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13 Operational Strategies for your Supply Chain
By
Sep 17, 2005, 13:20

Bernie Hart, global product head of supply chain consulting firm JP Morgan Chase, offers 13 invaluable tips to prepare for the unexpected:

1. Assess risk. In making your initial decisions concerning where to buy product, where to manufacture product, where to have distribution centers, and what ports to use, consider the following items: political, physical, and geographical risks; availability and proximity of primary and alternative logistics networks for all modes (air, ocean, rail, and truck); historic weather/natural disasters; labor union action; infrastructure (power grids and backups, water supply, etc.); economic and market risks; fuel prices; currency exchange rates; and inflation.

2. Establish a team that will be responsible for decision-making during a crisis and make sure that your entire supply chain knows of its existence.

3. Develop and use alternative suppliers and logistics networks. This provides the ability to control costs and service levels in normal times and flexibility during times of high demand or disaster recovery. Have the ability to diversify transportation.

4. Demand disaster plans from your suppliers and logistics providers, then review and update these plans on a regular basis. Test the options presented by your suppliers and logistics providers. By conducting such an audit, you will see their level of preparedness.

5. Detailed processes, procedures, and authorizations should be readily available for dispatch to new brokers who are being used in an emergency as a result of diverted cargo arrivals.

6. Constantly monitor each country/region for threats and trends which will affect your supply chain: weather, port and transportation strikes, fuel prices, labor rates, pending legislation (e.g., trade sanctions, quotas, anti-dumping duties, free trade programs), or political elections that may alter the local view of trade.

7. Analyze your products. Understand how demand for your products will be affected by the emergency. For example, before Hurricane Charley slammed Florida and the Caribbean in August 2004, The Home Depot and Lowe's set up a war room to monitor the storm. Then they supplied specific stores with plywood, generators, water, and medical supplies before the hurricane hit.

8. Establish a flexible supply chain. If your products are needed in case of an emergency, make sure your supply chain has the capacity to keep up with large increases in demand. Conversely, if your products are not needed and demand drops, make sure that the pipeline can be slowed down to avoid a buildup of unnecessary inventory.

9. Have a cross-trained workforce that can react fast. If part of your supply chain is directly affected by the disaster, it is important to have people that can keep the operation running as efficiently as possible.

10. Be prepared to avoid certain regions at certain times. For example, Florida ports are subject to hurricanes from June to November. For products destined to Latin America and the Caribbean that use Florida as a gateway, carriers, distributors, and exporters should set up alternate gateways. Perishables and other time-sensitive goods may need to exclude South Florida ports from their distribution networks through the peak hurricane-season months of August, September, and October.

11. Use customs facilities that enable clearances to be obtained and finalized at a location other than the port of entry. By doing so, you might be able to avoid port congestion.

12. Back up your files. Ensure that all trade-related documentation -- especially documents that require keeping for several years -- is backed up and saved in an electronic format offsite.

13. Conduct a risk assessment of your existing supply chain. If you are uncertain as to how your supply chain will hold up in times of trouble, hire external trade experts to assess risk and help strengthen your supply chain.


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