By Stephen DeAngelis
Organizations are often counseled to prepare for the unexpected. Even better advice is to prepare for the expected. Hurricanes fall into the expected category. There is a reason meteorologists define a hurricane “season” — roughly from June through November. Seasons are annual events. They may be mild or severe, but they will take place. Alex Behrens reports, “DHL Resilience360 recently released Stormy Weather Ahead: A Global Outlook on the 2019 Season to compile information about the impacts that even small storms can have and discuss the short- and long-term implications of these systems on existing supply chains. And it offers ways to mitigate that risk. While Resilience360 predicts a slightly below average number of hurricanes will affect the U.S. this season, an above-average year is anticipated for East Asia that could affect production of consumer electronics sourced from China and Taiwan and more advanced technology products from Japan and nearby regions.”[1] Behrens adds, “Severe weather poses one of the greatest threats and the least predictable risks to global supply chains within our modern globalized economy. The summer hurricane season is a particularly problematic time because nearly half the planet, and a majority of the production capacity for many industries, are located in areas routinely struck by catastrophic weather — East Asia, the Northern Indian Ocean, and the Southeast and Gulf coasts of the United States.”
Disaster preparedness
Benjamin Franklin once declared, “By failing to prepare, you are preparing to fail.” In the supply chain field, disaster preparation should be a continuous process. Siva Prasanna observes, “Disaster Management [can be thought of as an] emergency management lifecycle.”[2] He adds, “[Disaster management] is not an easy task to be accomplished. It is a step-by-step and long process which includes identification of risk, preparedness for the disaster, resource allocation, emergency response, [and] disaster recovery.”[2] Analysts from Source One suggest companies prepare disaster management plans that account for both short- and long-term consequences of a natural disaster.[3]
Short-Term Disaster Preparedness. Source One analysts suggest the following short-term activities:
- Keep abreast of forecasts: “Both regional and national agencies provide forecasts round-the-clock. DHL encourages supply chain managers to develop systems that ensure they receive advanced warnings. With these, they’ll have plenty of time to engage relevant suppliers, assess potential risks, and rework operations as necessary.”
- Identify vulnerable suppliers: “When storms are approaching, businesses need to know which links in their supply chain are vulnerable. Attending to storm trajectories will help them prioritize their efforts and make strategic adjustments. Supply chain managers should also identify opportunities to leverage alternate routes and reschedule essential shipments.”
- Stock up: “A storm will invariably mean damage to roads and disruptions to rail lines. It’s essential that businesses optimize their inventory ahead of hurricanes to mitigate the effects of these factors. Pharmaceutical organizations should also consider shipping temperature-sensitive and perishable goods to alternative, safer locations.” When considering stocking up, remember to emphasize items critical in disaster recovery.
- Establish communication systems: “It’s entirely possible that a hurricane or tropical storm will lead to extended power outages. That’s why it’s so important to establish back-up channels for communicating with key suppliers and stakeholders. A CB radio, for example, will keep businesses connected in any weather. Don’t forget to charge devices ahead of time, stock up on batteries, and set up backup generators as necessary.”
Long-Term Disaster Preparedness. Source One analysts suggest the following long-term activities:
- Test plans ahead of time: “The best plan in the world won’t do you any good if your team isn’t prepared to carry it out. Before a natural disaster strikes, take time to ensure your plans are well-documented and that every member of your team is familiar with their role. This way, you’ll identify any gaps or weaknesses and address them before it’s too late.” Even if you’ve tested your plan, don’t been fooled into thinking things will go as planned. Dwight D. Eisenhower once observed, “In preparing for battle I have always found that plans are useless, but planning is indispensable.” Exercising plans helps decision makers hone their critical thinking skills so they are better fit to make decisions in ambiguous and deteriorating situations.
- Leverage mapping tools: “DHL advises organizations to make use of mapping and survey tools to boost visibility throughout their logistics networks. These can help businesses assess their partners’ preparedness and locate alternative routes, suppliers, and hubs.” Visualization is a powerful tool in emergency situations.
- Diversify you supplier network: Source One analysts cite the DHL report which states, “Companies can consider diversifying supplier, manufacturing, and distribution locations.” Source One analysts add, “Establishing these alternate locations will greatly reduce the chances of a production halt or other sweeping disruption.” Note they stress alternate locations rather alternate suppliers. Suppliers in the same location will most likely suffer from the same disaster consequences.
- Optimize supplier relationships: “Organizations that build strong, strategic partnerships with their logistics providers enjoy access to a dependable source of on-the-ground intelligence. These providers will leverage this intelligence before, during, and in the wake of natural disasters to minimize risk and disruption.”
Shefali Kapadia (@skapadiaDC) reminds companies not to forget one of their greatest disaster preparation resources: lessons learned. She writes, “Each hurricane provides a lesson for supply chains to better prepare for the next one. … In risk planning for hurricanes, it’s a question of when, not if.”[4] PwC analyst Lenora Zimmerman (@LDZimm) adds, “A company’s ability to adapt to potential risks is a reflection of its supply chain management sophistication. A mature supply chain operation will take a data driven approach to create visibility, truly understanding their vulnerabilities and creating capabilities and contingencies to be more resilient. Beyond resiliency, these organizations may outperform their peers. A recent PwC/MIT study revealed that organizations with more mature supply chain risk management programs excel operationally in contrast to their less mature counterparts. Most notably, the EBIT (earnings before interest and taxes) margin of more mature organizations is higher for those that make these supply chain investments.” In response to the increasing risk of extreme weather events and the growing impact on ever more global supply chains, organizations must confront the complexity of their supply chains now and open the aperture of visibility beyond their immediate vendors. Only when the company fully knows its supply chain and has invested in exposing its vulnerabilities can it adapt as needed to mitigate the impact of extreme weather events and maintain strength in the marketplace.”[5] Basically, all of the analysts cited above are asking the same question: Is your company prepared for this hurricane season?
Footnotes
[1] Alex Behrens, “2019’s global hurricane season to be active, DHL Resilience360 reports about supply chain risks and safeguards,” Spend Matters, 24 June 2019.
[2] Siva Prasanna, “Dealing with Natural Disasters through Big Data and IoT,” Techiexpert, 2 June 2019.
[3] Staff, “Preparing Supply Chains For Hurricane Season 2019,” The Strategic Sourcerer, 5 June 2019.
[4] Shefali Kapadia, “Hurricane season begins: Lessons in supply chain disaster preparedness,” Supply Chain Dive, 3 June 2019.
[5] Lenora Zimmerman, “Supply Chain Risk: How prepared is your supply chain for the inevitable disruption caused by extreme weather?” PwC Bits & Bytes, 2017.
