What are your supply chain thoughts when you see this picture?
As pictures start to emerge showing the damage caused by the recent string of hurricanes like Harvey and Irma, immediate thoughts go to the safety of the people caught in the path of these storms. Thoughts and hopefully many donations are going to all those involved in disaster recovery efforts. The image below is an aerial photo taken and released by the Dutch Department of Defense showing the damage of hurricane Irma wrought on a shipping yard in the Dutch Caribbean island of St. Maarten.
If you happen to be involved in any way in supply chain, whether it’s supply chain planning, manufacturing or distribution, your next thought after hoping people are okay is likely, “holy crap!”. Once the initial shock has worn off, your supply chain instincts will kick in as you assess the damage from a supply chain perspective. You’re probably asking the question, “What’s the impact on supply?”. As you look at this picture, it’s natural to think about the amount and value of supply that is damaged or stuck on route. That immediately leads to worrying about the impact on the customer:
- What demands will be left unsatisfied by the supply disruptions?
- What orders should be filled with the limited supply available?
- Are there other capacity disruptions?
- How long will it take to recover?
If your supply chain happens to support the disaster recovery in any way, thoughts to a spike in demand is something else to manage. Bottled water, generators, batteries, building supplies, food supplies, the list could go on. Delivery, especially in support of relief from the destruction and customer satisfaction are obvious immediate concerns, but then cost and margin questions soon follow: What’s the impact on the supply chain when prices jump due to limited supply? What’s the impact on margin with a likely hike in fuel costs? What’s the financial hit on using more expensive alternate materials, suppliers and shipping routes? You could think of all these questions as “after thoughts.” At risk of beating our supply chain chest, practitioners have certainly learned their lessons from past experiences like Hurricane Matthew. Supply chain thought leaders began thinking about Irma long before the pictures surfaced. For example, Florida power companies began staging vehicles and equipment in strategic locations well in advance of the arrival of Irma. This was a strong example to help convince customers and residents they should prepare, as well. On top of this, AT&T, Verizon Wireless, Sprint and T-Mobile sent crews to cell sites across Florida to top off fuel generators, test back up batteries and protect facilities from Hurricane Irma’s anticipated storm surge and associated flooding. Many companies like Home Depot and Target were working with warehouses and distribution centers to ensure stores were well stocked. These companies are preparing their supply chains and stepping up 24/7 efforts to restock as merchandise starts to fly off the shelves as the cleanup continues. This can mean pre-staging supplies from distribution centers to stores in areas at risk. For supply chain leaders who took a preemptive strike against the forces of Irma, they’re thinking, “I am glad we prepared” when they see these pictures. Today, companies can easily simulate any number of scenarios to understand impact, and then determine preparation and response plans that will minimize the impact of the destruction. For example, supply chains can simulate a supplier being down for a day or a week, simulate a spike in demand and the ability of the supply chain to satisfy the increase in time to deliver goods to affected regions, and simulate an alternate source or more expensive supplier. Today, planners can have answers to these questions minutes after the National Hurricane Center issues its first press release on the next hurricane. The final thought we should all be thinking when we see these pictures from a supply chain perspective is “what other questions should I ask before the next hurricane or weather event?”. Let us know what you would add to the list.