Super Storm’s Ripples into the Supply Chain

“Neither snow, nor rain, nor gloom of night …” the familiar words known as a creed for postal workers, actually originated from an inscription on the main post office in New York City.  Those words could as well be ascribed to the police, firefighters and other first responders of that city and the rest of the Northeast that have helped to keep millions safe during, and in the aftermath of, “super storm” Sandy.

Our thoughts go out to the people of that region where many of us at IBM reside.

Sandy is just another reminder of the array of risks and unexpected developments that impact our businesses when least expected, and often when least convenient.

The storm cancelled more than 15,000 flights across the Northeast and the globe.  The Port of New York and New Jersey, which handles more than 200,000 tons of cargo a day, remains closed in the wake of the storm.  Shippers in Asia are planning for weeks of delays as air and ocean transportation networks clear the backlog for shipments that connect through the region.

The hurricane may have a more near-term logistical and transportation impact than a direct supply chain impact.  However, history teaches us that the fallout from such events can be “unpredictable” – or at least very complex.  For example, weeks after the Japanese tsunami, many manufacturers with whom I work were talking about the unexpected impact the event had on their sub-tier suppliers.  Their first concerns had been about their own direct material suppliers that were located in Japan, but the actual impact was more prominently felt in delays from their suppliers in other markets, who themselves were even more reliant on those Japanese suppliers.

With a more globally disperse supply base, companies must be increasingly concerned with external risks – whether those be environmental risks such as hurricanes, geo-political risks such as wars, industry and commodity risks such as price fluctuations, or supplier-specific risks such as financial failure.

Seven out of 10 companies report that risks have increased significantly for their businesses over the past ten years because of globalization.  Which probably explains why supplier risk management is atop the CEO’s and CPO’s agenda.

A best-in-class supplier risk management program, at their core, can empower an organization with the intelligence needed to make informed business decisions, to protect themselves against all manner of supply chain disruptions and failures.  They help companies to identify strategic and preferred suppliers and to develop a more flexible supply base that can adapt to these various events.