Entries tagged with “supply chain management”.


It is confirmed that Grimsvotn volcano in Iceland has erupted sending a plume of smoke and ash several thousand feet into the air.

In the past, this has not been a major issue, and air traffic was routed around a 120 nautical mile no fly zone. However, you may recall the challenges that many fliers to and from Europe encountered last year when another Icelandic volcano belched smoke and ash that was pushed to many of the major air hubs in Europe, slowing or stopping many flights and disrupting the flow of goods through the supply chain.

Hopefully the last time served as a wake up call to develop contingency plans to assure the smooth operation of your business.

One of the benefits of hind site in unexpected natural disasters is the opportunity to create a “lessons learned” document. By looking at the “pain points” that your organization encountered during the incident, you have the ability to develop contingency plans. 

What are some  common pain points?

  • Key personnel out of position due to transit delays
  • Inventory shortage levels due to interruption of supply chain
  • Increased costs due to spike in demand
  • Delayed deliveries
  • Decreased cash flow
  • Cancelled orders

I take a rather different approach to developing contingency plans by working backwards from the pain point (impact on the company) to the triggering effect.  So rather than looking at “Volcanic Activity in Iceland” as the starting point, I look at “delayed deliveries”. 

Why are there delays?  when brainstorming the reasons, think globally before locally.  

  • Limited shipping lanes
  • Lack of containers
  • Insufficient inventory
  • Lack of key components

Then ask Why?

Lack of containers -

  • Increase in demand
  • Not located where shipments are happening
  • Not being unloaded

Why?

Not being unloaded -

  • Customer using as free “warehousing space”
  • Dock strike at key receiving port
  • Unexpected inflow at key receiving point
  • Shipments aren’t moving  out of a shipping point

The why question asked 4 - 6 times will typically  drill down to a root cause, and root causes can be addressed by either establishing an alternative, or correcting the challenge to remove the obstacle.  They key is to not drill so deep that a plan must be generated for each possible reason, after all doesn’t a solution for delayed deliveries because of a volcano in Iceland require the same process steps as a dock worker’s strike in Los Angeles?  In both instances you would look at alternative transportation routes (perhaps moving the product from Frankfort to Madrid, depending on how the wind blows, or re-directing the container to Seattle from LA to get product into the country and stores quicker), or services (moving by ocean from Europe vs. air freight, or air freight from China to LA) and measure the cost and service impact against the cost and service impact for waiting out the obstacle.

The important idea here is to have a contingency plan for those items that may have a serious impact to your business, otherwise you may just erupt like Grimsvotn.

Back in 2007, the 9/11 commission established a number of recommendations for the public and private sector that would help both the government and private businesses be prepared for a disaster.   Title IX of the Implementing Recommendations of the 9/11 Commission Act of 2007 (the Act.) directed the Department of Homeland Security (DHS) to develop and implement a voluntary program that would accredit and certificate private businesses have established a program using a set of standard processes that will “enhance nationwide resilience in an all hazards environment”.  This program officially known as “The Voluntary Private Sector Preparedness Accreditation and Certification Program”.  Known as PS-Prep in the business world (which I think is a heck of a lot better than VOPSPAC that sounds more like a drug to reduce upper lip sweat caused by a government initiative), it is similar to the ISO standards many companies embrace to demonstrate to their customers and potential customers an adherence to process and procedure standards designed to maintain and improve quality products and services.

Similar to ISO9000, this program is not mandatory, and does not direct the specific processes and procedures that prepare a business for a disaster.  The program does provide three different standards to be used in establishing the program and measuring the successful implementation for accrediting and certifying the program is in place and in order.  The three standards selected were determined by DHS in June of 2009 after public input to meet the comprehensive needs in the event of a disaster and can be applied to the majority of businesses. 

They are:

  • ASIS International SPC.1-2009 Organizational Resilience: Security Preparedness, and Continuity Management System – Requirements with Guidance for use (2009 Edition). Available at no cost.
  • British Standards Institution 25999 (2007 Edition) – Business Continuity Management.(BS 25999:2006-1 Code of practice for business continuity management and BS 25999: 2007-2 Specification for business continuity management) The British Standards Institution is making both parts available for a reduced fee of $19.99 each.
  • National Fire Protection Association 1600-Standard on Disaster / Emergency Management and Business Continuity Programs, 2007 and 2010 editions. Available at no cost.

Embracing PS-Prep early may be a very good thing for several reasons.

  1. Utilizing the evaluation standards can identify any holes in your business continuity program and help to plug them.
  2. It differentiates you from your competition who are not participating.
  3. The focus on risk management from the board level due to SOX and other factors will be supported.
  4. While not mandatory, it can be a contributing factor in the securing business from government and other businesses during the bid process.
  5. If you do not have a continuity or disaster recovery program, it provides frame work for developing one.

For more information on PS-Prep, visit the FEMA site, or click here.

When Eyjafjallajokull volcano erupted on April 14th, the sky’s above Europe looked like the US sky’s after 9/11.  No major aircraft flew because of the danger to the aircraft, crews and passengers that may fly into the cloud and have all engines fail.  The result of this was passengers being stranded, product not moving, and the airlines loosing more than $200 million a day.  Who knows what the impact to other businesses was, due to delayed shipments, cancelled meetings, extended stays, and lost productivity to businesses around the globe.

This was the result of a continuity plan that has been put into place and has worked for more than 20 years.  Governments, airlines and aircraft manufacturers have long known what could result in flying a plan through a cloud of volcanic ash.  The engines can temporarily shut down because they are clogged with the material, causing the plane to lose power and potentially crash.   Because of this known hazard, a contingency plan was created that vectored planes around the ash plume to assure safety.  This contingency plan has been very effective, and  perhaps to effective.  According to a report in Bloomberg Businessweek (The Plume and The Planes), Marianne Guffanti, a vulcanologist, is quoted : “That’s kind of biting us in the back right now because the more successful we are the more people think there’s no problem.”  

It seems that these rarely occuring isolated environmental issues become forgotten about as time passes because they are either so monumental and low probablility that the feeling is not to put a lot of time building contingency plans that will never go into place, or the impact cannot be expressed in a way that individuals can comprehend.

Because the program put in place prevents a catastrophic accident, there is no “concrete” view of what could happen.  Any occurrences that have occurred are 30 years ago, and forgotten in almost every one’s mind (how many people not directly affected remember how many days the air space above the US was closed after 9/11?)  The challenge I see is that many corporations and individuals do not see the potential impact to them (from roller coaster like flights to death) and only see the impact that occurs from protecting them from these risks (delayed arrival, broken plans, lost profits and inconvenience).  

There is also a challenge to the airlines and transportation providers as well.  How they handle the flight stoppage will reflect on their reputation and could cause loyal customers to look at alternative carriers in the future.  How would you react to these different vendor scenarios?

The carrier throws their hands in the air and says “The government has closed airspace, there’s nothing I can do, deal with it.” and lets their passengers or customers fend for themselves while waiting for the sky’s to clear may have a significant backlash. 

The carrier that apologizes, and looks for ways to ease the burden (hotel and meal vouchers, establishing update phone numbers and web sites, offering assistance, etc.) or looks for ways to get the product shipped (alternative movement to an unrestricted area and then flying out from that location). will have customer coming back for more.

In my mind it’s pretty simple.  The supplier who works with you and shows an appreciation for your business and concern for your inconvenience will continually maintain my business over one who shows disinterest.