As I´m writing this column, the longshoreman´s union is on strike at West Coast ports over automation, work rules, and whether new jobs will be unionized. It´s prettu simple sfuff, but the impact could be substantial the strike were to drag on. There´s a lesson here for all of us in the materials organizations -bad things happen, and you need a plan to deal with them.
Bad things come in many shapes and sizes. How about floods or hurricanes knocking out plants? How about the flooding in Germany? Some plants there would necessarily be affected. Or how about the India-Pakistani standoffs and threatened wars? Many enterprises deal with India to supply chips or do coding. There are also fires or earthquakes, facts of life people don´t think about until too late.
The world is complicate and interconnected now. To effectively deal with potential disaster , you must study your supply chain, ask some simple questions, and do some planning.

The Critical Few

Start by analyzing your supply chain. Who are your key suppliers and where are they located? Create a flow chart of your supply chain. Can you identify any bottlenecks? Then, rate you suppliers and yourself on vulnerability. What happens if a key supplier has problems with labor disputes, or is adversely affected by political upheaval of some sort, or is struck by some natural disaster? More than likely, you will have only a small group of critically important suppliers. Many others will be less crucial for your survival, in that you could find replacement suppliers or, if necessary, do the work yourself.
Once you have identified the critical few suppliers, you need to do some detailed analysis and thinking about that select group. Why are these suppliers critical for you business? Is it because of technology, location, price, or quality, or is it a combination on these? What is their greatest vulnerability? These concerns should be part of any new supplier evaluation process to weed out potential problems before they occur.
Next, sit down with critical suppliers and review your analysis and concerns with them. Ask them some blunt questions: do they have and contingency plans for their plants in case something happens? Do they have backup and contingency plans for their information systems? This type of dialogue will be difficult for both you and your suppliers because of concerns over security, power, and sharing of data. If suppliers know you consider them critical, will that give them power over you when it comes time to talk about price? It´s possible. Could suppliers decide they would be better off seem to be making too many demands on them? They could.

Rate your suppliers and yourself on vulnerability. What happens if a key supplier has problems with labor disputes, or is adversely affected by political upheaval of some sort, or is struck by some natural disaster?

Don´t Just There

But it´s more risky to just do nothing. Plants or companies can go under if critical suppliers can´t deliver for weeks or months. You should take the carefully planned risk of talking to your supplier to start developing contingency plans and processes. The plans don´t need to be detailed, but they should at least provide a step-by-step process for tackling the problem.
Also, decide how your management should react to a situation. For example, your enterprise might op to form an executive action team that would quickly analyze the impact of a given disaster and then be charged with coming up with a plan to effectively deal with to problem. This team, depending on the urgency of the situation, may include the CEO and the board. Or the issue could feasibly be handled at the plant level. The point is to define the planning process before things go wrong.
Planning won´t necessarily solve every problem, but you will be that many step ahead in the game, and that is key. Survival of your organization could depend on it.

Philip E. Quigley, CFPIM, PMP, is a certified project manager with IBM Global Services, Costa Mesa, California. A member of both the Orange County Chapter of APICS and PMI, Quigley teaches project and quality management at the University of Phoenix´s Southern California campus. He can be reached at (714)438-5227 or via e-mail at pquigley@us.ibm.com

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