Japanese auto makers suspend production. Air shipments requiring special handling (refrigeration, time sensitivity, etc.) are put on hold. Performers can’t make scheduled appearances on “Idol Gives Back”. Mail delivery is delayed. The Royal Navy sorties to help service men and women get home from Afghanistan. And all because a volcano in Iceland decided this was a good time to spew ash into the atmosphere.
Natural and man-made disasters have been a major news story over the last six months. In addition to volcanic activity, three devastating earthquakes and several lesser but still sizeable shocks have struck around the world. The impact has been felt, in one way or another, by a vast number of people in myriad ways. I want to concentrate on the strain that these event place on those agencies and people who specialize in disaster recovery. There are lessons there for all of us as we consider supply chain risk.
When an earthquake struck Haiti on January 12, some of the most highly trained people in the world rushed to assist with the disaster recovery. Everything from engineers who specialize in assessing the structural integrity of partially destroyed buildings to handlers of dogs trained in finding people buried in the rubble were mobilized. On February 27, the same resources were needed in Chile. On April 5, similar resources were needed in Baja and, most recently, the April 14 quake in China again meant that the disaster recovery teams were mobilized to provide assistance. Talk about being stretched thin! And, yes, there were different levels of response from the international community depending on the local government’s resources and need to seek help. The point is that multiple disasters can create havoc on recovery plans if for no other reason than that “worst case scenarios” frequently stretch available resources beyond their capability.
This points up a common weakness in supply chain risk mitigation plans. The typical approach is to prioritize the possible risks, estimate impact, and plan for recovery by taking each INDIVIDUAL risk in isolation. If we accept the old saw that troubles always come in threes, the weakness of this approach is obvious. And, even if there is little evidence to support the belief in the power of three, it should be clear that, if two breakdowns occur simultaneously (or even in quick succession) the impact can easily become exponential.
More importantly, have you assessed the impact on your disaster recovery teams if two or three catastrophes strike in quick succession? The human impact of dealing with a full-blown disaster in your operations is quickly multiplied when people are called on to “do the impossible” several times in quick succession. Fatigue alone can rob individuals of the ability to make good decisions, can degrade their physical performance, and can leave them feeling that they “just can’t do this again”.
Here are two suggestions. First, do some noodling. Call it “scenario planning” if you like but the point is, get some people in a room and discuss how you might react if risk “A” pops up while you’re in the midst of the recovery effort for risk “B”. This will do two things. First, it will help you get a handle on which risks may have the most synergy. Second, it will give you a starting point that can prove useful even if, instead of “A” and “B”, you’re facing risks “F” and “G”.
Second, look at your recovery plans. Do you have clear back-ups for every critical resource? Are there key people who are called on for heroic levels of effort in virtually every risk mitigation strategy you have documented? If so, how will you cover their activities if they are unavailable? This is a frequent problem because of the tendency to create recovery plans for each unique risk without looking at their possible interactions. Indeed, taking this step may help uncover previously unrecognized linkages between risks. It is not uncommon to find that, while the independent likelihood of risk “A” is very low, that risk becomes a near certainty if risk “B” occurs. Knowing that in advance is the first step to being able to respond properly. And, it may alter your assessment of the importance of risk avoidance measures related to event “B”.
Has your organization addressed multiple risks? Do you think this is an area that deserves more consideration in your organization? What other strategies should be considered as part of the risk assessment process? I’m looking forward to hearing from you.
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