prepared for the worst

ready or not

Is your company prepared for a flu pandemic? If you work in the food industry, you probably answered yes to that question. But if you work for an energy company, industrial manufacturer or retailer, chances are you said no. A recent study by AMR Research found wide variations among industries when it comes to disaster preparedness.

If your company hasn't made much headway in crisis planning, you're not alone. The AMR study found that nearly 60 percent of enterprises surveyed had yet to adopt supply chain risk management policies. And even among those who had begun drafting policies, many appear to be still in the evaluation stage.

A study conducted by DC VELOCITY earlier this year also found a distinct lack of preparedness among survey respondents. Some 43 percent said they did not have general business continuity plans. Of those who had continuity plans, a staggering 83 percent had not yet addressed the possibility of a flu pandemic. Nor did they intend to. Nearly 75 percent of those who hadn't yet considered the impact of a flu outbreak admitted they had no immediate plans to do so. (See accompanying graphs.)

Not surprisingly, the companies most likely to find themselves on the frontlines in an emergency had made the greatest progress with their planning. "Certain sectors are more in tune to this than others," says AMR Research analyst Mark Hillman. Transportation businesses and chemical manufacturers tend to be ahead of the pack, he says. Food suppliers are at the top of the list as well. Take Hickory, N.C.-based food distributor Alex Lee Inc., for example. Alex Lee, which believes it has a responsibility to prevent disruption to the nation's food supply, has not only drafted a comprehensive pandemic plan, but is also well along in its efforts to implement that plan.

As for which businesses lag behind, the AMR report singles out automotive manufacturers, retailers and even some pharmaceutical concerns. The aerospace and defense industries are also at risk, AMR says, because of their tendency to forge sole-source agreements with specialized suppliers. "They are sensitive to the issue," says Hillman, "but the average company doesn't understand how much risk there is in their supply chain. The supply networks that will survive in the event of a pandemic or other major event are the ones that are the most prepared."

There are companies you'd expect to find on the forefront of disaster planning—food suppliers, say, or power and pharmaceutical companies.But chances are, semiconductor manufacturers wouldn't be high on your list.

Yet chipmaker Intel has emerged in recent years as one of the front runners in disaster preparedness. Over the past decade or so, the technology giant has devoted untold resources to business continuity planning, meticulously drafting provisions for dealing with everything from civil unrest, labor strikes and hurricanes to terrorist attacks and malicious computer viruses.

But for all the threats of earthquakes and tsunamis, the buzz at the company's Santa Clara, Calif., headquarters during the past 12 months has centered on a microscopic virus—the H5N1 virus, to be precise. H5N1, a particularly virulent strain of avian flu, has spread through Asia, Africa and Europe in the past decade. Public health officials fear that the virus will someday mutate to a form transmissible by humans, triggering a global flu pandemic.

In response to mounting warnings of a flu pandemic, Intel has formed an executive management team to study the potential impact of an avian flu outbreak on its business. Over the past year, it has pulled thousands of staffers into pandemic meetings and drills. It has enhanced its information technology infrastructure so that nearly half of its 105,000 employees will be able to work from home if necessary. It has arranged to stock enough food at each of its major facilities to feed one-third of its employees for three days. It has even stockpiled hand sanitizer, face masks and respirators.

Why would Intel go to such lengths to prepare for what many consider an unlikely event? A pandemic may represent a low-probability risk, but its potential consequences are staggering, answers Jim Wick, Intel's environmental health and safety manager for the Americas. By putting measures in place now, he says, the company boosts its chances of bouncing back if a pandemic does erupt. "If indeed a phase six pandemic [the worst possible scenario] occurs, the companies that have protected their people and their assets best will be in a position to recover quickest and become a contributing part of their community again."

Intel's interest in pandemic planning is more than a matter of protecting its profits, says Wick. "There is a business component to this," he concedes, "but there is also a moral and ethical component that outweighs that." Unlike many corporations, he notes, Intel is not stockpiling Tamiflu, the only medication available for treating avian flu (if administered early enough). Many Fortune 500 companies have stockpiled the drug to use for key employees, a controversial move that has depleted supplies of the drug. Intel has instead chosen to forge close relationships with public health agencies in hopes of getting a fast response to its requests should the need arise.

"We will not undermine a national strategy for the allocation of a scarce resource," says Wick. "We think we have [executives] who ought to have access to [Tamiflu], but we are not going to horde it at the expense of hospital emergency rooms."

Test drive
Intel's exhaustive disaster planning efforts might strike some as overkill, but it's hard to argue with the results. In the past four years alone, Intel has successfully implemented various provisions of its business continuity plan more than 200 times, as it responded to crises ranging from civil unrest to union strikes and storms like Katrina worldwide.

"A lot of those incidents occurred at the local site level and were not a big deal. But think about events like Katrina that have occurred over the last year or so and you can see the kind of impact it might have in your logistics transportation activities," says Tony Sundermeier, Intel's customer logistics manager for the Americas. "The good news is we are not sole-source suppliers for our transportation services, so if something happens to one supplier, we can react."

Intel will not discuss its distribution network or its specific plans for ensuring product availability during a flu pandemic. However, it's clear from executives' statements that Intel plans to pull its suppliers into the effort. Sundermeier, for example, reports that Intel has already requested that its suppliers take specified steps to prepare for a flu pandemic.

"That's one of the key considerations transportation- wise," he says. "For a logistics professional, it's a daily part of doing business. About 95 percent of the time, everything runs well. It's how you manage that other 5 percent that differentiates you from the others. You need to build in a lot of redundancies in order to be able to change on a dime."

Money well spent
Despite the potentially catastrophic effects of a pandemic, it's often tough to convince management to invest time and money to plan for something like a flu outbreak, which could be six months—or six years—away. That's especially true of public companies, where management may be more concerned about the next quarter's financial results than in preparing for something as uncertain as a pandemic. And if rival companies aren't making similar investments, those managers will be all the more reluctant to spend money on pandemic preparedness for fear their earnings will look bad by comparison.

But the folks at Intel say it's money well spent. "It's like buying insurance," Steve Lund, Intel's director of security and head of its crisis response team, told a recent forum held at the Massachusetts Institute of Technology's Center for Transportation & Logistics. "Hopefully, you never have to cash it in. Yes, we are considered a cost [on the balance sheet]. And not all companies are willing to invest that money. But we provide a service that allows you to be much more profitable in the future [should a crisis occur]."