Global Logistics and Supply Chain Strategies - March 2008 - (Page 56)

understand the potential for disaster in extended supply chains, with industries such as pharmaceuticals, chemicals and energy ahead of the curve because of the stiff regulatory requirements that they face every day. Others tend to define the risk of disaster in a narrower sense, missing some of the possibilities that can bring the flow of product to a standstill. In the process, they fail to address certain controllable problems, such as West Coast port congestion, which can be minimized through alternative routing strategies. There are isolated cases of companies with detailed plans and the ability to rise to the occasion. Procter & Gamble, for one, is justifiably proud of its response to Hurricane Katrina. The company, which produces substantial amounts of coffee in the New Orleans region under the Folgers brand, was the first local business back in operation after Katrina hit. It found alternative sources of product while the New Orleans plants were out of commission due to flooding, then worked hard to meet the needs of its 550 local employees during the crisis. The storm had no long-term impact on P&G, other than giving the company ideas for further strengthening its disaster response plans. A Game of Catch-Up P&G is among the exceptions. Most companies are forced to play catch-up when their flow of product is halted by disaster. They have only the vaguest idea of which problems are most likely to occur, and how to react when they do. Such ignorance even extends to events that can be foreseen, such as the 2002 employer lockout which left thousands of containers stranded at West Coast ports at the height of the Christmas shipping season. It isn’t as if state and local governments were serving as an example of proper planning. “I’ve got some shocking news for you,” says Rice. “There are very few if any states that have started to think about economic recovery and the impact of freight disruption on their economies.” It might be too much to ask that companies concoct a complete plan all at once. Research by MIT shows that supply chains typically follow a four-stage path to maturity. “Pre-compliant” companies aren’t even part of the voluntary Customs-Trade Partnership Against Terrorism (C-TPAT), which requires getting a better handle on the identity of one’s suppliers and the contents of containers bound for the U.S. “Compliant” companies have embraced C-TPAT but not much else; they view security merely as a cost of doing business. “Secure” companies know that externally imposed measures aren’t enough. They are proactive about working with suppliers and customers to head off disruptions. “Resilient” companies, by contrast, view risk management as part of their business strategy and an opportunity to boost competitiveness. They have built some measure of redundancy into their supplier chains, and can detect and respond to potential crises. To reach the final stage, Rice says, a company will have considered all six major possibilities of failure: the loss of plant capacity or inventories, transportation infrastructure, supply base, human resources, communications and demand. Of course, a GLOBAL LOGISTICS & SUPPLY CHAIN STRATEGIES 57

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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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