The American Logistics Aid Network, or ALAN, responded to the greatest domestic emergency since Hurricane Katrina: Superstorm Sandy. Bringing massive destruction to the Northeastern region of the U.S., the storm impacted more than 100 million people, and is among the 10 most expensive hurricanes in U.S. history.
After the devastation caused by Hurricane Katrina in the Gulf Coast of the United States in 2005, the professional supply chain community recognized the opportunity to make a larger difference in recovering from such large-scale disasters. A group, including Richard Sharpe, CEO of Competitive Insights, and the late Jock Menzies, former chairman of The Terminal Corp., met in 2008 to plot a course for how competitors in the logistics industry could cooperate to serve the greater good.
The group ultimately founded ALAN to connect relief needs with resources from the business community. Since that time, ALAN's industry professionals have invested in knowing, understanding and building working relationships with nonprofit and government relief agencies to enable rapid and effective business engagements.
As a key clearing house for information, and a point of coordination across an extended network of commercial supply chains, nonprofit organizations and government agencies, the organization recognizes an opportunity for further improvement in emergency management processes across all sectors. It also sees that the unique capacity and expertise of supply chain organizations make them an asset in any recovery operation. There are many lessons from ALAN's experiences that individual corporate supply chains can incorporate into their risk management programs.
Create 'Loss of X' Plan, Not 'Hurricane' Plan
Several factors, including leaner inventories, higher concentration of capacity in logistics clusters and complex management systems (such as multichannel distribution), have led to a general decrease in the resiliency of public and private supply chains. A previous Gartner study found that less than one-third of the companies surveyed had visibility beyond their first tier of suppliers, and even fewer include their entire supply chain in continuity planning. The combined result is the potential for cascading failure and longer time to recovery.
In the aftermath of Superstorm Sandy, there was a disarray of food, safety and shelter needs with homes, transportation, fuel, power and water systems unavailable or severely damaged. The cascading failure effect was evident in numerous ways. Much of the fuel used in the New York and New Jersey region is delivered through water-based terminals. In some instances, these channels were blocked or impaired as the storm surge put seaside terminal equipment and power out of use. Transit systems were also stopped due to excessive flooding and power outages. There was no fuel to power backup generators at these locations, which restricted the distribution of fuel into greater metropolitan areas.
Food, water and other supplies typically brought in by trucks were restricted by roads and bridge closures. Some first responders had difficulty getting to support positions, such as hospitals and disaster stations, since private vehicles were not allowed to enter affected areas. Only police, ambulances, fire trucks and other "known" vehicles were permitted to travel in the areas affected by Superstorm Sandy.
Moreover, land-based communication lines were down, and available mobile phone towers were overloaded. A lack of power soon contributed to further communication loss, as computers, mobile phones, and communication and transportation networks came down. During the crisis, the ALAN team used a Web-based portal, email and phone-based communications to connect government
and volunteer aid organizations with businesses and their supply chain organizations outside the immediate impact area that possessed the resources to help break the cascade of outages.
• Create and test recovery plans in the context of bringing multiple capacities such as manufacturing and logistics, or inputs such as electricity or water, back online instead of specific to events.
• Map and build interdependencies between the capacities into your plans. Use the Superstorm Sandy experience as a reminder of how power, water, transportation and communication systems interrelate.
• Plan low- or no-tech backups for lighting/heating, transportation and communication systems.
• Partner with public agencies and other local businesses to plan for multiple outages.
Value at Risk, Time to Recovery and Priority
The ALAN team observed that companies were prepared, but not fully, for Superstorm Sandy. Many had formulated plans in isolation and had not accounted for multiple breaks in the supply chain. Generally, companies prepare for what they know and what they can handle, but not the unknown. People also tend to have disaster myopia: They forget the impact of previous disasters once they have passed and greatly underestimate the probability of catastrophic events.
