For many supply chain professionals in the United States, history is divided into two eras: Before Katrina and After Katrina.
The amount of flood-related damage and disruption that occurred after the powerful hurricane made landfall in Louisiana on August 29, 2005, shocked the nation. Existing emergency response plans were no match for Katrina; nobody had prepared for an event that not only brought an entire city to its knees, but also resulted in the unprecedented migration of hundreds of thousands of homeless citizens to nearby states. It's probably safe to say that few people had imagined that a natural disaster of this magnitude could occur in the United States.
We know better now. Since then, we have witnessed the shocking destructive power of a tsunami in Japan, terrifying earthquakes in Nepal and China, and floods in Thailand. Those are just a few of the most catastrophic examples; there have been many other disasters that were smaller in scope but were deadly and destructive nonetheless. A factory or two under several feet of water or raw materials that become inaccessible following an earthquake can cause disruptions that ripple from one end of a supply chain to the other.
One positive outcome of the experiences with Katrina and other disasters was the recognition that companies needed to take supply chain risk more seriously. That meant developing better forecasting, better analytics, and better contingency planning. More companies began to diversify their manufacturing locations and supplier base, and achieving end-to-end visibility—the Holy Grail of supply chain technology—became an even higher priority than in the past.
Technology-enabled visibility from sourcing and production through delivery will play an increasingly important role in managing supply chain risk, said Gary Barraco, director of product marketing for the software firm Amber Road, in a recent conversation. A lot can happen between order and delivery, of course, and "knowing what's happening upstream is key to managing downstream events," he said. Many companies take the traditional path, with backup plans for specific segments of their supply chains—disruptions at manufacturing plants, or in their transportation and distribution networks, for example. But a more useful approach, Barraco contends, is to think about supply chain risk in a holistic way that incorporates end-to-end visibility.
Here's an example: Suppose a natural disaster shuts down a company's distribution centers in a particular region. Knowing what products are scheduled for production, and when they are scheduled to ship from the factory and be delivered to the now-disabled DCs will allow the company to delay those orders and either reschedule production or hold the finished goods for rerouting to a new destination. To be most effective in this kind of situation, Barraco said, you need not only visibility of what's happening upstream and down, but also collaborative communication between all parties, including raw material suppliers. Once the problem has been resolved, those same capabilities will help the various nodes in a supply chain collaborate to open the pipeline back up again.
E-mail has its place in an emergency, and sometimes phone calls are the best way to compare notes and make immediate decisions. But in today's multitiered, global supply chains, dealing with situations in isolation is itself risky. Instead, you also need to understand how risk could play out from one end of the supply chain to another, and to have the visibility, data, and communication capabilities in place to respond to the threat to the enterprise, not just to individual supply chain nodes.
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