Supply Network Snow Storm – Understand the Risks
John P. Campi advises businesses to avoid being “snowed” by the supply network! Beware of unintended consequences.
So it is 2014 and the great city of Atlanta is experiencing the occasional cold weather that can happen in the Deep South from time to time. Since the South rarely encounters a snow storm, the major municipalities are not generally equipped with either snow plows or salt. Such an investment is hardly logical given the infrequent nature of severe winter weather in this part of the continental United States. Furthermore, the occasional ice storm, debilitating while it lasts, is generally a short-lived experience. People in the metro area are used to having an advisory warning issued the day before an event, in which case the city simply shuts down ahead of time to avoid any unnecessary travel issues.
Think of the metro Atlanta area as a supply chain. You have daily logistics of the movement of goods and people throughout the infrastructure providing the “materials” for the execution of commerce. The “network load” while heavy at times, flows reasonably well providing “on-time” delivery of the resources where needed, while also providing a steady stream of cross-country, long haul logistical activity (three major interstate highways intersect in the middle of downtown Atlanta).
Now consider the snow (reportedly only 2 inches) this past week as a short lived natural disaster. Mother Nature delivered a surprise to the network. A daylight snowfall, that was originally anticipated to be delivered fifty miles south of the city, started at approximately 11 am and continued until nearly 7 in the evening. The business community and government offices of Atlanta made the tough decision to terminate work and let people out to make it home before things got out of hand.
Unfortunately, most businesses and schools let everyone go by 2 PM when it became apparent that the snow was not stopping. A city of over 5 million people, whose rush hour is challenging on a good day, dumped everyone on the streets at about the same time. This while the temperature was dropping and the new snow, which would initially melt from the heat of the traffic, quickly froze providing one of the largest skating rinks in the world. The result made national news – Atlanta had come to a screeching stop with thousands of stranded motorist spending hours in their cars trying to get home.
What does this have to do with the supply network for your business? Too often, we take for granted that our supply network will continue to support our needs regardless of the various disruptions that can and will occur. We need only look at some of the recent supply failures to see example after example of “snow storms” impacting what we thought to be a reliable network of suppliers. While the tsunami in Japan of a few years ago was a wake-up call to many manufacturers, we still find organizations blind to the inherent risks within their network of suppliers.
Network dependencies have emerged as a major threat to continuity of supply and the sustainability of any business organization. While most companies are engaged with their primary suppliers, they have little to no knowledge regarding the lower tiers of supplier network upon which their primary suppliers depend.
Furthermore, while most organizations consider their supply chain strategic, they have virtually no understanding of the risks that are inherent within these supply networks. A national survey taken approximately two years ago confirmed the disconnect between perception of the strategic nature of supply chains and the lack of understanding of the risks inherent in the supply networks being utilized by most manufacturing organizations.
Globalization, while providing many opportunities for expansion of business and reduced cost by sourcing within low-cost countries, has also escalated supply network risk at an unparalleled rate. Only through a detailed, supply network architecture review can an appropriate assessment be made of risk and mitigation strategies developed and executed.
Most companies still leave the sourcing decision in the hands of the procurement organization and, in many cases, it’s a buyer who is making the decision as to with whom to place the order. Without a comprehensive understanding of the company strategy and, likewise, an understanding of the supplier’s supply network risk, it is inevitable that your business will experience unintended consequences in the sustainability of supply for your business.