Justin Fogarty over at Supply Excellence has reminded us in this blog post that hurricane season is again upon us.  While this year’s hurricane season is forecast to be near or below average, there is still a 48% risk of a major storm hitting the US.  Justin’s blog includes steps from Rachel Rutoski’s post which provides excellent advice for companies looking to reduce risks from natural disasters.  I’ve summarized her advice here:

• Get proactive, rather than reactive.  Establish contingency plans BEFORE the event happens
• Do the Math.  Figure out what alternative transport modes / routes will cost. This will help make decisions quickly
• Beware the Bullwhip effect. Understand the downstream implications of a disruption
• Have a game plan for natural disasters

One thing to remember.  If a natural disaster does strike, your company won’t be the only one scrambling to re-route traffic out of the affected area.   Make sure your contingency plans include contracts with alternate carriers or previously defined alternate routes so that the switchover happens quickly and doesn’t get bogged down.   Also, be sure to account for the extra cost …if shipping companies are near capacity or if you are making emergency route changes, you may need to pay a premium to get your goods moved.

Justin’s article focuses on the impact of a natural disaster on transportation through that zone.  A more significant impact can occur if your supplier’s business is in that area and is impacted by the disaster.  A National Association of Manufacturers (NAM) Survey reported that 32% of respondents said that damage caused by Hurricane Katrina in 2005 affected their ability to ship products to their customer.  To mitigate this risk, companies need to understand what parts are critical (sole sourced or long lead time parts that are used in higher volume / value end items) and whether suppliers of those parts are in high risk areas.  Those parts that are critical and at risk should have a contingency plan.   Contingency plans could include the following;

• holding a buffer inventory or the part at risk
• identifying  or developing alternate sources for the critical part.
• identifying alternate parts used in an assembly
• identifying substitute items that could be sold in place of the items that can’t be built

Similar to transportation contingencies, it’s too late to develop a plan if the event has already happened.  Make sure that you identify the risks and develop contingencies now,  before the disaster strikes. 

What contingency plans do you have for this year’s hurricane season?  Post a comment back and let us know!

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