June 06, 2022 / Blog

Planning for Weak Links in the Supply Chain

Chris Duffy

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Planning for Weak Links in the Supply Chain

Rule of thumb: Things are never as good as they are when they’re going well, and never so bad as when they’re going poorly. Except somehow the bad times are worse, and the good times seem to have the half-life of a Paris fashion trend.

The challenges of the past two-plus years definitely proved that things can go from good to awful very quickly. A perfect storm of events toppled domino after domino in the wake of the COVID-19 pandemic (which, please note, isn’t yet over). The just-in-time supply chain has become hold-your-breath and cross-your-fingers. Supermarket shelves were bereft of the full assortment of goods, toilet paper shortages were again predicted, car and computer production slowed awaiting delivery of semiconductors (FORD Stops orders for 2022 Electric Mustangs in April), as did smartphone deliveries. In China, shortages of imported coal forced streetlights to be turned off, and rationing led to reduced water and turned-off elevators. In Australia, shortages of timber and steel are hampering the construction industry just as home prices are driving demand.

Those not previously aware of how interconnected the world economy is, are now painfully, and personally aware. We know our immediate vendor — whether it’s a supermarket, an auto repair shop, or a power company — but we haven’t necessarily considered the full scope of the supply chain: Where that semiconductor is manufactured, where it’s shipped to be assembled, and where it’s warehoused prior to sale.

Supply chains exist because they’re efficient. Labor is more cost-effective in some markets. Operating costs are lower in some markets. The comparative advantages we learned about in Econ 1 — whether it’s timber, rare-earth metals, or fossil fuels — become most relevant when goods can move seamlessly from Location A to Location B.

The pandemic and the subsequent Great Resignation may be the apparent reason for the supply chain problem that’s currently affecting businesses here and abroad, but they’re not the only reason such a problem can affect your enterprise today or in the future. Reasons for disruptions in a supply chain — yours or the world’s — include natural disaster, political changes, terror, cyber-attacks, the war in Ukraine, and those black-swan circumstances you just can’t foresee.

Let me be the first to point out that there’s a silver lining to the problems the world is facing now. Everyone has a clear example of the value of business continuity and disaster recovery (BC/DR) and a powerful incentive to apply it. Every day provides us with a lesson in addressing a new challenge and gives us the ability and flexibility to war-game solutions.

So let’s consider the options.

Working on the Supply Chain, Gang

One thing to consider is where your pain point on costs might be — or might need to be reset to. Just-in-time inventory management and logistics requires that there’s a way to move your supplies from Point A to Point B either without interruption or with a solid backup plan in place. Everyone involved in BC/DR has been re-examining the ability of those transportation modes to serve under circumstances not before thought of or whose strengths were previously overestimated. BC officers will be reassessing the factors they considered and the weights they applied to them. Accepting that logistics should be more expensive will have to be embraced, whether that means relying on alternative carriers that charge more or warehousing more materials to prevent rapid out-of-stock conditions. According to entrepreneur and strategic advisor Deepak Agarwal, low-cost methods don’t prevent disruption. You can picture the reasons why, from vendors who will attend to better-paying customers first to those strapped themselves because they’re operating on razor-thin margins. That also requires examining the ability of THEIR vendors to deliver to ensure your needs are met. Paying for storage may add to costs, but it will ensure you can manufacture and deliver what your customers need when others cannot.

A good BC/DR plan must examine the ability of your vendors to deliver while meeting your needs. A platform like BC in the Cloud, for instance, allows business continuity planners to enumerate potential threats to sustained operation and then organize the thinking that will lead to successfully overcome those threats should they occur.

Similarly, your vendors may have planned poorly for a disaster. The winters of 2013 and 2014 were harsh and icy in the Eastern United States. This caused a transportation problem on the west coast because trucking companies leased their equipment, instead of owning it. A chassis needed on time on the west coast was still out east, unable to be returned to its leasing company. Companies that needed to ship from Southern California to Arizona, which one would think wouldn’t be affected, were.

