Immunizing your supply chain network from terrorism

With the unfortunate rise of terrorism in the last couple of decades, it is imperative that companies incorporate immunizing their supply chain networks as part of their core risk mitigation strategies.

I have listed down some of these mitigation techniques below:

1. For starters, you must opt for transportation insurance. This will protect them from other disasters or shortfalls as well.
2. You must look to distribute the risk by avoiding total dependence on any one particular transport medium (railways, airways or waterways). In case any one of these mediums is disrupted, they can still rely on the other one.
3. You must maintain adequate buffer inventory. An optimized point must be found between just-in-time principle and the just-in-case principle. Use of predictive and prescriptive analytic techniques can help you achieve this.
4. You must shorten their supply chains in terms of distance and the number of parties involved. This will reduce the vulnerability of the network as the attackers will then have lesser points of attacks. Conversely, it also reduces the complexity and is easy for the company to manage the supply chain.
5. You must build a strategic alliance with your suppliers and logistics providers and not just a business relationship. This will ensure that if need be they prioritize your consignment and the entire model stays stable (at least for your company).
6. You must collaborate and educate your suppliers and logistics providers about the associated risks and the mitigation techniques so that the strategies are deployed across the entire network.
7. Lastly, you must also collaborate with your customers (to whom you are the suppliers) so that they understand risks of the supply chain. If collaboration doesn't work, then you must incorporate clauses in your agreements to avert dire consequences.

Reference: http://spendmatters.com/2010/11/01/terrorism-and-the-supply-chain-strategies-for-coping-with-a-form-of-supply-risk-we-cant-ignore/

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?

 

Source: http://www.nytimes.com/2011/05/13/business/global/13auto.html?pagewanted=all&_r=0

Primary Source: http://www.mckinsey.com/insights/operations/building_a_flexible_supply_chain_for_uncertain_times