‘Natural disaster’ is defined as being “a major adverse event resulting from natural processes of, or effecting, the Earth” (Wikipedia). One thing is clear – natural disasters are nearly impossible to predict and are typically devastating on so many levels. The most recent example is hurricane Sandy which caused significant destruction across the U.S. northern seaboard. As supply chains continue to expand with globalization trends, natural disasters such as hurricane Sandy can have crippling effects on local as well as global businesses. The economic impact Sandy will have is yet to be seen, but a recent example of the paralyzing effects a natural disaster can have on global supply chains is the earthquake and ensuing tsunami in Japan in 2011. Toyota, for example, was forced to shut all of its US factories due to parts shortages. As a result, the company’s status of number one car maker was put in jeopardy.
Today’s supply chains stretch across many borders making the avoidance of natural disasters difficult. Therefore it would be wise for supply chain managers to plan ahead and create an emergency-ready supply chain. This is of course easier said than done as preparations for the unexpected have to be made.
The following are some tips on how supply chain managers can prepare for natural disasters:
1. Create a strong demand forecasting basis. Maintaining a well-oiled supply chain “pre-disaster” could reduce the negative impacts a disaster may have on a supply chain.
2. Keep the supply chain flexible. This includes the diversification of suppliers as well as transportation methods. This helps ensure a quicker response to resulting fluctuations in demand in the case of a natural disaster.
3. Stay alert. It is important to be aware of weather forecasts in disaster-prone regions. In the case of hurricane Sandy and hurricanes in general, the path the hurricane travels can often be fairly accurately predicted a few days in advance. This allows for adjustments in deliveries to be made, for example redirecting a shipment of goods to a different port.
4. Have a plan: Contingency planning is vital to creating a stable supply chain, especially in disaster-prone regions. Having a plan can perhaps include having an emergency team of suppliers in the network, ready to respond in the case of a natural disaster. Defining roles in the event of a disaster, both internally and externally, can help create an emergency-ready supply chain.
The impact an isolated natural disaster can have on the global economy is growing due to the international nature of supply chains. This amplifies the importance of maintaining a flexible, emergency-ready supply chain.
Feel free to include your ideas on how to create an emergency-ready supply chain in the comment box below.