After the Fall

Although the September 11 attacks devastated our nation, business may be all the wiser because of them. Re-evaluating your company's supply chain in light of crises, foreseeable or not, is the way to move forward.

Turning off the radio before I left for the hospital. That's what I was doing September 11 when I heard that the bad guys had forever changed the world. As I drove to the hospital, I heard that the World Trade Center had not only been attacked, but had fallen. Not collapsed or imploded. Those terms are too sterile. Like a strategic point in a ground war seized by the opposing forces, the emblem of American business fell, because that's what happens to people and things we rely on.

Later still, I heard of the attack on the Pentagon, and the fourth airborne bomb effort that was thwarted by courageous passengers who, warned of the fate of the other three planes, decided to give their lives rather than perish helplessly and take others with them. I'm too young to remember other turning points in American history - JFK's assassination, the bombing of Pearl Harbor - but I'll forever carry the mental image of that portable radio telling me of a thunderous metallic impact and a choking cloud that, together, signified things would truly never be the same.


Buying and Selling Effected


It wasn't just our psyches that were affected by those cowardly acts. Business also took a terrible blow. Even now, a few months after the death of thousands, it can seem callous to consider business interests, but business is the engine that drives much of the world's humanitarian efforts. Societies with disposable income might buy boy-band CDs, digital cable TV and the fashion fad of the moment, but they also bankroll charities, volunteer time and budget millions for medical research; societies with no disposable income worry about food for the day. Foolish people thought they were striking a blow only at America September 11, but in an economy that's more global than ever before, the strikes at America's business heart lowered the entire world's quality of life.


American commerce is too driven to be brought to its knees for long. It will recover. But what's it looking like now in the post-September 11 world? Forced to now write terrorist attack alongside natural disaster on their contingencies list, how will companies protect and plan for their supply chains? iSource sought answers and understanding for the future.


Down, But Not Out


Soon after the disaster, AMR Research issued a brief report saying that U.S. financial institutions have information technology (IT) systems with redundant hardware, software and data, as well as extensive disaster-recovery systems. As a result, these financial institutions - which comprised many of the companies directly affected by the events - were up and running in an amazingly short period of time, considering the severity of the attacks. Turning the switch on so that all hardware, software and data are working is sync is one matter, but knowing the overall economic impact is another.


According to Bruce Culbert, senior vice president of KPMG Consulting and global practice director for supply chains, the attacks only worsened an already tight economy. The Internet boom had gone bust, and companies had tumbled from the euphoric heights and were dealing with the cold, hard facts that we were in a state of contraction. As Culbert explains, "There was a tremendous amount of uncertainty, and most companies were reeling in and reducing their spending budgets." Then came the attacks, and economies around the world drew in a collective breath and went into an all-too-real combat mode. Culbert says, "In the first few weeks, business basically panicked. They didn't know where we're going to be in terms of the economy, a reliable supply chain and international trading partners, so business is hunkering down even more."


When the FAA halted air travel after the attacks, the world clearly saw, in a way that can't be expressed on a spread sheet, just how interconnected the business infrastructure is. Just-in-time (JIT) inventories aren't as feasible when disaster doesn't let supply chain professionals maintain JIT levels. Yet while some companies have made at least tentative steps away from a reliance on just-in-time inventories, Culbert says that won't be the case across the board.  As he puts it, companies aren't saying I'm going to have a disrupted supply but This uncertainty is really going to impact my business, therefore, what do I need to do? While the reliance on just-in-time inventories might prove to be a liability in the future, should there be further disruptions in the supply chain, the money required to stockpile large inventories just isn't there. If we are indeed involved in the first war of the 21st Century, then American business will do what has always been done in times of war: it will make do.


Putting An e In Crisis


The good news is that e-commerce will go a long way toward facilitating this critical evaluation of business processes. For instance, the visibility into the upstream and downstream supply chain, which was only a dream a few years ago, can be purchased off the shelf. Culbert believes that supplier relationship management in particular will play a big part in companies' strategies. He says, "Companies are trying to figure out 'Who do I do business with? What are my contingencies? How do I continue to rate my partners, both in terms of strategic partners and commodity partners, to get the best mix of price, service and risk?'" 


As is the case with most tools, e-commerce utilities are only as effective as the approach in which they're used. Give the average handyman a set of the most expensive woodworking tools and he only has more expensive things to break. It takes an experienced hand to coax the true utility of those tools, just as it takes experienced and well-planned business processes to get the most of the e-commerce tools available. Culbert says, "You don't need a tool, necessarily, to make the decision that you're going to collaborate with your key partners in the supply chain on new product development." Once that type of collaboration or integration decision is made, then the e-commerce tools can be employed to their maximum effectiveness.


In addition, technology providers, according to analysts, need to help business figure out how to develop supply chains that can proactively react to disaster when it occurs. When companies have automated tools that allow for automated alternative sourcing, then supply chain professionals will be able to play with a range of options. In this way, they can make a switch and still keep their supply chains operating. Basically, what can technology do to help prepare for the worst?


Collaboration: A Big Answer


Collaboration is one e-commerce area in particular that Culbert believes will receive a boost from the new face of business. Companies have long known that it's cheaper to design products online, linking manufacturing, research and development, and supply facilities together via the Internet. The images of September 11 caused many executives to realize that it's safer, too. Air travel is a series of physical connections brought about by large machinery and legions of workers. Collaboration is composed of electronic connections that can be controlled by just a few people. It's not that electronic means of collaboration are immune to any disruptions - one day with a downed Internet service provider (ISP) will prove that - but there are means of routing e-commerce around bottlenecks that just aren't feasible with the conventional means of working together. Planes only take off and land at airports. Computers can be set up almost anywhere.


In addition, collaboration is another tool that can be used to make business leaner and more efficient, which is all the more important in the present economic climate. Culbert says that one of his company's clients, dealing with "big, hairy projects" like airframes, has recently been spurred to increase its commitment to online collaboration. According to him, "In the last three weeks we've consulted with them about five times, and they've already made two commitments to purchase a fairly significant number of licenses from one of the providers in this space and move forward very aggressively with implementing their new product development methodologies and these new tools. They recognize they need to accelerate their product-development cycle in response to what's happened in the last few months."


Strategy is Back


So what's the economic upshot of this body blow to our lives that took place September 11? How will business react, and how will it be changed? Culbert believes that the result of the restructuring and rethinking will be that business will place more emphasis on being strategic. Just as a general has to look at the big picture of the war in order to win the battle, businesses can no longer afford to take a short view of things. They must continually evaluate each facet of their processes to ensure that they're functioning as efficiently as possible.


"Everybody is looking at themselves a little more strategically, says Culbert. They're considering the investments they've made and wondering how they can leverage that. They're looking inside for the next six months. The business climate will be very introspective as companies look at how they do what they already do better, and how they do it with less, and how they can protect that."


Jim Dunn is a freelance writer based in Birmingham, Ala.