Whether caused by weather, pandemics or financial meltdowns, every supply chain will experience disruptive events, says Phil Renaud, vice president of risk management at Exel. Planning for these events is a very important part of overall supply chain strategy, with the aim being to restore full service to customers as quickly as possible, he says.
One important and often overlooked element of crisis management is understanding the different ways in which day-to-day operations will be impacted by adverse events, says Renaud. For example, he notes that a flu pandemic may create disruptions in the supply chain because of employees being unable to come to work or to perform all of their duties. "That could then create security exposures because fewer people are watching the goods," he says. Through its parent company Deutsche Post, Excel has been tracking the H1N1 virus. During the winter months in the Southern Hemisphere, countries in Australia and South America experienced a 30-percent to 40-percent increase in absences, "so we know it is coming," Renaud says.
In another example, Renaud notes that weather disasters can impact the supply chain in areas far removed from a storm's epicenter. The impact of Hurricane Katrina was primarily in the Gulf area, but areas as far north as the Ohio Valley and beyond were disrupted by power outages, he says. "The point is that all of these things are interrelated and when businesses think of crisis management, they need to think in a holistic fashion," says Renaud.
The number of disruptive events has increased significantly over the past seven to eight years, and that upward trend is likely to continue, Renaud says. "Companies need to make sure they are evaluating their entire risk profile and that every aspect of their business is prepared to react when crises occur, because time has shown that they will occur," Renaud says.
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