August 21, 2014 Leave a comment
The ways companies respond to emergencies are as varied as the types of incidents that can disrupt operations. But a key feature of effective response efforts that emerged during a recent gathering of supply chain risk experts organized by MIT CTL is aligning the company’s reaction to the scale of the disruption.
A logistics services provider has three levels of response. Level 1 pertains to local crises, but these might still be serious in nature. The devastation caused by a tornado, for example, is usually localized but still extremely traumatic. Level 2 responses cover regional situations that often involve multiple business units and geographies, and Level 3 is a corporate-wide emergency.
Similarly, an automotive company has three response team structures. One structure is at the local level. A second structure consists of a series of security information centers located around the globe and at headquarters. These centers are staffed by 6-8 people whose primary responsibility is to monitor personnel, namely senior executives who are traveling around the world.
The company’s third response structure is supply-chain based. Located near the corporate HQ, this Command Center is a conference room equipped with wireless communication, laptops, whiteboards and flat panel monitors. The center responds to all manner of disruptions and is staffed by cross-functional personnel. Most recently, a steel supplier experienced a roof collapse and then a fatality during reconstruction that closed its facility for six weeks. The supplier served every one of the company’s assembly plants as well as 80 other automotive suppliers. The command center was activated within 24 hours of the incident, and the company’s supply chain team worked to identify which parts were affected, how much inventory was on hand, and what spot buys were necessary to plug gaps in supply.
The three-tier response structure helps companies to react quickly and decisively to disruptions – key to speedy recoveries. A CPG firm’s local/national/global response effort was called into action in April this year following an earthquake in Mexico. Six hours after the earthquake struck, the company had structural engineers at its facilities to verify safety and operational integrity.
Within the local/regional/global disruption response structure, multi-level alarm systems can be activated for handling events of escalating importance.
For example, the automotive company has set up a stepped alarm process in its plants that use exception-based monitoring to trigger alarms and alert response teams. The first alarm kicks in at the factory floor level when inventory falls below a certain threshold. Second and third alarms activate when carriers do not arrive within a 15-minute window and when a supplier is unable to ship parts. If there is no inventory to make a part, another alarm is triggered. If the situation is out of the plant’s control – when adverse weather is disrupting operations, for instance – the alarm system is escalated to the command center to decide how to allocate scarce supplies of the part(s) affected. The command center also gives guidance to suppliers; it might advise a supplier to deliver to an alternate facility that is not experiencing storm conditions.
Another way to streamline the recovery process is to build a response structure that clearly differentiates between staff safety and the demands of restoring the business to normalcy.
A high-tech company has two teams that work independently and in parallel when a disaster strikes: the Emergency Response team and the Business Recovery team. The former deals with safety issues, while the latter team focuses on what is needed to get stricken facilities back up and running. The company has learned that this parallel structure is necessary because it’s difficult for the same team members to handle the emotional issues of employee safety as well as the demands of business recovery.
For more information on MIT CTL’s supply chain risk research contact Deputy Director Jim Rice at email@example.com.