July/August 2009, eSide Supply Management Vol. 2, No. 4
Key Tenets for Mitigating Disastrous Supply Chain Disruptions
Supply chains play an important role in the role of the world economy. They are also, however, a point of vulnerability.
When a disruption happens without warning — and with devastating results — supply chains have significant impact on the world economy. Recently, increased incidents of hurricanes, earthquakes, various chemical plant explosions and global terrorist attacks have driven his point home.
While some of the devastation in the aftermath can be attributed to the disaster itself, an inordinately large amount of it can be linked back to inefficient supply chain coordination during the relief effort. Hurricane Katrina is a good example: Supply lines of food, clothing and building materials were cut off, and federally funded relief efforts were thwarted.
Solid supply management concepts are crucial to helping provide relief to damaged areas, organizing information coming from those damaged areas and facilitating repair efforts.
Supply chain risk and disruption have been studied and categorized in various ways over the years. Traditionally, the focus has been on operational risks — equipment malfunctions, for example — or on human-centered risks such as strikes or negligence. More recently, however, losses felt after categorical disruptions, such as Hurricane Katrina, are incentives to develop improved reconstruction practices. Mitigating these efforts results not only in time and money saved; it also potentially saves lives.
After a disruption, effective supply management integrates and optimizes three flows: material, information and finance. As most companies already know, information sharing and supply chain coordination is not easy to achieve. Overcoming barriers and attaining alignment requires integration, technological development and continuing research.
A grounded foundation of communication is crucial when preparing for (and minimizing the magnitude of) supply chain disruptions and increasing the effectiveness of disaster relief efforts. When two or more groups are involved (FEMA and the Red Cross, for example), the degree of effectiveness depends on:
To improve post-disruption response efforts, a functional framework that specifies how these factors affect logistical efforts is critical. This framework must work to improve interaction between organizations, enhance the degree of interdependence and improve skill levels for facilitating flows of information, funds and materials.
Understanding the organizational dynamics of these types of agencies, when operating under an increased workload in urgent situations, fosters better contingency plans. As a result, the effectiveness of the response is enhanced.
One corollary of supply management is collaborative information sharing, which lends itself to collaborative relief efforts. The goal is not to censor information from news reporters and other media agencies; rather, the aim is to enable data collection and warehousing for effective information mining.
In the aftermath of a disruption, information flows originate from various sources — news agencies, individuals calling for help or even outside public forums reporting hearsay. A fundamental first step, then, is to organize the information and sort facts from fiction in an effort to properly direct resources. This is facilitated with a model.
Effective response to a disruption is predicated by various groups coming together to organize relief efforts. Similarly, the degree to which all these groups are interdependent also drives response capability. Five contextual parameters are essential for success: the degrees of group diversity, differentiation, interdependence, increased workload and a sense of urgency for the organizations.
Global optimization is achieved through a collaborative communication structure. In a disrupted supply chain scenario, relief efforts are likely to originate from many sources, including local, state, federal, private or governmental organizations. A centralized information center facilitates the central communication process.
In many cases, confusion and inefficiencies in relief efforts have incapacitated affected areas for months and years after a disruption. Unfortunately, these instances support the idea that when a response is unorganized and inefficient, it can magnify the devastation. Often, it is after the immediate emergency response has been deployed when operations and supply management theory — together with readily available technology — can be applied to mitigate long-lasting damages.
Application of supply management theory prescribes the centralization of information collection and dissemination. The framework consists of key inter-organizational attributes: interdependence, skill level, interaction and load during emergencies. These affect the decision processes that drive the logic of how funding, relief materials and information flows are administered.
The benefit of this framework is the dissemination of knowledge resulting from the improved facilitation of aid to disrupted areas — but it does not end there. The added payoff is a renewable long-range plan to subsequently establish a self-sustaining supply chain disruption strategy.
Gary Stading is an associate professor of supply chain management at the University of Houston — Downtown. To reach this author, please send an e-mail to firstname.lastname@example.org. Footnotes were omitted by the editors.
For more research and survey findings, visit the ISM articles database.
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