Natural Disaster/Emergency Planning

13 supply chain tips to better weather the storm

Dulles, VA  September 6, 2005  This year has not been easy for importers and exporters. Rising fuel costs, port strikes in California and Canada, and now Hurricane Katrina.

What can importers and exporters do to better prepare for natural disasters, port strikes and other factors beyond their control? What emergency planning considerations should be in place to better ensure that company's supply chains operate in tough times? How can manufacturers and retailers better weather the storm?

The following are some tips from the global trade management experts at JPMorgan Chase Vastera:

1. Assess Risk. In making your initial sourcing and fulfillment decisions concerning where to buy product, where to manufacture product, where to have distribution centers and what ports to use, consider the following risk items:
   
   
   • Political risks of the country
   
   
   
   • Physical and geographic 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
     
     
     • Inflation
   
   Running different scenarios of best, average and worst case begins to get the organization thinking through how they'd handle normal variability and disasters alike.



2. Establish a team that will be responsible for the decision-making during a crisis and ensure that is communicated throughout the supply chain. Often times the communication channels break down, and a lot of people will act and react on their own thinking that they are doing the right thing, when in fact it may hurt the overall plan.



3. Don't put all of your eggs in one basket. Develop and use on an ongoing basis alternative relationships with suppliers and logistics networks. Use the services of multiple carriers at all times who use different ports of dispatch. This provides the ability to control costs and service levels in normal times and flexibility in times of high demand or disaster recovery. Have the ability to diversify transportation. Transportation routes maybe disrupted, so it is important to have alternate means of transportation.



4. Demand disaster plans from your suppliers and logistics providers, then review and update these plans on a regular basis. Test the alternatives 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 that will impact your supply chain: Weather, port and transportation strikes, fuel prices, currency exchange, inflation, labor rates, pending legislation (i.e. trade sanctions, quotas, anti-dumping duties, free trade programs), political elections that may alter the country's view of trade.



7. Analyze your products. Understand how demand for your products will be affected by the emergency. For example, before Hurricane Charley, 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 storm hit.



8. Develop a flexible supply chain that is able to capture the large fluctuation in demand. If your products are needed in case of an emergency, make sure your supply chain has the capacity to keep up with large increase in demand. If your products are not needed and demand drops, make sure that the pipeline can be slowed down to avoid a build up of unnecessary inventory.



9. Have a well 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 best as possible.



10. Be prepared to avoid certain regions during certain months. For example, Florida ports are subject to hurricanes from June to November. For products destined to Latin America and the Caribbean that gateway out of Florida, carriers, distributors and exporters should have alternate gateways with rates and frequencies established. Perishables or other time sensitive goods may need to exclude South Florida ports from their distribution networks through the more hectic 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, this provide opportunities to avoid port congestion.



12. Back up your files. Ensure that all trade-related documentation  especially documents that require keeping for five or seven years, depending upon the regulatory agency  is backed-up/saved in electronic format somewhere offsite. That way, if all records are lost in the actual site, they're easily accessed from a different location.



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 outside global trade experts to assess risk and help strengthen your supply chain.

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How is your supply chain coping with the aftermath of Hurricane Katrina? Send your stories and advice to Andrew K. Reese, editor of Supply & Demand Chain Executive.

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