Sunday, September 8, 2013
A Different Take on Supply Chain "War Rooms": GM's Reaction to Disaster in Japan
"Building a Flexible Supply Chain for Uncertain Times" introduced the "bullwhip effect" and several tactics companies can use to confront it. One of these tactics was the idea of a "war room", where diverse teams meet either daily or weekly to assess data on purchasing, productions, orders, and deliveries. This information is used to make rapid decisions on inventory cuts, changing product suppliers, and when to discount products. This process seems routine; however, many companies initiated war rooms as a reactionary process.
One such company is General Motors, who after the earthquake and tsunami in Japan in 2011, assembled a war room team to work 24/7. The team was initiated four days after the disaster, when GM found that several critical parts were unaccounted for in their supply chain. The team was split into two sub-groups: one for the supply chain component and one for engineers. GM adopted a system of mapping and color coding suppliers: those who were completely out of commission were colored red and those with a lack of reliable power or water resources were coded yellow. GM's intent was to change these colors to green.
Another tactic used was called "white space", where the entire supply chain was drawn out based on the products availability and timeliness. Green bars indicated products that were available for production, while white spaces dictated the amount of time until needed parts would be available.
Considering that information from suppliers on their plant's status was often lacking, GM sent forty employees to Japan to firsthand assess the situation.
In the end, only one U.S. plant was temporarily closed due to the disaster. It marked the first time that this had ever happened in the auto manufacturing industry. However, this was actually a success, as 118 parts were originally labeled "problematic" in GM's supply chain.
I found the lengths that GM went to ensure that its supply chain was minimally effected to be impressive. This made me wonder if Fortune 500 companies should do more with their disaster response? For instance, should companies that can afford to do so, help suppliers rebuild, if it will ensure a lack of disruption in the supply chain and be returned in a better price per good?