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The Business Case for Preparedness
Resilient Supply Chain Management Yields Cost Savings Through Better Forecasting, Smoother Operations, Downsized Warehousing, and Lower Administrative Overhead
May 24, 2008 12:05 AM
"A survey of more than 600 financial executives identified supply chain risk as having the greatest potential to disrupt the top revenue driver."
Resilience strategies not only work in maintaining business continuity but can yield cost savings through better forecasting, smoother operations, downsized warehousing and lower administrative overhead.
Source: "Supply Chain Management under the Threat of International Terrorism", Yossi Sheffi, Massachusetts Institute of Technology, 2001
Key Points:
* On the morning of September 11th, 2001, the United States and the Western world entered into a new era - one in which large scale terrorist acts are to be expected. The impacts of the new era will challenge supply chain managers to adjust relations with suppliers and customers, contend with transportation difficulties and amend inventory management strategies. This paper looks at the twin corporate challenges of (i) preparing to deal with the aftermath of terrorist attacks and (ii) operating under heightened security. The first challenge involves setting certain operational redundancies. The second means less reliable lead times and less certain demand scenarios. In addition, the paper looks at how companies should organize to meet those challenges efficiently and suggests a new public-private partnership. While the paper is focused on the US, it has worldwide implications."
* For example Solomon Smith Barney, the financial services firm, had 7,000 workers in the World Trade Center, all of whom, fortunately, got out in time. The company was up and running within 12 hours using a backup New Jersey site and invoking a set of emergency backup processes."
* Benefits of Shipment visibility: Shipment data visibility allows manufacturers to avoid plant shut down due to part shortages and allows retailers to avoid turning customers away due to unavailability of goods since such problems can be corrected early... The cost savings associated with better forecasting and smoother operations include not only lower inventory carrying costs, and the avoidance of expedited shipments; it also means that warehousing facilities can be downsized and a significant amount of administrative overhead associated with unscheduled activities can be avoided."