The Logistics of a Crisis

FOR RELEASE: March 8, 2002

The events of September 11 caused many professions to respond in "overdrive." Though emergency response workers and volunteers were on the forefront of the action, it was supply management professionals who were supplying those workers with the services, resources, equipment, and products needed to get the job done. Below are two articles highlighting the role of supply management during this time of crisis.

The Logistics of a Crisis

Nothing and no one in America went untouched by the disaster of September 11. The supply management and logistics industries were affected, and like every American, found ways to continue operating in the wake of a crisis.

No business operates in a vacuum. Just about every business or organization in the world relies on several businesses and components working together to provide goods and services to customers. This "supply chain" is the long line of suppliers and customers that are linked together for the purpose of transforming raw materials and information into the products and services that are used in everyday life.

The effective functioning of supply chains is contingent on each link in the chain performing its role effectively. Suppliers, customers, and the transportation between the two must all be working in sync to keep the chain functioning effectively. It is a continuing challenge to ensure that each portion of the chain is functioning properly, but the challenge is magnified when a disaster occurs — such as the terrorist attacks on the United States on September 11, 2001.

During the crisis, most Americans were concerned not about business but about people — particularly those affected directly by the attacks. However, for those injured in the attacks to receive medical treatment, some businesses and organizations (such as hospitals and law enforcement agencies) were forced to concentrate on their respective businesses. In turn, other organizations were required to function because of the dependence on a particular industry — like the transportation industry. Despite the grounding of all commercial flights, medical supplies, equipment, and blood, for instance, were still needed by hospitals to treat those injured in the attacks.

How do transportation organizations deal with this kind of a disaster and still keep things moving? Relying on its crisis response plan, UPS Logistics Group (UPS LG) worked to meet its challenges despite losing one of its facilities that was located 150 yards away from the World Trade Center. Lynnette McIntire, director of marketing for UPS LG, notes that much of the crisis response plan is built around the information technology (IT) system that is based on exceptions. This means that if a shipment is not where it’s supposed to be, then an alarm sounds. The IT system allowed UPS LG to identify the problems and "to work with customers to set priorities and to start developing alternative plans for getting shipments to their intended destinations," says McIntire. In short, the IT system assisted the organization in knowing where to focus its resources.

Paul Gettings, a senior vice president at UPS LG, explains that another part of the organization’s crisis response plan includes two locations designated as the crisis response centers. These two locations, located in Scottsdale, Arizona and Atlanta, are equipped with videoconferencing and teleconferencing systems to accommodate the telecommunications requirements for sustaining business operations. Gettings also notes that the group participates in crisis training. "We have a documented crisis response plan that is in our regional locations. It establishes, in advance, lines of communication, who should be communicating, and how they’ll communicate," he says. The written plan also includes directions for a general crisis and for site-specific crises, as well as directives about media and customer communications.

Gettings comments that within 40 minutes of the attack, the organization’s management team was on a nationwide teleconference discussing the response to the crisis. On a broad scale, customer communication was key. After information had been gathered and the immediate effects gauged, UPS LG sent an e-mail to all of its customers based on the facts of what was available, what had happened, and what the status of operations was. On a smaller scale, individuals within the organization did what they had to do to accommodate individual customers. One staffer prepared to put a 60-pound radiology imaging machine onto a handcart and walk it over to Manhattan’s Mount Sinai Hospital where doctors were treating terrorist attack victims. McIntire describes another instance in which staffers from the Louisville, Kentucky distribution center drove a blood product needed by two hemophiliac patients awaiting surgery to Memphis, Tennessee, where two other UPS LG employees from Memphis then drove the product to Dallas where the surgery took place.

Both Gettings and McIntire note that the people on their staffs made the most significant difference in dealing with the crisis. Gettings comments, "The part of the plan that really played an important role for us in dealing with the crisis was that managers from other locations were asked to get to the affected areas with less than 24 hours’ notice and did so by driving to New York City and Washington, D.C. to help support these operations." McIntire credits a sound IT system as part of the reason that UPS LG was able to successfully handle the challenges that the crisis brought, but she also notes that it’s only half of the solution. "You have to have people for creative problem solving, and that’s what really made the difference for us," she says.

September 11, 2001, taught Americans that each day is unpredictable. What, then, can organizations do to be prepared in the event of a crisis — be it large or small? Gettings makes the following suggestions:

  • Get serious about planning.
  • Review your communications systems.
  • Protect your data and know how to access it.
  • Review your transportation needs.
  • Monitor changes in import/export regulations and restrictions.

Now is the time to learn from this crisis situation. Specifically, it’s a good time for organizations to examine their supply chains or networks — to ensure that they’re fully optimized. When considering preparations for the future, it’s easy to consider simple solutions such as carrying additional inventory in anticipation of a disaster. However, many organizations not only may find this infeasible due to the economic impact of the crisis, but they also may find that the additional inventory weighs them down by undermining the just-in-time inventory methods that may have been in place. Instead of seeking a short-term approach to preparation, the better method for ensuring that the organization is prepared for such a crisis is to work on optimizing the supply chain. After the network is fully optimized, organizations then need to trust the chain of suppliers, customers, and logistics providers to adapt to changing situations. Gettings notes, "Those companies whose supply chains are flexible will respond effectively. They’ll be able to make adjustments because they’ve optimized their supply chains." Extra inventory isn’t the complete answer to the question of being prepared. An optimized supply chain or network that can accommodate situations requiring flexibility is the best bet for crisis preparation.

