How a Disaster on the Opposite Side of the Globe Can Impact Your Business
By: Jim Satterfield, Firestorm CEO/President/Co-Founder, and Candace Kaiser, Firestorm Content Marketing Manager
The world experienced two very different earthquakes this week. Following Mexico’s goal against Germany in a World Cup match, seismic sensors in Mexico City reported a minor earthquake, thought to be caused by fans simultaneously jumping in celebration. Although we are excited for Mexico and their historic win, that’s not the type of earthquake businesses need to plan for.
On June 18th at 8 a.m. local time, Osaka, Japan was struck with a destructive earthquake that killed three and injured hundreds more. The quake registered as a 6.1 magnitude on the Japanese scale, and 5.3 on the U.S. Geological Survey.
The earthquake occurred during morning rush hour, causing travel disruptions for trains and airports. According to the Japan Times, 170,000 homes were left without power and gas supplies to 100,000 homes were stopped. Although businesses outside of Japan may not have physically felt the tremble of Monday’s earthquake, the disruptions were felt worldwide.
How an Earthquake in Japan Impacts Your Organization
Supplier failure and supplier’s supplier failure is one of the leading causes for business disruption. While most organizations understand that the supply chain is strategic to the ongoing success of the company, few, if any, have visibility into the network that supports their supply needs. A disaster may not impact an organization’s primary supplier; however, secondary and tertiary supplier disruption will directly interrupt business functions.
We have found confusion and denial within organizations regarding the risks that are inherent within today’s complex supply networks. Today’s perception of the risks we are running do not match the experience of most companies. Additionally, training programs in risk identification and how to mitigate those risks simply are few and limited.
Examples of the risks that companies are confronting could not have been more plainly demonstrated than during the Japan earthquake and consequential tsunami in 2011. We saw similar, concentrated disruption resulting from the Osaka earthquake this week.
Disruptions impacted multiple industries from electronics to automotive; business buyers may have knowingly or unknowingly single-sourced product in the most active earthquake zone in the world. Most procurement organizations have buyers making decisions driving cost savings without regard to the potential risks being assumed.
The inability to control critical supply chain is one of the five common failures in a disaster or crisis. What can you do today that will mitigate failures in the future?
Every business should periodically, formally assess their supply chain risks as part of a business impact analysis. Even if you have regularly conducted periodic assessments (and especially important if you have not), it is imperative that you conduct a new supply chain formal risk assessment.
- What are your unique risks?
- Do you have a clear understanding of how such a disruption would impact your operations?
- Have you given thought to your plan(s) for supply chain disruption consequence management?
The keys for increasing resilience of your supply chain and managing a supply chain disruption crisis are to Predict.Plan.Perform.®
It is important to ensure your supply chain risk assessment is on track.
- What steps can you take now to mitigate or reduce these risks?
- Can you take steps now to add resilience to your supply chain(s)?
- Can you get everyone in your business “on deck” in this assessment and planning effort?
- Do you have a supply chain disruption crisis management process in place?
- What is your plan?
- What alternative backups do you have prepared to utilize or adjustments to make in your business processes if there were a major supply chain hiccup?
- Have you conducted tabletop exercises with suppliers to identify their capabilities and vulnerabilities during a disaster?
Plan today so your organization is not identifying and handling weaknesses as the crisis unfolds.