By Bridget McCrea
When it comes to coordinating crisis activities with other members of the supply chain, some companies get it and others don’t. As a whole, electrical distributors are critical of their own abilities to react to crisis in concert with other supply chain members. According to NAED’s The Electrical Distributor of 2020 survey, 24 percent of companies responded “not at all” when asked if their firms coordinate activities with supply chain partners during a crisis.
When asked to rate their own distributorship’s ability to resume normal operations after a crisis, 43 percent responded “good.” So while the electrical distributors are confident in their abilities to bounce back after a crisis, they clearly will have more difficulties in responding as part of the broader supply chain.
Bob Boyd, president and CEO at Charlotte, N.C.-based Agility Recovery, isn’t surprised by the results of the NAED survey. “Vendor involvement is critical during the advanced planning, crisis, and recovery stages of a disaster,” says Boyd, “but it’s an area that most organizations don’t plan for at all.”
Even those companies that do take the time to develop, test, and use disaster recovery plans tend to ignore one of their most valuable assets: their suppliers. “Firms are too internally focused on IT networks, communication abilities, and their people,” says Boyd. “As a result, they neglect key resources like business partners and suppliers.”
Such oversight can cost distributors dearly. Boyd says 150 presidentially-declared disasters have impacted the U.S. during the last two years alone – each one wiping out companies that did not have adequate disaster plans. Those firms that lack such plans typically never reopen, says Boyd, while another 40-50 percent will close their doors within the two years following the disaster. “Every state in the country has had some type of disaster within the last two years,” says Boyd. “You can’t just bury your head in the sand and say ‘bad things won’t happen to us.'”
Putting the Time Into Planning
Distributors who aren’t convinced that time spent working alongside suppliers to prepare for disasters need only look at international disasters like the Thailand floods and the Japan tsunami as proof that such pre-planning works. “The companies that had recovery plans in place during those disasters were able to maintain supply, build their products, and deliver those items to customers,” says Joe Payne, vice president of professional services at Source One Management Services, LLC, in Willow Grove, Pa. “The ones that didn’t lost market share and revenue. Because they had to raise prices to offset their own losses, they also generated a lot of customer dissatisfaction.”
To avoid this trap, Payne says electrical distributors should look first at exactly who their key suppliers are. Which ones supply the most critical, in-demand components? Which ones will you not be able to live without? Which of those suppliers have the highest risk of outage in the face of disaster? Asking these and other questions will help you whittle down the list instead of getting overwhelmed by the names of 100+ vendors that you work with.
Once identified, those suppliers should be contacted to set up initial meetings around disaster and recovery planning. Understand that not every vendor will want to reveal the “kinks” in its supply chain, Payne points out, and be prepared to take other measures if that’s the case. “If you have suppliers that don’t want to talk about it you have two options,” he says. “You can buy additional inventory from the high-risk suppliers or come up with dual sources of supply.”
In many cases, suppliers will be open to working through joint disaster recovery plans, says Payne, particularly with the rash of natural disasters and other events that have taken place over the last few years. (According to Insurance Journal, insured losses in 2012 were 36 percent higher than the 10-year average [$72 billion vs. $53 billion] because the two most costly events – Hurricane Sandy and a year-long drought – of the year occurred in the U.S.).
When meeting with vendors, Payne says key points to cover include perceived risk (what could happen?), possible supply chain bottlenecks (what could hold up supply?), logistical issues (will the goods get through to our distributorship in case of emergency?), and the financial impact of these various challenges. Other important points to discuss and plan for include key contact people (who are they and how can they be reached during an emergency?), escalation plans (what happens if things get really bad?), and backup logistical plans that can be rolled out in the event of a disaster.
While it may take time to work through these and other issues with vendors, Payne says the payoff will be well worth it. Acknowledging that most companies are working in a leaner, streamlined fashion as a result of the most recent recessionary period, he says now is the time break out of that mold and put some time into forming strong ties with vendors who could serve as your lifelines in case of emergency or even disaster.
“There’s no doubt that this will take some legwork and collaborative thinking,” says Payne, “but when you can build procedures and policies jointly that will offset risk for both entities, it’s definitely a win-win game.”
Editor’s note: Come back to tedmag.com Friday for six partnering points to keep in mind.
McCrea is a Florida-based writer who covers business, industrial, and educational topics for a variety of magazines and journals. You can reach her at email@example.com or visit her website at www.expertghostwriter.net.Tagged with tED