When I was growing up in the south suburbs of Chicago, my Dad was the mayor of our little town. Being a small town politician, he was involved in all matters involving municipal operations and government, including sanitation. The one phrase I remember my Dad using was “the person who controls the sewers controls the city”. Not cool or sexy to be sure, but it sure rings true, particularly when you compare it to supply chain disruptions.
Not to belabor the “toilet talk” but at the recent CSCMP conference I attended a session entitled: “Supply Chain Disruption: What to do when the Toilet Doesn’t Flush”. Mark Heinrich from Microsoft and Mike Regan from TranzAct shared the speaking duties and both did a great job impressing upon the audience the importance of responding to chaos and how they approached their decisions.
So my question to you today is: Are you prepared for when the sewers clog and the toilets don’t flush? Or to relate it to your supply chain, how did you fare in response to the Hanjin bankruptcy? It seems obvious that the industry lacks the ground rules to deal with the situation and it appears that most of us are making it up as we go along. To minimize the collateral damage, industry wide ground rules among carriers, terminals and other supply chain participants seem to be in order.
What about the weather related mega-storms we have experienced in the past couple of years? I don’t think Supply Chain executives realize the power of they have controlling their “sewer” (read supply chain). The only time they get noticed is when things go awry.
A larger issue for shippers is the increasing fragility of the supply chain and its transportation providers in general. While ocean carriers and ports have been the primary indicators of disruption, shippers also need to keep an eye on their motor carriers, both local and long-haul truckers and railroads. The carriers you use and their financial stability can make a big difference. It will be interesting to see whether financially sound carriers will be able to extract a rate premium for the security they offer to shippers. While current freight demand is soft and there appears to be enough capacity to go around, shippers should enjoy it while it lasts. The time is coming that if a carrier isn’t being compensated for providing surge or insurance capacity, they simply won’t provide it.
What this means for shippers is that their transportation providers are much less resilient than they used to be. Supply chain disruption can take many forms, be it financial distress, operational mistakes, natural disasters (an ever-growing threat thanks to climate change), or an unexpected uptick in demand.
I believe one of the key factors in managing disruption is to plan for it. Now you can’t divine every possible scenario but you can identify the possibility of major disruptions and construct a response. Having a sound Business Continuity Plan helps. Having table top enactments of those disruptions help even more.
Reliability isn’t free and as shippers we need to be prepared to pay the price for quality.