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Monday, September 12, 2005

[ALI] [article] Thirteen Steps for Disaster Planning

Thirteen Steps for Disaster Planning

Here are measures that may be undertaken to lessen the impact of natural
disasters, port strikes and other factors that can cripple the supply chain.

Bernie Hart, global product head of JPMorgan Chase Vastera offers these
emergency planning considerations for maintaining company supply chain
operations in emergency situations.
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
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
2. 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.
3. 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.
4. Don't put all of your eggs in one basket. Develop and use on an on-going
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.
5. 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.
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 which 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 which 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
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
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 5 or 7 years, depending upon
the regulatory agency -- is backed-up/saved in electronic format somewhere
offsite. So, if all records are lost in the actual site, they're easily
gotten to 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

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