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1、Planning for Supply Chain DisruptionsYossi SheffiMIT, Cambridge MAOutlineThe threatPast disastersSupply chain preparednesspreliminary research findingsTerror Threats:PhysicalChemical/biologicalNuclear/”dirty”Cyber attackThe Economic Targets: InfrastructurenAgriculturenTourismnTransportationnElectric

2、 gridnBanking & finance systems nOil and gasnCommunicationsnContinuity of governmentnMedical services delivery nWater supplynFood supplyLearn From Past DisastersKobe Earthquake - Jan 16 1995, 6,300 killed, 100K buildings destroyed, 80K damaged. Total damage: $250BBhopal - Dec 2nd, 1984, Union ca

3、rbide factory, 2500 dead, 50,000 hospitalized.Chernobyl April 26, 1986, 15M people affected, Belarus still affectedLearn From Past DisastersInfluenza 1918 675,000 dead in the US alone; Started in army barracks and prisons in the US; 30 50 million worldwide (“the Spanish Flu”)The Mont Blanc - Dec. 6,

4、 1917 the Mont Blanc explodes in Halifax port (400,000 lbs. Of TNT, 2,300 ton of Citric Acid, 10 tons of gun cotton, 35 tons of Benzol). 2500 dead; 9,000 injured; shock wave felt in Cape Bretton (270 miles away).Foot and Mouth Disease (FMD) and Mad Cow Disease UK, 2001, quarantines and slaughter of

5、suspected animals; $3B - $5B hit.Danger Government ResponseOn 9/11:nFord idled several production lines intermittently due to delays at the Canadian bordernToyota came within hours of halting production since a supplier was waiting for steering wheels shipped by air from GermanyAfter Flight 587 cras

6、hed, Nov. 12, 2001nBridges to NY were closed for several hoursIn UK FMD nFarmers costs $1BnTourism costs (after the government issued a ban) $2B - $4BJapanese government bankrupted many private hospitals in the Kobe areaPreparing for Another DisruptionSupplier relationshipsnCore suppliers vs. public

7、 auctionsnUse of off-shore suppliersnDual supply relationshipsInventory managementnThe vulnerability of JIT manufacturingnAdvantages of JIT manufacturingnStrategic Inventory (SoSo management)Knowledge backupnDeveloping backup processesnBacking up the companys knowledgenStandardization and cross-trai

8、ningnCRM and customer relationshipsSupply Chains under UncertaintyBetter visibilitynTransportation visibility involves multiple handoffsnNeed for full supply chain visibility, including detailed handlingnIndependent data acquisition sourcesBetter collaborationnLast decade: VMI, CMI, EDR, QR, JIT, JI

9、T II, CPD, CPFR Now: implementationnNew: joint emergency planning (alternate shipping methods; alternate suppliers)nAlso: security knowledge sharingBetter forecastingnPostponementnBuild-to-ordernProduct variability reductionsnCentralized inventory managementIndustry-Government partnershipsClear role

10、 for cooperation happening alreadynIndustry participation in Free and Secure Trade (FAST) and Customs Trade Partnership Against Terrorism (C-TPAT)n“Known shipper” and “known carrier” programsDifficult to get terrorism insurance role of government as insurer of last resortInsurance companies are only

11、 starting to model terrorism threats.Efficiency vs. redundancy (who pays for cells, electricity, medicines, etc.)Collaboration Vs. Secrecy (example: hazmat placards)Centralization vs. dispersion (physical vs. I/T attack)Lowest bidder vs. known supplier (whats in the container)Security vs. privacy (v

12、s. efficiency of search)New Business Trade-offs:When Disaster StrikesCrisisImpactPrepared ManagementUnprepared managementHurricane Mitch(Nov. 1998)Floods destroyed banana plantationsChiquita leveraged existing alternative sourcesDole took time to find alternatives and lost sales andTaiwan Earthquake

13、(Sep. 21 1999)Component supplies to PC OEMs disruptedDell priced to steer customers to available componentsApple could not change config.- faced backlogs and lost salesMad Cow & FMD(Spring 2001)Shortage of hides for leather manufacturersGucci, Wilson supply contracts; Naturalizer, Danier - inven

14、toriesEtienne-Agner suffered cost increases9/11Closed bordersDaimler-Chrysler Alt. modes based on contingency plansFord idled several plantsPreliminary Research DataTwo responses: active and “do nothing”Active:nPast bad experiencenCorporate culture (defense business, work in dangerous places around

15、the world, etc.)nSecurity departments staffed with experience“Do nothing”:nBelieve 9/11 is a one-time eventnCannot find a way to paynBelieve government will helpAll companies most concerned about government response to terrorist attacksAll companies report a large increase in cyber attacksPreliminar

16、y Research Data(Active Respondent)Build redundanciesTighten collaboration with partnersWork with government to understand and influence security initiativesLook for technology to help (RFID, GPS, e-cargo seals, biometrics, sensors, etc.)EducationnAwarenessnContingency planning (including drills with supply chain partners)SummaryA long term adjustmentIn past incidents: the economic i

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