By Julie S. Roberts, writer for Inside Supply Management™.

Operating under Crisis in a JIT Environment

Despite a national crisis that included an airspace ban, The HON Company was successful in maintaining its JIT operations.

On the morning of September 11, 2001, global supply chains faced a reality that few could have predicted. As both towers of New York’s World Trade Center collapsed following terrorist attacks by two hijacked commercial airliners, the future of organizations across the country was uncertain, as were answers to lingering questions. Is this the last of the attacks? How has this event affected our employees? Will the closing of the country’s airspace concern our business? What is the status of companies within our supply chain? While some of these questions were impossible to answer, others were addressed immediately.

One group of business professionals who would need to act immediately in a crisis are those involved in supply management activities for their organization. This group of professionals is responsible for a variety of organizational activities such as managing inbound goods, meeting distribution requirements, and dealing with logistical challenges.

John Stock, vice president of distribution and logistics for The HON Company, a middle-market furniture manufacturer in Muscatine, Iowa, was attending a regional conference of logistics professionals in Grand Rapids, Michigan, when news of the attacks was announced. "My obvious first reaction was immediate shock, then the whole conference dissipated as everyone immediately went to address the personal needs of their members (employees) and secondly, the professional needs of their organization," he says.

Recognizing that there were sudden issues needing to be resolved, Stock didn’t waste any time coordinating a conference call with The HON Company corporate logistics staff (i.e., logistics, plant distribution management, and customer service support) of all of the distribution facilities for the company. Because the company operates under a Just-In-Time (JIT) system, its materials are purchased, transported, and processed "just in time" for their use in a subsequent stage of the manufacturing and distribution process. As a JIT producer and supply management operation, The HON Company’s first priorities dealt with identifying the following:

  • Members (employees) who were traveling
  • Customer areas that were affected
  • Orders that were scheduled to be delivered that day or over the remainder of the week
  • Delivery issues on orders crossing into Canada and Mexico
  • Immediate effects on the manufacturing facility in Mexico

One of the first things that the company did was to locate all of the individuals throughout the company who were traveling. While the airspace ban did not affect The HON Company’s furniture deliveries because of its sole use of ground transportation, the company did place a ban on employee flights for an indefinite period. Without prior approval, members (employees) were not allowed to travel by air even if flights became available. "Because we have plants throughout the country, the majority of our executives travel by air," Stock says. "While I was able to return by ground transportation, the flight ban was an issue that we put into place."

In meeting customer and operational needs, Stock explains that The HON Company has an advantage because of the close relationship and proximity with its suppliers. Due to the number of materials required, many suppliers have established locations in the same city as The HON Company’s plants. As a JIT producer and supply management operation, many of these plants receive supplier deliveries three times per day. "Whenever we need to produce goods on the second shift, third shift, or first shift of a next-day or two-day schedule, those materials will be delivered to us just prior to when the shift starts," Stock explains. "That provides us some hedge by having distribution facilities in the same city as our plants."

Prior planning also made a difference at the company’s Mexico facility. Stock says that because of border issues not related to September 11, the company maintains two days of additional safety stock. In addition, The HON Company uses a software package that allows for flexibility and visibility within the supply chain to adjust its overall production and distribution network throughout the United States. "We have the ability within our system to see every order, all of the requested delivery dates, what distribution and production capacity would be required, and available shipping lanes to fill those orders," he says. "If the border had been closed for more than three days, we had contingency plans in place to reroute orders to other manufacturing facilities within the United States to continue service with our customers."

For The HON Company, its biggest challenge was servicing customers with emergency orders, while not negatively impacting regular business orders that were already in the pipeline. For example, Stock explains that a customer requested a five-day turnaround on 20 trailers of furniture. Because the company normally works in a two-week window, it had to adjust its capacity, move orders, and reoptimize its system to accommodate the customer’s timeline. "The challenge was dealing with the short-term emergency capacity needs that arose out of nowhere with no expectation of it coming, but still servicing our overall customer base outside of the New York and Washington, D.C., area," he says. "We had to move some orders from one facility to another and still meet those customers’ delivery expectations in other parts of the country that were physically unaffected by the attacks."

For many organizations like The HON Company, the events of September 11 will only strengthen their supply chains. Whether it’s reacting to changes in the economic climate or dealing with a national emergency, Stock says that The HON Company will continue to increase its ability to manage capacity and its distribution transportation network by increasing the visibility of its supply chain. "We have the tools that allowed us to react well during this crisis, and we will continue to refine those tools to bring us to the next level," he says.

By John Yuva, writer for Inside Supply Management™.

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