Supply chain risk can be viewed by estimating the probability and impact of an adverse event. Not all risks are created equal, so assessing vulnerabilities requires multiple inputs and activities, including collecting business intelligence, understanding interdependencies, monitoring continually, and utilizing decision support models to simulate potential disruptions and mitigation plan.
Just as banks were required to conduct "stress tests" of their liquidity during the economic crisis of 2008 and 2009, it is possible to stress-test your supply chain against a variety of potential disrupters. Conducting what-if analyses to assess the potential value at risk can also guide your mitigation priorities. When creating a disrupter list, it is important to include larger, less likely events as part of the "value at risk" analysis. The general trend of natural disasters over the past decade has shifted toward more frequent and higher magnitude events, as reported by multiple government agencies and global reinsurance firms.
It is also critical to assess the anticipated time to recovery of lost capacities, since mitigation plans often differ based on outage duration. For example, a small, local disruption that knocks out a supplier's ability to ship a critical component for two weeks might be mitigated with additional buffer stock or by shifting production to an alternate supplier site. By contrast, a larger natural disaster that could take multiple suppliers offline for months might drive investment in and qualification of additional offshore capacity.
In human psychology, there is a well-known model called Maslow's hierarchy of needs that describes human needs, starting with basics such as food, water and sleep. Once basic needs are met, other higher-order needs emerge, such as safety, love/belonging, esteem and self-actualization.
Likewise, the ALAN team found that there is a natural staged approach to the
capacities that should be brought back online after a crisis, starting with basic human needs, then safety and, finally, operational.
Speed of action is a key factor before, during and after the event to reduce anxiety caused by the level of uncertainty created by the crisis. In the case of Superstorm Sandy, it was a slow-moving, tracked system that allowed for several days of preparation, and that time was critical, given the magnitude of the eventual impact.
If your company is asked to participate in a relief effort, first ensure the safety of your personnel, facilities and resources, and work toward resuming a semblance of normalcy. The next step is restoration of your operations. It is also important to be realistic about and to clearly communicate which relief arrangements are "quick hit" and which are sustainable over longer periods of time.
• Position "value at risk" as a part of mitigation plan funding decisions.
• Have two sets of supply chain recovery plans: one for smaller, short-term disruptions and one for large-scale, long-term disruptions.
• Plans should work from the top down and bottom up, with a balance between global and local decision-making capabilities.
• Take a staged approach to the capacities you bring back online, starting with basic human needs, then safety and, finally, operations.
• Beyond using the right sequence for bringing capabilities back online, also consider the interdependencies between capabilities within each "need group."
Anticipate Government-Related Disruptions
During a crisis, government entities are good at setting up perimeters and often issue prescriptive orders. An unintended consequence of these actions, however, is disruption to the supply chains that are needed to restart and sustain the necessary services for the local population. Subsequent to the Japan earthquake and tsunami of 2011, for instance, there was significant business pressure on the government to lift transportation restrictions impeding supply to impacted areas.
Following Superstorm Sandy, there were cases where companies had fuel provisions for emergency generators, but, in some instances, the government commandeered those resources. A government-policy-induced issue for hospitals was that, although "emergency" workers were given priority for fuel and road access, the classification did not include staff nurses. A pharmaceutical distributor, facing a similar dilemma, took matters into its own hands and rented ambulances to circumvent an "emergency vehicles only" order that thwarted deliveries to hospitals.
Under the U.S. federal system, jurisdictional boundaries tend to be stumbling points, since events will not respect them and efforts segmented by their lines are less effective. Each state has its own emergency management agency and its own plan, and, depending on the degree of home rule within a state, local jurisdictions may or may not be well-integrated into or bound by them.
Moreover, federal officials may also intervene in local disaster recovery efforts. For instance, a congressional office may demand that one of their constituent's donations get priority into an impacted area, regardless of relative need, pushing aside prescripted plans and assignments in favor of an ad hoc approach.