Now is also the time to examine how governments have responded to emergencies and expect them to behave the same — or worse. FEMA may wind up competing with you for scarce labor and supplies in the wake of a disaster. It famously pays drivers much higher rates during hurricane relief to make sure it can deliver quickly (so it applies the higher-cost option discussed in the previous paragraph). However, history has shown that those drivers have waited on the clock at ports for supplies to come in when they could have been productively moving local cargos. The overall effect was diminished ability for numerous businesses to be active faster after disaster. What’s your plan if the government absorbs the labor force you need, the equipment you need, or the materials you need to get back underway? Similarly, are there obscure laws that may inhibit your ability to recover after a disruptive event? More problematic, do any of the governments have a propensity to create ad hoc knee-jerk solutions that are more impediment than aid? What will you do when that happens? Whatever it is, enter it into your BC software and take the time between yourself, your management, and your fellow managers to identify the solutions and train for them.

Don’t Count Your Black Swans Before They’re Hatched

The very definition of a black swan as defined in the 2007 Nassim Nicholas Taleb book— that it’s improbable — means that you can probably do away with planning for such an event. The very improbability of such events means that the time and resources you would spend to prepare for them would be ill-spent. Even more to the point is that, even if such an event happens, it’s unlikely you’ll have any competitive advantage or disadvantage. If the sun goes nova next Tuesday, we’ll all have bigger problems than keeping hospitals staffed because there won’t be any hospitals (or Planet Earth).

As a result, you need not adjust your processes for the unlikely events. Likely events — deadly storms, earthquakes, civil insurrection — are the ones to worry about and plan for.

Making Your Supply Chain Numbers Add Up

As you’re re-examining your enterprise’s supply chain, you’ll want to rely on the best data you can gather. You should have this information in your records. If you don’t, you need to gather it expeditiously. This may require looking at past purchase and receiving information, or it may require contacting vendors. This may prove effective for both of you; the vendor will know you’re planning for contingencies they may not have planned for and may use that as a spark to begin their own examination. It may also strengthen your relationship, as the vendor realizes that you are counting on them in the future.

BC in the Cloud allows you to store and access this data so that you can analyze them, plot alternatives, and train the organization on responses. You’ll need to attend to collecting reliable data in order for it to be actionable; no “Sam in the loading dock thinks” numbers should find their way into your data table.

Your plan for supply chain resilience should be able to withstand changes in real time. If you’ve written a good enough plan, a port labor action or a highway shutdown should prompt a response that you’ve already simulated and enable you to move on and around the problem with the least interruption. Define the signals that get your attention and alert you that action might be necessary, whether it’s a low-pressure weather front in Kansas or a story about terrorism in a key foreign country. All of these can be entered into BC in the Cloud. Don’t, however, get lost in the nanodetails. Prioritize the potential problems by likelihood and degree of probable severity. Doing so will serve as guardrails for your planning, exercises, and training, ensuring that you’ve addressed the most important things. Leave those black swans be.

Just as you want to enlist the support of your suppliers in this endeavor, be sure to ensure that your in-house team is on board. When everyone knows on whom to rely and what their roles and likely contributions are, coordination is most optimal. Identify the key personnel and highlight them and their contact information in your plan — yes, BC in the Cloud will do that, assisted by Sendigo, the mass notification solution its integrated with. This will make for the smoothest possible response when needed.

Resilience Above All

While it’s tempting to try to control everything, then find yourself drowning in the details, triage is no excuse for ignoring every possible input. The planning system you use will help you qualify your decisions once you’ve learned as much as you can. BC in the Cloud ships as a turnkey solution that identifies the most common supply chain concerns you’ll have, but it also enables you to add any that are unique to your business or industry. Are those issues universal across your many locations and types of facility, or do individual facilities or groups of facilities present their own unique problems (for instance, because they’re on an island, or in a country with a poor infrastructure)? BC in the Cloud lets you mark and score all of those options and make every needed revision as it’s recognized anywhere in the organization. The end result is you’ll be ready for the next supply chain disruption, and, if you’ve done your work well, more ready than your competitors.

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