Swine flu. Hurricanes and tornadoes. Supplier failure. The potential causes for supply chain disruptions are many. So it is no surprise that those involved in supply chain management have paid increasing attention to crisis management and resiliency in recent years.
In a session on crisis management planning in the supply chain given at the Council of Supply Chain Management Professionals, the speakers offered suggestions on strategies and practices for creating an effective crisis management plan and increasing an organization's resiliency.
Perhaps the most important thing is simply recognizing the need for crisis planning. Lew Roberts, president of L. Roberts & Associates, said he is surprised by the lack of comprehensive risk management practices, particularly among large companies. As companies expand, they have greater exposure to risk and thus have a greater need for risk management, Roberts said. "The key is understanding your vulnerabilities," he said. "Traditional buffers are missing as cycle times and inventories are compressed."
But risk management is far from easy. Developing crisis management processes involves several challenges, said Philip S. Renaud, a vice president for DHL/Exel Supply Chain. These include defining just what constitutes a crisis, developing consistent practices across multiple cultures, and determining when and how often to update business partners.
The panelists went on to identify tools that they have found helpful for creating a crisis management plan. Renaud outlined the "operational risk controls" that DHL has in place to manage crises when they do occur. DHL has also developed internal and external communications tools for use during emergencies, including an incident reporting system, which is used throughout the prevention, response, and recovery phases of a crisis.
Roberts focused on how to handle supplier risks. Tools companies are using to manage those risks, he said, include managing currency fluctuations, developing rigorous supplier evaluations processes, developing long-term supplier relationships, retaining possession of tooling, and double translation of contracts.
The third panelist, Omar Keith Helferich, professor of supply chain management at Central Michigan University, encouraged participants to investigate software tools to help with monitoring and managing risk.
While a sound crisis management programs and tools are critical, it's also important not to over-react. Helferich reminded listeners that the widely anticipated Y2K crisis fizzled when the year 2000 dawned. "There's a fine line between responsible risk management and overplaying it," he said.