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Saving Your Supply Chain

Mon, 02/21/2011 - 6:06am
Tony Schmitz

In April of 2010, the eruption of Iceland’s Eyjafjallajokull volcano began what was to be a two-month long eruption, ejecting 250 million cubic meters of fragmented material into the air. The ensuing cloud of ash stalled air traffic in Europe for days on end, leaving travelers stranded and global supply chains interrupted like never before. Deliveries were stalled, sporting events were cancelled, and the economies of every region suffered.  

In Europe, sectors that depend on air freight were affected the most deeply. Shipping companies cancelled hundreds of flights and were forced to reroute packages through non-European destinations before relying on road transportation for the final stages of delivery. Deliveries of flowers, foods, electronic and IT hardware components, and pharmaceuticals were halted, and the ensuring shortages affected many other industries.  
 
In Kenya, where hothouse flowers account for 20 percent of the country’s exports, thousands of flowers were left to rot in warehouses because they could not be moved. An estimated $3.8 million was lost each day that the disruption continued.  Automotive manufacturers in Japan, clothing factories in China, and electronics distributors in South Korea all suffered significant losses as well.
 
Although many of these setbacks were unavoidable, the way in which organizations reacted to the volcano’s impact revealed much about how well they had prepared for emergencies. Many organizations had work-around solutions in place and acted quickly to minimize the losses incurred by the volcano. Other businesses stalled because they could not reach key employees or effectively communicate their needs. 
 

Maximizing the Modern Supply Chain

The modern supply chain has seen a great number of advancements that have increased profits and streamlined operations for countless organizations, including single-sourcing, offshore purchasing, outsourcing, just-in-time delivery, lean manufacturing, and the centralization of distribution. However, the modern supply chain is highly susceptible to the pitfalls of new technologies and methods of transportation. A small server failure can wipe out an entire day of business, while – as we saw in 2010 – a single volcanic eruption or unexpected snowstorm can stall operations around the globe for days or even weeks.
 
According to the Business Continuity Institute, over 70 percent of organizations experienced at least one supply chain disruption in 2010, and most of them cited weather as the main cause of disruption. Unplanned IT and communication outages were the second most likely cause of disruption. The highest losses were generally incurred in the realms of productivity and revenue, although many businesses also suffered brand or reputational losses as a result of these disturbances. When disruptions occur, most organizations seek to recover in 24 hours or less – more than this and the effects of a supply chain break can become very detrimental very quickly.
 
All companies should develop, maintain, and test their communication strategies and platforms to prepare for these risks – because, luckily, many supply chain disruptions are events that we can plan around.  
 

Rethinking Communication

Quick and easy access to on-demand communication with suppliers, channel partners, and third-party distribution networks is incredibly important for an organization’s sales productivity. As supply and distribution chains become increasingly dispersed and complex, it is more challenging than ever to convey vital information to everyone in a timely manner. Despite the range of communications tools available to organizations – cell phones, email, pagers, PDAs – it is still a labor-intensive, time-consuming process to send out information in a consistent, predictable way and to confirm that this information has been received.  
Through on-demand alerting, response, and incident management services, organizations can execute back-up plans quickly when a supply chain is interrupted. Most importantly, these organizations can protect themselves against both financial and reputational damages by having such communications channels established before crises occur.
 
Beyond that, there are myriad ways in which efficient communication strategies can benefit an organization’s supply and distribution chains. Businesses need effective communication chains for all kinds of situations. Make sure that you have effective means to:
  • Locate employees and vendors
  • Communicate with distributors ahead of time to ensure that supplies are kept stocked according to need
  • Respond quickly to an increase in consumption or demand from distributors
  • Coordinate provisions from alternate vendors at a moment’s notice
  • Send information to sales and distribution partners in real time
While on-demand notification platforms can be extremely beneficial during crises, they actually provide more value when used on a regular basis. One of the best ways to minimize risk is to have effective communication and back-up plans in place before a crisis strikes.  By recognizing communication as the key to successful recovery, organizations can not only minimize continuity risks but streamline daily operations as well. 
 

What about Product Recalls?

While the normal flow between your suppliers and distributors is susceptible to its own risks, product recalls constitute a risk entirely on their own. For consumer goods manufacturers, product recalls can lead to both financial and reputational losses. The good news is that by planning ahead, you can prevent them from becoming more of a problem than they need to be. Product recalls can disrupt the flow of a supply and distribution chain, but they’re also something for which you can prepare. Think ahead before a recall and keep the following in mind:
  • Work within your company and with regulatory agencies to develop recall templates that you can readily populate and distribute quickly and easily. 
  • Communicate with shareholders, consumers, media, employees, regulatory agencies, and government officials. Use an emergency notification service (ENS) to communicate these recalls across distribution channels and confirm that these critical messages have been received. 
  • Prepare your organization to suspend operations and recall your product immediately should a problem occur – your swift and efficient action will minimize collateral damage and show your customers that you put their safety above all. 
  • Put at least one person in charge of recalls and TEST your plan so that your response is coordinated and centralized when enacted in a real scenario.
 
Aside from these tips, remember that you should always be mindful of regulations and the audits that you may be subject to after a recall. Many organizations suffer not because of a poor recall strategy, but because they failed to effectively communicate with customers and stakeholders to the satisfaction of a regulatory body. Your messaging system should not only work well, but it should also include methods to electronically record, process, and report all of your communications.
 
As a manufacturer, you may be required to provide a regulatory agency with status updates of your recall, in order to prove that your products have, in fact, been pulled off the shelves. This can happen at any time, and you don’t want to be left scrambling to prepare documents for auditors in the middle of a crisis. By effectively managing recall data and by keeping records of all communication involved, you can save yourself time, energy, and stress when it comes time to face a post-recall audit.
 

In the End

You can’t always control what will impact your supply chain, but you can always be prepared to work around it and most importantly, to communicate effectively with distribution partners, customers, and other stakeholders when disruptions do occur.
Whether during a snowstorm, volcanic eruption, factory shutdown, or product recall, manufacturing organizations should always make communication a priority. By establishing secure and simple communications channels in routine businesses operations, organizations can maintain a proactive stance against whatever disruptions may occur. And they can be prepared to act quickly in the event of a supply chain break, coordinating provisions from alternate vendors in just minutes.
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