Calm before the storm

Posted on 4 Nov 2013 by The Manufacturer

The St Jude storm last Monday brought hurricane force winds across the UK, causing damage and major disruption to transport networks across the country. But the business impact has been minimal. Anne Marie Kilkenny, partner at supply chain optimisation specialist, Oliver Wight explains why.

Anne Marie Kilkenny, partner, Oliver Wight

Economist David Miles, who sits on the Bank of England’s Monetary Policy Committee, believes last week’s storm is “likely to have a little bit of an impact on GDP” and Howard Archer of IHS Global Insight said the storm “does not appear to have had much lasting impact. It’s not, for example, like heavy snowfall where there may be a sustained disruption to travel and supply chains.”

So, business leaders, politicians and economist can apparently heave a sigh of relief that the latest extreme weather event to hit the UK seems to have caused minimal lasting damage.

Partly, this is due to the fact that most supply chain carry excess inventory; so a few days disruption is unlikely to have long-term repercussions.

But it’s also thanks to the plans and processes businesses have put in place in preparation for extreme events.

Recent disasters, from the global financial crisis to volcanic ash clouds, tsunamis, floods and catastrophic earthquakes, have taught business leaders a lesson the hard way – everyone must have a business continuity plan which can be used in extreme situations.

No matter how efficient your organisation, there will always be unplanned events that without good visibility, communication and understanding of your extended supply chain, will negatively impact your business.

Mapping or modelling the extended supply chain can help to recognise the relative size and influence of different entities within the supply chain, identify the most influential customers and suppliers, but also establish the areas of greatest complexity and risk.

This is an essential part of Supply Chain Management.

Oliver Wight has studied the best practice models for business continuity at those companies who simply can’t afford interruption for more than a very short period of time.

Take the pharmaceutical industry, for which secure supply can ultimately be a matter of life and death. Robust supply risk management processes need to be in place, coupled with heavy investment in contingency.

For others, genuine flexibility throughout the supply chain, as well as properly integrated processes will put them in a much better position to manage these potentially disastrous situations well.

The oft-quoted example of Dell, following the devastating Taiwan earthquake of 1999, serves as a great example of when flexibility really comes into play.

Following the earthquake, severe power outages and damaged equipment caused production in several Taiwanese factories supplying PC components to companies including Apple and Dell to halt.

Dell responded by changing its pricing strategy and running promotions in order to influence demand towards products with available components through a direct sales model.

The result? A 41% increase its third quarter earnings compared to the previous year.

Fundamentally, this shows that, while you can’t legislate for everything Mother Nature could throw at your business, you can prioritise to mitigate damage and potentially turn challenge into opportunity.

Thanks to accurate weather forecasting, we were all expecting St Jude. Coupled with best practice examples of flexibility and ingenuity in the face of supply chain disruption this goes to show that building visibility, communication and understanding into your supply chain processes, is an essential prerequisite in mitigating risk and boosting competitiveness in all scenarios.