By David Turbide, CFPIM, CMfgE, CIRM
Since you’re reading this after Friday, December 21st, 2012, the world did not come to an end as some thought it might at the end of the Mayan calendar cycle. On the other hand, I just heard a report that there is an asteroid that may hit the earth in 2029 or, if it’s a near miss, will return in 2036 for another try.
Predictions of the end-of-the-world disasters are quite common – there’s always somebody claiming that the end is near, it seems. But most of us don’t change our lives because of these predictions, no matter how credible. Lack of real credibility may be a part of that, but a bigger part may be that there isn’t anything that can be done to prevent or mitigate the disaster; and if it actually occurs, recovery is not an issue.
Business disruptions and supply chain disturbances are another story altogether. Credibility is replaced by probability: we know that these things actually do happen, we just don’t know when, where and to whom. And there is usually a multitude of ways to avoid the risk, lessen the impact and/or position resources for quick recovery. These disasters may be serious but they are not the end of the world.
Say, for instance, a supplier’s factory blows up (a rare but possible scenario). It is, indeed, the end of that source, but other sources may be available. If not, the plant can be re-built or another supply can be developed.
In another scenario, perhaps the part or material cannot be recreated. In that case, the product can be redesigned to not need that part/material. We do this all the time for sustainability (substituting a renewable material for a non-renewable, for example), or simple economics, substituting a less costly material or design.
Businesses don’t intend to allow this kind of disruption to cause the end of the business, but it does happen – more often than you might think. Reports show that 25% of businesses do not survive such a disaster; most never financially recover and 75% fail within a few years. There are a number of reports on this, each with different statistics – but all of which point to significant risk to the business.
It is universally agreed upon that anticipation and preparation are essential for both reducing risk and for improving the odds of recovery. There is certainly a cost for prevention and preparation, but these costs are manageable. However, the cost of recovering from an unanticipated disaster may not be.
Dave is a consultant, writer, educator and subject matter expert with first-hand knowledge of manufacturing management practices, supply chain functions and enterprise systems. He is certified by APICS as a Supply Chain Professional, at the fellow level in Production and Inventory Management and in Integrated Resource Management. He authored six books, published hundreds of articles and is currently President of the APICS Granite State Chapter. www.daveturbide.com