Logistics news: Marsh Inc. provides details on potential impact of H1N1 on supply chain and the business world
Sean Murphy, Associate Editor -- Logistics Management, 11/16/2009
Most everyone in the general public knows now about H1N1, how dangerous it is, and how to work to prevent spreading or catching it.
But for supply chain managers, it's not just about hand-washing and personnel management, according to Gary S. Lynch of Marsh, Inc. Marsh has been tracking pandemics since the emergence of H5N1, the so-called "Bird Flu" in 2004, and as Lynch recently told SCMR, supply chain managers need to examine what other effects a pandemic may have on key parts of a company's flow of inventory, goods and raw materials.
With a little advanced planning, Lynch said, supply chain managers will have a better chance of weathering the current pandemic, and can head off disruptions from future pandemics.
One big concern, Lynch said, is the possibility that global sources will be cut off in the event of a major disaster. Lynch said recently, a major electronics component provider was trying to get supplies from Mexico when H1N1 first broke out. Lynch said there was a lot of confusion at the Mexican border, for obvious reasons.
"It delayed getting shipments across the border by 8 days," he said.
Overall, the best way to protect against disruptions like this is to act to prevent disruptions of all kinds. Lynch said supply chain managers need to ask themselves whether they realize the impacts of failures in the supply chain. It doesn't matter how unlikely these failures could be, he said-as a good supply chain manager considers the impacts of all possible failures, likely or not.
This consideration, Lynch said, involves modeling and analysis, which will usually suggest a plan-and hopefully more than one. For example, delays at the border could lead to a shortage in parts. Lynch said supply chain managers should design a window for delay. Find a balance between excess inventory, and a large enough "buffer" to account for possible disruptions.
Lynch cautioned supply chain managers to study their entire supply chains, not just key suppliers.
"It's not just your first-tier supplier. It's your extended supply chain," Lynch said.
Planning for a supply disruption, Lynch said, often leads to companies seeking out multiple, redundant sources. This is a good idea, but Lynch cautioned that three sources all based in a single country won't be any better than one if that country closes its borders. Multiple sources should come from multiple locations for the redundancy plan to work best, he said.
Back home, demands for products may shift on the part of the customer, Lynch said. News of a pandemic will cause a spike in demand for some goods, such as medical supplies, and a drop-off in others.
Read more about Marsh's business advice regarding H1N1 by clicking here.
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