Seeing as we're in the throws of hurricane season, it's an appropriate time to address the effect natural disasters have on the supply chain and how problems can be avoided.
The effects of hurricanes is, unfortunately, all too well known. High winds, storm surges and flooding can wreak havoc and untold devastation on all areas in the path of the storm.
There is much to consider for companies and their business partners located in the Hurricane Belt. When a natural disaster knocks a company offline, the supply chain all but grinds to a halt.
We saw it in Japan earlier this year, when the back-to-back disasters of a major earthquake and the ensuing tsunami impacted the supply chains of various electronics manufacturers.
Speaking recently with the Silicon Valley/San Jose Business Journal, executives and local experts from an area well-versed in the effects of earthquakes identified a number of steps companies can take to prepare their supply chain management for responding to a natural disaster.
David Steele, the dean of San Jose State University's College of Business, put it this way: "It’s a very simple concept of not putting all your eggs in one basket." When applicable, companies should work to diversify their supply chain partners as much as possible.
For example, it may not be the best idea to work with only companies located in south Florida, as the area is under constant threat of catastrophic storms during late summer and into early fall. However, mitigate the risk of natural disasters by avoiding the problem as much as possible.
2. Identify failure points
If perfect diversification is not an option, companies should at least identify the points along the manufacturing process that may be affected. This is no different than running a data security audit; the company can better prepare for a incident if it knows where it may come from.
"So when you think about it from that standpoint, suddenly this huge problem with thousands of parts and hundreds of suppliers – you identified those single points of failure, then you have a strategy of how you go about protecting those single points of failure," said Bindiya Vakil, the president and founder of supply chain risk management firm Resilinc.
Of course, the the next step is going about how to deal with possible incidents if they do occur in the future: