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PlanningforSupplyChainDisruptionsYossiSheffiMIT,CambridgeMAOutlineThethreatPastdisastersSupplychainpreparednesspreliminaryresearchfindingsTerrorThreats:PhysicalChemical/biologicalNuclear/”dirty”CyberattackTheEconomicTargets:InfrastructureAgricultureTourismTransportationElectricgridBanking&financesystemsOilandgasCommunicationsContinuityofgovernmentMedicalservicesdeliveryWatersupplyFoodsupplyLearnFromPastDisastersKobeEarthquake--Jan161995,>6,300killed,100Kbuildingsdestroyed,80Kdamaged.Totaldamage:~$250BBhopal--Dec2nd,1984,Unioncarbidefactory,2500dead,50,000hospitalized.Chernobyl–April26,1986,15Mpeopleaffected,BelarusstillaffectedLearnFromPastDisastersInfluenza1918–675,000deadintheUSalone;StartedinarmybarracksandprisonsintheUS;30–50millionworldwide(“theSpanishFlu…”)TheMontBlanc--Dec.6,1917theMontBlancexplodesinHalifaxport(400,000lbs.OfTNT,2,300tonofCitricAcid,10tonsofguncotton,35tonsofBenzol).2500dead;9,000injured;shockwavefeltinCapeBretton(270milesaway).FootandMouthDisease(FMD)andMadCowDisease–UK,2001,quarantinesandslaughterofsuspectedanimals;$3B-$5Bhit.Danger–GovernmentResponseOn9/11:FordidledseveralproductionlinesintermittentlyduetodelaysattheCanadianborderToyotacamewithinhoursofhaltingproductionsinceasupplierwaswaitingforsteeringwheelsshippedbyairfromGermanyAfterFlight587crashed,Nov.12,2001BridgestoNYwereclosedforseveralhoursInUKFMD–Farmers’costs<$1BTourismcosts(afterthegovernmentissuedaban)$2B-$4BJapanesegovernmentbankruptedmanyprivatehospitalsintheKobeareaPreparingforAnotherDisruptionSupplierrelationshipsCoresuppliersvs.publicauctionsUseofoff-shoresuppliersDualsupplyrelationshipsInventorymanagementThevulnerabilityofJITmanufacturingAdvantagesofJITmanufacturingStrategicInventory(SoSomanagement)KnowledgebackupDevelopingbackupprocessesBackingupthecompany’sknowledgeStandardizationandcross-trainingCRMandcustomerrelationshipsSupplyChainsunderUncertaintyBettervisibilityTransportationvisibilityinvolvesmultiplehandoffsNeedforfullsupplychainvisibility,includingdetailedhandlingIndependentdataacquisitionsourcesBettercollaborationLastdecade:VMI,CMI,EDR,QR,JIT,JITII,CPD,CPFR…Now:implementationNew:jointemergencyplanning(alternateshippingmethods;alternatesuppliers…)Also:securityknowledgesharingBetterforecastingPostponementBuild-to-orderProductvariabilityreductionsCentralizedinventorymanagementIndustry-GovernmentpartnershipsClearroleforcooperation–happeningalreadyIndustryparticipationinFreeandSecureTrade(FAST)andCustomsTradePartnershipAgainstTerrorism(C-TPAT)“Knownshipper”and“knowncarrier”programsDifficulttogetterrorisminsurance–roleofgovernmentasinsureroflastresortInsurancecompaniesareonlystartingtomodelterrorismthreats.Efficiencyvs.redundancy(whopaysforcells,electricity,medicines,etc.)CollaborationVs.Secrecy(example:hazmatplacards)Centralizationvs.dispersion(physicalvs.I/Tattack)Lowestbiddervs.knownsupplier(what’sinthecontainer…)Securityvs.privacy(vs.efficiencyofsearch)NewBusinessTrade-offs:WhenDisasterStrikesCrisisImpactPreparedManagementUnpreparedmanagementHurricaneMitch(Nov.1998)FloodsdestroyedbananaplantationsChiquitaleveragedexistingalternativesourcesDoletooktimetofindalternativesandlostsalesandTaiwanEarthquake(Sep.211999)ComponentsuppliestoPCOEMsdisruptedDellpricedtosteercustomerstoavailablecomponentsApplecouldnotchangeconfig.-facedbacklogsandlostsalesMadCow&FMD(Spring2001)ShortageofhidesforleathermanufacturersGucci,Wilson–supplycontracts;Naturalizer,Danier-inventoriesEtienne-Agnersufferedcostincreases9/11ClosedbordersDaimler-ChryslerAlt.modesbasedoncontingencyplansFordidledseveralplantsPreliminaryResearchDataTworesponses:activeand“donothing”Active:PastbadexperienceCorporateculture(defensebusiness,workindangerousplacesaroundtheworld,etc.)Securitydepartmentsstaffedwithexperience“Donothing”:Believe9/11isaone-timeeventCannotfindawaytopayBelievegovernmentwillhelpAllcompanies–mostconcernedaboutgovernmentresponsetoterroristattacksAllcompanies–reportalargeincreaseincyberattacksPreliminaryResearchData
(ActiveRespondent)BuildredundanciesTightencollaborationwithpartnersWorkwithgovernmenttounderstandandinfluencesecurityinitiativesLookfortechnologytohelp(RFID,GPS,e-cargoseals,biometrics,sensors,etc.)EducationAwarenessContingencyplanning(includingdrillswithsupplychainpartners)SummaryAlongtermadjustmentInpastincidents:theecono
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