. But too many companies fail to realize that the lack of one is putting their brand identities at risk. Even relatively contained problems such as the lead-tainted toys that were recently discovered in factories making product for Mattel Inc., or the sudden supplier bankruptcy that cut off chassis frames for Land Rover’s Discovery vehicles in 2001, can severely damage a company’s position in the marketplace. In the well-known case of a fire at a Philips Electronics semiconductor factory in 2000, the resulting shortage of components took LM Ericsson out of the business of making cellular phones under its own name. Says Rice: “These things can really cripple a firm.” It isn’t for lack of awareness of the problem. A study by Aberdeen Group found that 82 percent of the companies surveyed were concerned about the ability of their supply chains to withstand major disruptions. The catch: only 11 percent were actively managing the risk. Another 47 percent were “concerned” but had no formal process, while 18 percent weren’t concerned about risk at all. Companies have many “buckets” of profit and expense within their operations, but few if any run actual risk budgets, says Jade Rodysill, senior manager in the supply chain strategy practice of Accenture. Still, she believes that business is beginning to 56 MARCH 2008

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Global Logistics and Supply Chain Strategies - March 2008 Editorial GL & SCS Exclusive FastForward Up Front The Green in Green Think Inside the Box Have a Second Look Can't Happen Here Opinion: Stay in the Black as Your Workforce Fades to Gray Opinion: Four Critical Steps to Managing Change in the Supply Chain Industry Voices

Global Logistics and Supply Chain Strategies - March 2008

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