The risk of disruption from crisis-related mandates makes "executive access" critical. To avoid bad or ill-informed judgments being made and disruptive orders given, you need to have access to senior people in office, such as governors, mayors and congressional representatives, and work with them to determine paths forward. On the other hand, it is also important for the private sector to not over-rely on public-sector direction during the early stages of a crisis, since this is a flawed strategy. While some emergency management agencies have infrastructure that can be leveraged, such as logistics hubs for distributing products, these can become a bottleneck. During a recent crisis, the ALAN team witnessed some representatives from large companies saying to the U.S. Federal Emergency Management Agency (FEMA), "We're glad we have you to tell us what to do about distribution in these markets," to which a senior FEMA manager replied, "Actually, we won't be able to tell you what to do [at a granular level]."
Ground-up network building is extremely important. Analysis conducted by ALAN after Hurricane Katrina pointed to the importance of this "social capital" as an indicator of a community's resilience.
For the first two years of its existence, the ALAN team studied and mapped out the process by which disaster recovery works between states, FEMA and the National Voluntary Agencies Active in Disaster (VOAD). The team then went to the VOAD and focused on the agencies as customers whose needs could be supported by the business community.
To develop the support network, ALAN partnered with organizations ranging from local chambers of commerce, retailer groups, national real estate associations, technology vendors and 26 supply-chain-oriented associations. Often, when governments speak about relationships, it is with too narrow a focus or to get an inventory of who is in a jurisdiction or a geographic location at any point in time. ALAN focuses on active, trusted relationships, and works to maintain and build them.
One of the first calls to ALAN during Superstorm Sandy was from a U.S. government agency looking for megapumps to clear water out of the subways in New York City. In this case, the government wasn't able to track down what they needed in the required time frames. Based on active relationships, ALAN found pump providers, and shared those contacts with the government agency. The team also drew on its network to get pallets for sandbags within hours after a 10 p.m. call on a Friday night. According to Kathy Fulton, ALAN's interim president and director of operations, "Getting results is about getting to know people and developing relationships, rather than just conducting transactions. It is also about being open and honest with your partners and coaching them to ensure that their logistics plans are sound. If someone suggests a ground-level facility as a distribution center, you may need to explain how this could impede their operations due to transportation requirements, inaccessibility in the case of a flood and other issues about which they may be unaware. An effective relationship implies a certain level of trust — they know that we have their best interests in mind, and are working to find them the best solution."
• Anticipate government-related disruptions to your recovery efforts and plan contingencies accordingly.
• Develop relationships and maintain access to those who can make key decisions during a local crisis.
• Build and document active relationships with key partners at customers and suppliers that can be relied on to manage significant supply disruptions.
• Go to local and state associations to identify chapter-level representatives. Make connections and develop relationships with those in your region.
• People are the most critical aspect of resilience and recovery. While planning and preparation may be good on the business front, few are well-prepared on the home front. Be cognizant that spouses and a family's needs will likely trump work.
• In a time of disruption, the biggest concern of companies is reliable and accurate information. Move from a push to a pull mode on communications with key partners, using a variety of communication mediums, to improve time to recovery.
ALAN's Next Chapter
The ALAN team has seen increased attention to supply chain risk management in corporations and the academic community over the past several years. The organization has also observed millennials joining companies and wanting to apply their vocational talents for the good for the community. The team is encouraged by the enthusiasm they consistently receive when sharing their
charter with those unfamiliar with ALAN. The next step for the team is building on this momentum.
Currently, ALAN uses Web portal technology developed by the Aidmatrix Foundation to aggregate needs from nonprofit relief agencies and distributes them to its more than 20 supply chain association members for support. To improve the accuracy of connections, it recently ran a detailed capabilities mapping project. ALAN is also building connections at regional and state levels between those with supply chain experience, local governments and VOAD. Looking forward, the
ALAN team still sees room for improved alignment between federal and local governments, VOAD, and local businesses.
Per the late Jock Menzies, "There are always surprises in disasters, but many of these can be addressed by the capabilities and expertise of the supply chain community."
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