Post Sandy: Predicting Supply Chain Disaster

The question before the supply chain crowd these days, post Hurricane Sandy, is: Are supply chain disasters predictable?

The easy answer is yes, but with qualifications, and then no. Every supply chain manager worth his or her salt knows about contingency and backup planning especially with long, complex supply chains, because ‘stuff happens.’

A recent piece by Tom Linton and Thomas Choi on the HBR Blog Network makes that point that “if we can forecast a super-storm, we should be able to predict events that could disrupt supply chains and mitigate their impact.”

To make the unpredictable more predictable, they state all the parties with a stake in potential disruptions, including supply chain members, insurers, governments and markets, “should proactively develop a responsiveness system that would be able to predict different types and levels of supply-chain disasters. Depending on the type and level, different response plans would get activated.”

Of course this is much easier said than done. It takes an uncommon level of collaboration, cohesiveness, resiliency, transparency, communication and sophistication all along the supply chain to make effective contingency plan work. There’s a reason it’s called a chain – if one link is weak or unattended, then the entire system is in peril. There’s no software or app that covers all of those elements on a continuous basis.

Even the best contingency teams would have had trouble coping with an event such as the March 2011 Japan earthquake, tsunami and nuclear reactor disaster. And they did – auto and electronics supply chains were disrupted for many months.

The HBR post notes that in developing an effective disaster response system there are three things to be aware of:

- Supply-chain collaboration rapidly gives way to competition in post-disaster recovery. “During catastrophes like the tsunami that devastated Japan and the floods in Thailand,” the HBR article says, “chief procurement officers were in constant communication on the day of the crisis but went silent in the days and weeks that followed as they focused on serving the interests of their own stakeholders and scrambled to move more of their products and restore their services.”

- The resilience of supply chains should be continuously improved. They recommend that insurers, transportation and manufacturing companies and local governments “form a coalition to coordinate efforts to improve the resilience and responsiveness of supply chains.”

- Government incentives are necessary. “Incentives from Washington might help speed up the process of developing the kind of responsiveness system that we're advocating. The governments of other countries should do the same.”

Those are laudable goals but their real-world implementation in a free-market trading system is unlikely. If those sound like high-tone words from academics it’s because they are. Getting to real collaboration within a supply chain is difficult enough, but a collaborative coalition among competing supply chains, with “government incentives” to develop a sort of one-world uniform responsiveness system? Good luck on that, as well as predicting the magnitude of supply chain disruptions.

[Image: chain by pratanti via Flickr cc]