Global Logistics and Supply Chain Strategies - March 2008 - (Page 58)

monitoring services that can warn of impending problems in a source country. When Plan B Fails Companies aren’t always free to make changes on the fly. Alternative suppliers won’t necessarily spring into action for customers that aren’t using them on a regular basis. To avoid that scenario, the buyer should consider reallocating a portion of its supply base before disaster strikes. For example, a firm that rushed to Asia in search of cheap production might move a portion of its manufacturing back to North America. It would be willing to eat the extra cost up front, in favor of having product close to market in case of a supply chain disruption. “resilience assessment.” The goal is to gauge the extent to which the business can bounce back from non-preventable disasters. Having identified potential threats by geography, industry, economics and competitive dynamics, managers should conduct a series of pilot exercises in which those scenarios play out. In addition, individuals from multiple disciplines within the organization should participate in intensive workshops that will prepare them for the worst. Karrenbauer says companies can use existing network-design technology to test their supply chains for resiliency. Two approaches are possible, he says. One is standard modeling based on the potential loss of raw materials, manufacturing facili- “I know Fortune 10 companies that can’t get information on their suppliers. It’s too hard—it’s buried.” — Jeff Karrenbauer of Insight Nevertheless, a number of supply chains today continue to rely on a single supplier for vital raw materials or components. That reality stems from efforts to apply classic “Lean” manufacturing concepts across the extended supply chain. “We have worshiped at the altar of cost minimization at all cost,” says Karrenbauer. “We have greatly restricted and even eliminated the possibility of a plan, because there’s no slack left in the system.” Certain mitigation measures, he says, should be carried out before disaster strikes. Companies might find it wise to give a portion of their business to secondary or even tertiary suppliers, even if they charge more than the favored vendor. Having those alternative sources on hand during an emergency can more than make up for the additional cost. “That’s especially critical if there’s a technology transfer involved,” Karrenbauer says. “If you wait for an emergency to occur, you’re still facing that burn-in time [for the new supplier to begin making product].” Rodysill says companies should go beyond a risk profile to conduct a broader ties, port capacity, and transportation options. A second involves the practice of customer segmentation—identifying the most important accounts, and ensuring that their needs are met first. “I want to have capacity in the network to take care of my critical customers,” Karrenbauer says. “They are my lifeblood.” The IBM Experience IBM has one of the most extensive—and potentially vulnerable—supply chains in the world. The company draws on its own experience when advising others on how to minimize risk. Karen Butner, global leader for supply chain management in IBM’s Institute for Business Value, says executives should have an ongoing conversation about outsourcing versus insourcing. One technique is to employ an “ABC” plan in cooperation with suppliers and logistics providers—“so that if ‘A’ is not available, you can very quickly switch to ‘B.’” IBM’s high-level risk analysis covers customers as well as suppliers. Often there are multiple layers of distribution, and each must be examined for its impact on cus- tomer service, Butner says. Then come the simulation exercises which can uncover weaknesses throughout the chain. Such analyses can be of value in ways unrelated to risk and disaster avoidance. At a time of increased environmental awareness, they can help companies to assess their total carbon footprint and devise suitable trade-offs. Risk, Butner says, is just one factor in a larger examination of opportunities for streamlining global supply chains. Sometimes the exercise can lead to changes in a supplier network. One client of IBM went to a hub-and-spoke operation that allowed for regional alternatives if the central distribution center were shut down by a disaster. Businesses are coming to realize that long-distance outsourcing entails certain costs that might not be obvious at the outset. “One vice president [of a consumer products company] said he was reopening a lot of distribution facilities across the world that he had closed three to five years ago,” Butner recalls. “One of the reasons was energy, fuel and transportation costs. The second was service.” Karrenbauer sees a “modestly increased awareness” by businesses of the need for comprehensive disaster planning. Some are motivated by the possibility of lawsuits that could emerge following an emergency, if executives are found to have been inadequately prepared. Even more chilling is the prospect of a terrorist attack on some part of the nation’s infrastructure. Based on conversations with military experts, Karrenbauer believes that occurrence is only a matter of time. “It’s mandatory that we have plans in place,” he says. Editor’s note: For more on risk management, see “Snake Eyes! The Failure to Manage Risk in Supply Chain Can Be Catastrophic,” GL&SCS, August 2007. To access this article online, visit The Digital Edition at www.SupplyChainBrain.com. Resource Links Accenture, www.accenture.com IBM Global Services, www-935.ibm.com/services/us/igs/ Insight, www.insight-mss.com Marsh & McLennan, www.mmc.com Menlo Worldwide Logistics, www.menloworldwide.com MIT Center for Transportation & Logistics, http://mit-ctl.mit.edu/index.pl?id=0 www.SupplyChainBrain.com GLOBAL LOGISTICS & SUPPLY CHAIN STRATEGIES 59 http://www.SupplyChainBrain.com http://www.accenture.com http://www-935.ibm.com/services/us/igs/ http://www.insight-mss.com http://www.mmc.com http://www.menloworldwide.com http://mit-ctl.mit.edu/index.pl?id=0 http://www.SupplyChainBrain.com

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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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