Disaster-proofing the Supply Chain

Using supply chain solutions to prepare for the next "Big One"


On the collaboration front, Dow is working with the chemical industry, shipping community, customers, and other public and private sector partners to improve supply chain infrastructure and emergency preparedness and response. In one recently announced joint initiative, Dow is working with the Chemical Transportation Emergency Center (CHEMTREC) — a 24-hour emergency call center established 36 years ago by the American Chemistry Council (ACC) to facilitate immediate emergency response information for accidental chemical releases — on a full-scale demonstration project intended to improve railcar tracking and information sharing between the two organizations. "The Dow Chemical Company Railcar Shipment Visibility Initiative" aims to enable surveillance of highly hazardous materials in transit and provide for better communications for emergency responders nationwide to protect the safety and security of the communities through which these materials are transported. This project equips Dow's existing Toxic Inhalation Hazard (TIH) material railcar fleet with GPS and sensor technologies to allow electronic monitoring of the location and condition of rail cars and their contents. CHEMTREC will have access to a newly created Web-based network that will supplement its existing communications network to make data available to emergency responders through its system in the event of an incident involving Dow shipments of TIH materials.

The chemical company's initiatives around supply chain design aim to reduce the total inventory of TIH chemicals in the supply network at any given time and to reduce the movement of chemicals through the network. The strategies that Dow is applying to meet these goals include seeking alternate sourcing arrangements through exchanges, swaps and contract manufacturing agreements; avoiding new, long-term shipments of highly hazardous materials; establishing alternate modes of delivery, with greater producer/user process integration and more discipline in customer selection/qualification; converting chemicals to less hazardous derivatives prior to shipment; and pursuing process integration with suppliers and customers to explore alternative products and co-location.

The ROI on a Disaster-proof Supply Chain

The results to date that Dow has achieved in its sustainability initiatives underscore that building increased preparedness, resiliency, safety and security into the supply chain need not be a cost-only equation. "The first reaction that most people have when they think of more security is that this will increase cost," Mathes says. "That's true in some cases, but on the whole we've found that increased safety makes good business sense, too. When you get creative and find ways to change the design of your supply chain, you can find different routings or different suppliers in a way that reduces the total freight and therefore reduces costs. There is some investment, but there's a return on the investment, too."

In one discrete example, Dow's supply chain staff worked with the manufacturing side of the company to identify ways to reduce the inventory of one highly toxic material, improving the overall safety of the operation — and, by the way, cutting inventory by $160,000 at the same time. In another case, Dow reduced the transportation of a particular material by about two-thirds, resulting again in improved safety, but also saving the company millions in annual operating costs. Likewise, Dow's supply chain visibility projects have resulted in a 50 percent improvement in response time to identify and resolve in-transit problems, a critical metric that will allow the company to respond much more quickly in the event of a natural or manmade disaster. But the initiatives also have produced a 20 percent reduction in excess product or safety stock inventory, a 20 percent reduction in the company's container fleet, and up to 90 percent improvement of delivery time windows.

Other companies are finding that their efforts to improve the resilience of their supply chains can yield concrete business benefits as well. Liqueur producer Grand Marnier, for example, has implemented a track-and-trace application called G.O.L.D. Stock from Aldata Solution to meet U.S. bioterrorism regulations. Deployed in 2004, the solution has given the company the ability to locate and trace its entire production and distribution supply chain, from raw materials through to finished goods, in compliance with regulatory requirements. But the company also has identified such additional benefits as improved inventory management, standardization of many warehouse functions, and better storage and flexibility in forklift truck driver operations due to automation. In general, J. Michael Barrett, the terrorism and homeland security expert, says that companies are likely to find that the time and effort they spend on reinforcing their supply chains against disasters will pay off when they run up against normal business disruptions. "The investment in resiliency is agnostic to the type of risk," he says. "It doesn't matter whether it's a hurricane or a manmade incident or some other disruption. Having a resilient system will be useful whatever happens."

Best Practices for Disaster-proofing the Supply Chain

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