Collaboration is the key to disaster-resilient supply chains

We’re unaware of any major supply chain problems caused by the Southern California fires last week or the Silicon Valley earthquake this week, but these disasters remind us that supply chains are vulnerable. Ironically, according to an MIT expert, supply chains that have done the most to integrate vertically and reduce excess inventories are often the most fragile in natural disasters and manmade catastrophes.

“We are only as secure and resilient as our weakest link in the supplier network,” James B. Rice Jr. told a gathering of supply chain professionals in San Jose last week, an event planned long before the fires erupted and the earthquake hit. As director of the Integrated Supply Chain Management Program at MIT’s Center for Transportation and Logistics, Rice studies security and risk in supply chains.

Much of his research has been prompted by concerns over terrorist attacks, but his findings apply to any disruption. Last year he published an article on security that should be required reading for supply chain pros.

Rice has found that most supply chains are not prepared for high consequence, low probability episodes like fires, floods and earthquakes. He added that partners must work collaboratively to reduce risk in the supply chain by creating greater resilience, which he defines as “the ability of a supply network to sustain variations in supply and demand, and to recreate itself after disruption.”

Rice’s main message is that supply chain networks have become so complex and dispersed that no single company can possibly map out a plan. “You need to think and plan with customers and suppliers,” he said.

To help assess supply chain risk, Kathleen Geraghty, chief operating and knowledge officer for eKNOWtion and a senior supply chain consultant with Technology Forecasters, is developing a risk audit tool. “Natural disasters may be the least of your worries,” she says. “The risks we ignore or, worse, inject into our supply chains are a far more likely factor that we will confront.”

While we’re on this topic, Kinaxis, a strategic partner of Technology Forecasters, always has interesting things to say about managing risk and disruptions; check out its blog.

We’d also like to hear about your experience in achieving disaster preparedness.

Posted by Bill Roberts, November 2nd, 2007

Filed to Supply chain management