Do You Have a Supply Chain or a Spiderweb?

This question was recently asked by Zurich's "Risk Engineers" and I think it is a fascinating question.  The metaphor we are all familiar with, the "supply chain" connotes a nice set of interlocking rings, probably made of steel, and that are perfectly aligned.  It brings to mind a very planned and organized way to get from point "a" (raw materials) to point "b" (finished goods) to point "z" (The consumer).  We all know the problems recently experienced from hurricane Sandy however this study clearly indicates the issue is deeper and more broader than just a freak storm.

Reality is, unfortunately, many are spiderwebs.  Not made in any particular order, overlapping and easily disrupted with the swat of a hand.  Zurich believes 2013 is the year companies better take managing, or at least mapping, this web a bit more seriously.  A few key statistics:

• 73% of respondents to a survey in 2011 reported at least one supply disruption; 50% reported two. 
• 40% of those who experience extended disruptions eventually go out of business.
• The leading cause of disruptions is IT or telecommunications. 52% saw some or a high level of disruption from these issues. 
• One in five companies said they had one instance where they incurred at least $161M in damages

I had an opportunity many years ago to meet with the people of Zurich about this topic in New York City.  At that time it was an "interesting"topic but not much more.  Today, it is critical.  Terrorism, global warming, reliance on sophisticated telecommunications networks, "just in time" (i.e., lack of buffer stocks) and the web of globalization has not only made the likelihood of a disruption more probable but the consequences of it far more severe. 

Their solution is at least to start mapping out your supply chain through tier 2 and rate it based on likelihood of disruption, financial stability and physical stability.  From there I imagine you can create significant contingency plans to at least have a fighting chance at keeping your business running.  

A Good After Action Review (AAR) for Logistics Companies Post Sandy

A neat article in Reuters today titled "Transport, Logistics Weather Sandy Well Despite Glitches" calls out the great work the trucking and logistics industry is doing in Sandy.  Specifically, the good news is the industry learned from Katrina and has developed very good playbooks to deal with big storms and natural disasters:

"Freight transportation company triage playbooks have been evolving with a series of disasters, including Hurricane Katrina.

 By the time Sandy hit, trucking and logistics companies had topped off gas tanks, bought or rented back-up generators to power distribution and fueling centers, and shipped relief and manufacturing supplies to the Northeast that customers would need after the storm. During the storm and in the days after, these companies and East Coast railroads diverted shipments away from the hardest-hit areas and found alternative delivery options for customers"

This is good news as we know these disasters will not only increase with frequency but also with severity and the fact the industry is preparing for them is a great service to the US.

On Veterans day, we thank all the veterans who have served this Nation.  I would also say if companies are preparing to work in disaster stricken areas there is no better person to lead these efforts than a veteran.