Global Logistics and Supply Chain Strategies - March 2008 - (Page 57)

single big disaster can impact on more than one of those categories, necessitating a multi-pronged response. But all six share common needs, says Rice, include external partnerships with critical vendors, “earlywarning” risk detection systems, education and training, strict communications protocols for information sharing, and a general culture of awareness throughout the organization. Supply chain vendors need disaster response programs as well. San Mateo, Calif.-based Menlo Worldwide Logistics has had one in place for a number of years, according to Joe Dagnese, vice president in charge of the consumer and industrial group. In its case, at least, memories are long. Technology concerns about Y2K got the ball rolling back in 2000, Dagnese says, but Katrina and other recent natural disasters boosted awareness of the subject. The key lies in sitting down with a customer in advance, and determining what steps must be taken in order to sustain continuity of product flow. Shippers themselves must do some deep soul-searching about how they want to serve their customers in an emergency, Dagnese says. For its part, Menlo offers “roving real estate” that can be deployed within several hundred miles of the customer’s regular facility. The partners decide on a standard set of order sizes and SKUs that will be shipped from those alternative locations. The plan, which is reexamined quarterly, doesn’t require the placement of expensive safety stock outside everyday plants or warehouses. Most of the time, the emergency property sits empty; Menlo can make quick deals with landlords when the space is needed. New York City Acts Katrina was the catalyst for an emergency response plan put into place by New York City, with the help of Menlo. City officials got to thinking about the potential impact of a hurricane of similar size hitting the northeast coast. “We looked at a lot of things that had gone on after Katrina,” says Alex Markowski, director of logistics in the city’s Office of Emergency Management. “If we were in the same situation in New York, we would want all the services ready to go.” The city took a logistician’s view of what would be needed at shelters—cots, blankets, bottled water and other supplies— then worked out a plan to store the items at two facilities run by Menlo. One of the “front-line” locations is over the river in New Jersey; a smaller one is in the Bronx. In an emergency, Menlo will follow a detailed plan that allots supplies to various areas of the city according to population and need. Because it’s working for a public entity, the vendor will have priority to traverse any bridge or tunnel. If those routes are blocked, it can even resort to airlift, Dagnese says. The city chose Menlo, following a standard bid process, in part because the vendor also owns trucks, through its sister unit Con-way Freight. “You need someone who has a strong fleet as well as warehousing,” Markowski says. Menlo would likely supplement its requirements with outside carriers, though, as it does for most customers. Another factor in planning was the proper designation of unloading points. “On the other end,” Markowski says, “there has to be an operator ready to receive my goods.” The city intends to conduct a field exercise of its entire sheltering plan, of which logistics is one component, during the spring or summer of this year. It has already learned one lesson from an exercise that was conducted last year, prior to the selection of Menlo. Separate transport will be needed to move people’s pets, whose cages didn’t fit on the buses that were designated for their owners. “We had to ship to more points than we would like,” says Markowski. “Things like that, we do pick up on.” In serving the private sector in an emergency, Menlo won’t have the luxury of priority access to choke points like bridges and tunnels. And it doesn’t always control outbound transportation for commercial customers. But the provider can draw on relationships with hundreds of independent carriers across North America, to supplement the Con-way fleet. “We have to ensure that our capacity list is deep enough,” Dagnese says. A Profile of Risk New York City-based Marsh & McLennan has a long history of consulting on risk management issues. Managing director Ann Grackin says the firm recommends that clients create a detailed risk profile that examines the end-to-end supply chain. “You are really understanding where the vulnerabilities are, based on product, product integrity, policies, people, technology gaps and process gaps,” she says. After that, companies need to apply the analysis to the various elements of a supply chain, including suppliers, plants, transportation, warehouses and customer-facing activities. Getting one’s hands on the necessary facts isn’t always easy. Companies need to know how many suppliers they have for the most important raw materials. “I know Fortune 10 companies who can’t get that information,” Insight’s Karrenbauer says. “It’s too hard—it’s buried.” The highest vulnerability, Grackin says, tends to center on people and the business processes related to monitoring them. On a day-to-day basis, such an oversight can lead to lost, damaged or pilfered goods. The situation grows worse in the event of a disaster, which can play havoc with multi-source supply chains that are subject to problems involving weather, security and political instability. To deal with those eventualities, Grackin says, companies need real-time event tracking. The technology allows for rapid response and the selection of alternative routes and suppliers. Part of the problem lies in the increasing complexity of global supply chains. Many companies have made themselves more vulnerable by jumping aboard the outsourcing bandwagon, says Rodysill. A reliance by U.S. business on manufacturing in China, for example, creates additional opportunities for failure, and exposes supply chains to more potential disasters. The situation is especially dire for those who are relative newcomers to outsourcing, and haven’t experienced a tsunami, earthquake, disease outbreak, or economic and political problems in the host country. True resiliency isn’t just about managing physical locations. It’s also about accessing the working capital needed to set up alternative supply chains. Grackin says companies must balance the need for diversifying their sourcing with the cost of redundant facilities and inventory. The formula is a delicate one that will vary from business to business. Those who rely on a single supplier might find it difficult to locate alternative sources during an emergency. Companies should have alternative logistics plans that they can put into play overnight, when the routing of product changes, Grackin says. At the same time, they should subscribe to 58 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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