The last 12 months has been shocking for extreme natural disasters. We’ve seen extreme flooding and monsoons in Asia leaving over a thousand dead and many more affected. We’ve seen an earthquake in Mexico City in September which killed more than 200 people. There have been extreme wildfires in Europe and North America and, of course, hurricanes Irma and Harvey. For supply chains, these extreme events come as a reminder that you need to have a supply chain disaster-recovery plan ready to swing in to action should you need it.
A supply chain recovery plan is about being prepared so that even though extreme events are, generally, rare – you can weather them if they do happen. Sad and tragic that these events are for the local communities, in the globalised world they also send disruption through supply chains worldwide.
Puerto Rico Critical Drug Case Study
We’re not just talking about supply chain problems leaving consumers waiting on a desirable. Perhaps the most alarming case study from the extreme events of this past year is that where 80 plants in Puerto Rico were destroyed in hurricane Maria earlier in the year.
These plants made drugs for treating diseases such as cancer, heart disease and diabetes as well as various medical devices. As stated in the New York Times, Scott Gottlieb, the commissioner for the American Food and Drug Administration explained: “Some of these products are critical to Americans. A loss of access could have significant public health consequences.” Gottlieb has also stated that: “We have a list of about 40 drugs that we’re very concerned about.”
The article goes on to explain that 13 of these medications are supplied from a sole-source – a monumental problem when there is unexpected disruption to the supply chain like this.
You need to be prepared for extreme events.
How to Prepare for Extreme Events
There are a range of different factors in your supply chain that you need to consider when attempting to prepare for extreme events, natural disasters, and anything ‘unexpected’. Fundamentally, all require building resilience in to your supply chain. Brought together they can help a supply chain to weather the storm.
You need to take a two-pronged approach to looking at your facilities. Firstly, where are they and how at risk are they. You need to carefully consider the location and how prone they are to natural or political disasters. Specifically, you need to take quite a cautious approach here. Flooding looks set to worsen, for example. Secondly, you need to consider the facilities you already have and rely on, and establish how well they would fare in an emergency, and if you have a back-up.
Here, you may need to consider what changes you can make to your existing facilities. Can you raise the buildings? Can you create defensive barriers? It can be difficult to consider spending in this way in advance, but if you want a resilient supply chain then it is crucial.
Then you need to look beyond the facilities themselves to the local areas. You don’t exist in a vacuum and will be depending on your neighbours and their safety plans, and other local links in the chain. For example, if you use the local distribution centre – how would your supply chain be affected if that went out of action? Additionally, you need to think about local infrastructure as well as state services and how they would react.
Standard Operating Procedures
However, even with careful facilities planning and management you need to have well planned standard operating procedures which can swing in to action in an emergency. These should be both specific and comprehensive, and exist for each and every site within the supply chain. The specifics of these should include everything from the rota and contact details of workers, to tactical plans as to how to act in certain emergencies. Alongside this should be checklists and all relevant information. Once this is formulated, it should be reviewed and updated regularly.
One notable inclusion should be an assistance plan detailing how you will help employees affected by an extreme event. You won’t have employees rallying around to get the business back running if they are concerned for the welfare of their family and loved ones. If you help your employees get through an extreme event, they will help you too.
The Knock-On Effects
Next you need to think what will the effects of an extreme event in one area of the chain be on other parts of the chain? The best plans won’t stop with only your individual links in the chain. It will look above and below and see who else will be affected and work out contingency plans for them too. This requires intricate visibility to see exactly what goes on, not only with your own suppliers, but with the suppliers of those suppliers. None act in isolation.
In our experience, not many businesses look at disaster and extreme event planning on this scale. They often don’t even know who those suppliers are. You cannot wait until an extreme event has happened before you try and track down whether it affects you – you should know. If you don’t, the result is delays and lost opportunity for plugging any gaps that may occur.
Admittedly, this can be incredibly difficult. Therefore, we always suggest you look at the key components of your key products. Anything that is unique or created just for you needs a back-up plan. You need to have utmost visibility of those core components. This can help to minimise the impact of an extreme event if it’s being predicted, such as with a hurricane. You could, for example, get inventory away from the likely impact, if you have enough warning.
Never Rest on Your Laurels
Unfortunately, a disaster plan never shows its true worth until a disaster. It can seem like a hassle and an unnecessary thing to spend time and resources on. However, with such complex globalised supply chains it is essential to ensure your business isn’t the one hugely damaged whilst others fare the storm better.