Supply Chain Managing the Risks

Supply Chain

Managing the Risks of Global Supply Chain Operations

In the "Global Supply Chains" chapter of his book, Bowersox gives a very comprehensive introduction to the benefits, goals, and major challenges of global supply chain management. Helferich and Cook, in their White Paper on Securing Supply Chains, focus specifically on the planning and execution of Disaster Management Plans to protect domestic supply chains. It is difficult to directly compare the two approaches because Bowersox focuses on concepts and considerations, while Helferich focuses on detailed planning and execution.

The Helferich paper provides concrete guidelines and processes through which the broad considerations in the Bowersox paper can be resolved. The Helferich plans are particularly useful because they discourage reliance on public bodies for disaster relief and provide contingencies in the absence of public assistance. This is important for global supply chain managers because they often have operations in underdeveloped or underserviced countries where public services are not available as they are in the United States.

Securing Supply Chain Management

Below, I will detail the most valuable elements of Helferich's Disaster Management Plan to global supply chains. According to Helferich and Cook, systematic preparation must be taken to protect supply chains because supply chains are: (1) Vulnerable to destruction by disaster; (2) Overly complex and reliant on operational support from numerous firms; (3) Reliant on highly flexible, quick response operations to meet customer requirements. Thus, the integrity of the whole supply chain operation can be jeopardized by any disruption of electrical power, communications/transportation flow, or destruction of operating capabilities.

The 5 Elements of Disaster Preparedness

1. Planning -- Preparing enterprise and supply chain for unforeseen event-disaster. (1) Establish Planning Team; (2) Analyze Capabilities and Hazards; (3) Develop the Plan; (4) Implement the Plan

2. Mitigation -- Defining actions to reduce impact of disaster. (1) Define Mitigation Opportunities; (2) Develop Mitigation Plan; (3) Initiate Development Plan; (4) Continuous Improvement Program

3. Detection -- Identify latent risks before they cause real damage. (1) Develop Protection Plan; (2) Acknowledge Warnings; (3) Evaluate and Act on Observations; (4) Decide on Need for Further Action; (5) Continuous Improvement

4. Response -- Prepare for actions to be taken by employees, general community, emergency services, and emergency medics. (1) Implement Response Plan; (2) Evaluate Direction and Control; (3) Evaluate Communications; (4) Evaluate Life Safety; Evaluate Property Protection; (6) Evaluate Public Services; (7) Evaluate Community Outreach

5. Recovery -- Executing Strategy to Resume Normal Business and Community Operations. (1) Review and Implement Recovery Plans; (2) Ensure Continuity of Management; (3) Maintain Employee Support; (4) Resume Operations

Key Areas for Improvement

Collaboration -- Businesses in a supply chain must collaborate with government and relief agencies (training, sharing resources) in order to be adequately prepared for a major disaster.

Develop Disaster Classification Profile -- Intentional, Accidental, Natural

Asses Disaster Impact on Supply Chain - Severity, Duration, Geographical Scope, Detectability, Frequency.

Assess Impact of Disaster on Supply Chain Resources -- Human, Product, Private Infrastructure, Public Infrastructure, Information, Financial.

Insurance Expensive -- Corporations must stop relying on insurance companies to mitigate losses as insurance will rise sharply, especially in Southeast Asia.

Business Continuity Lessons -- (1) Fiduciary Responsibility to stockholders to protect business, people, property and information; (2) Responsibility for executives is not only crisis management but also recovery; (17) Need to create audit-trail defining what is happening in real time starting with earliest detection through recovery; (18) Plan should include capability to process at new locations and include alternative equipment and systems; (22) Need robust systems, processes, and infrastructure that can survive period of disruption; (32) Good plan should have business operating at new facility within 2-3 weeks; (34) Recovery plan should be test once a year.

Global Supply Chain Issues

The increasing focus on core competencies and efficiency has led many companies to outsource non-core operations to distant specialists, saving production costs and cutting organizational waste. The integrity of a global supply chain is absolutely crucial to keep these relationships profitable. However, the benefits of global supply chain operations extend far beyond cost-savings. They also serve to: (1) Increase Revenue; (2) Achieve Economies of Scale; (3) Reduce Direct Cost; (4) Advance Technology; (5) Reduce firm's global tax liability; (6) Reduce market access uncertainty; (7) Enhance sustainability.

Challenges/Vulnerabilities

1. More demanding logistics operating environments

a. Language

b. Unique national standards

c. Sheer amount of documentation

d. High incidence of countertrade and duty drawback

2. Security considerations

3. More complex total cost analyses

4. Transportation considerations

5. Import constraints

Global logistics must support operations in a variety of different national, political, and economic settings while also dealing with increased uncertainty associated with the distance, demand, diversity, and documentation of international commerce. A manger must also consider the relative maturity or stage of global trade: (1) Import/Export; (2) International with Local Presence; (3) Globally Integrated Enterprise. Each stage possesses unique product, marketing, supply chain, management, information technology, and human resource strategies.

Analysis

Helferich's principles of supply chain Disaster Management Preparation are useful for non-disaster supply chain management as well. The unpredictability of far-flung GSC operations is not unlike the unpredictability of disasters. GSC managers should strive to be as thorough in their preparation and try to learn from the mistakes SC managers have made in preparing for disasters.