Winter weather, or even a severe storm, offers a good opportunity to review risk mitigation strategies. For that matter, the storms could even occur somewhere else.
For example, a storm expected to be one of the windiest and rainiest in five years pushed across parts of Northern California early Thursday. Schools in San Francisco, Oakland and Marin counties shut down before the heaviest rainfall began. At San Francisco International Airport, where winds were measured at 48 miles an hour Thursday morning, more than 200 flights were canceled. As of early afternoon yesterday, 150,000 customers were without power in the San Francisco Bay Area, including 94,000 in the city itself, according to the National Weather Service. As much as eight inches of rain was expected to fall on coastal mountains over a 24-hour period, the Weather Service adds.
Then again, states in the northern half of the country, particularly the Midwest and Northeast, expect tough winters. Last winter was different though. Extended periods of below-zero temperatures and wintry conditions pushing south into unprepared states caused trouble in the energy and transportation grids. Many people in those areas, or who have operations in those areas, now wonder if another polar vortex is on the way this winter. If so, they could be in store for week-long periods of sub-zero temperatures that are disruptive and frequently make on-time delivery a challenge for suppliers hit by either the extreme cold or heavy snow.
Chris O’Brien, senior vice president at global third-party logistics provider CH Robinson, wrote on eft recently that the time to develop a mitigation strategy is when there still is time to identify and evaluate the weakest links and develop a plan to circumvent potential disruptions. That’s because disruptions can interrupt business between a company and its customers and suppliers—and last for days, weeks or even months. The longer those connections remain broken, the easier it is for competitors to step in and take market share, O’Brien wrote.
Global companies with high-value, high-demand products coming from multiple locations are the most likely to need a mitigation strategy. Certain industries are particularly vulnerable to disruption. Retailers and brand name pharmaceutical companies, for instance, require speed to market to keep sales channels open and customers satisfied, O’Brien writes. Manufacturers need raw materials and supplies at planned intervals to ensure plant uptime. Food and beverage companies must be able to trace problems back to their source in multi-tiered supply networks, he continues.
Companies with resilient global supply chains are more likely to have goods available when they need them, and to be able to continue serving customers without disruption. When they have visibility and are able to see their inventory, these companies are less likely to spend unnecessarily to transport emergency stock or supplies.
Complete redundancy is cost prohibitive. However, having some redundant stock, systems and resources in place may help avoid the waste of system breakdown if a disaster occurs, even in a highly efficient supply chain, O’Brien writes. Certain considerations can help build backup plans for more resilient supply chains and help companies adapt to changing circumstances.
For example, it’s especially important to map supply chains to identify chokepoints, and whether they are related to suppliers, inventory, transportation or technology. To ensure supply chain resiliency, O’Brien suggests companies continually ask questions such as: Are there sufficient backup suppliers for critical components? Where is inventory located? Should there be a plan for safety stock or forward stocking? What transportation alternatives are available to keep product flowing? Finally, if operations technology is disrupted, corrupted or destroyed, how quickly can data be recovered?
What are your thoughts on risk mitigation? Does your company continually review its strategies?