Building in Resiliency

If there’s one lesson to learn from the pandemic, it’s that supply chains must now become even more resilient to respond to all kinds of emergency events. Many companies already had emergency plans in place when the pandemic started but found these plans to be inadequate and/or insufficient to address the unique circumstances of COVID-19.

Disaster planning and preparedness should be a flexible framework that can be effectively adjusted and applied in response to any emergency. That means that instead of planning for a specific event such as a fire or hurricane, your plan establishes a framework for responding. This allows your company to respond to all kinds of events and emergencies.

A preparedness response framework consists of six major components:

• roles, responsibilities and authority;
• funding;
• people plan;
• systems plan;
• supply chain plan; and
• conducting training and drills.

Roles, responsibilities and authority

To be organized for a response to any emergency, you are going to need a rapid response team. When an emergency happens, people always look for who is in charge or who is taking charge. In preparedness planning, designated and recognizable leaders must be selected so that people know who to follow. Without designated leadership, the response can easily degrade into chaos. It is important to appoint and publicize who these leaders are before any disaster happens. Each leader must have a clearly defined role and understand his or her responsibilities in responding.

Enabling response teams. The first question to ask is what kinds of teams need to be established. In the case of a fire or storm, the top priority is to lead people to safety, by the department response leaders. These people are typically designated and well-known to the people working in their areas. You will also need a team to address the fire itself or other building safety responses.

During the pandemic, response teams were enabled to address different kinds of employee safety concerns such as social distancing, acquiring and distributing PPE supplies (you should always have these supplies on hand for immediate response), and acquiring plexiglass barriers. The key is to have a response leader already designated to work on responding to these issues. Flexibility is essential.

Other response teams had to be organized to deal with supply chains including locating alternate suppliers and sources to keep operations going. Engineering staffs were also engaged to find or develop alternate parts for production. One Midwestern tractor manufacturer began using 3D printing for parts that they could no longer procure from their supplier in China.

After 9/11, terrorism was foremost in our preparedness planning. More recent events such as the cybersecurity attacks, mass shootings, and the condo building collapse in Florida all require flexibility in responding and different kinds of response teams.

Regardless of the type of emergency, certain organizing aspects can improve the effectiveness of the team. This organizing framework can be applied when developing different kinds of teams.

• Designate an executive sponsor in charge of the overall disaster preparedness program, and who has executive authority to engage the response teams when needed.
• Determine what response is going to be required. Evacuation? Health and safety concerns? Personnel management? Global Supply Chains? Reengineering?
• Identify and establish a leader for each kind of response team; allow the leader to select his or her own members of the team. Have the teams develop their own plans with oversight by the executive sponsor.

Many companies have evacuation plans in place and warning systems such as fire alarms. Designated leaders in each department, recognizable with a special hat or vest or designated nameplate, are prepared to act immediately. During practice drills for fire or hurricanes or other natural disasters, these leaders are expected to organize and lead employees out of the building or to protected areas. This is a good first step, but depending on the disaster, this kind of response may not be appropriate.

When the pandemic became a recognizable problem for business, best practice companies used teams in different ways. Evacuation of buildings was not necessary, but cleaning and sanitation were. Some teams were assigned to business interruption response such as locating alternate suppliers, preparing alternate logistics networks and setting new sanitation standards.

The key to successful response teams is their ability to respond and solve problems.

Funding

One thing that is often overlooked when planning for emergencies is funding. To enable teams to do their job may require immediate access to funds without going through levels of approval. An emergency fund should be set aside for each team together with the authority to spend up to a certain amount. When a disaster happens, you won’t have time to talk to the CFO about money or the COO about making operational decisions.

For example, after a plane crash, explosion, or building collapse, response teams may have an immediate need to hire refrigerated trucks for body recovery and storage. Drivers may need fuel to keep generators running or purchase other supplies. Cash may be required to pay for food and water.

In addition, a simple accounting system must be available to easily record the money being spent and later reconciled with the company’s books.

People plan

If the emergency is a fire, it’s obvious that people must evacuate the building. But in the case of other kinds of emergencies, the right thing to do for employees may not be so obvious. When the pandemic hit, many companies switched to “work from home” instructions that had to be approved and communicated. With these policies came a need to address communications via video conferencing, the availability and repair of laptop computers, organization of staff meetings, and so on. Human Resources departments had to scramble to design and support different kinds of workplace changes.

In preparing a people plan for disasters, the employee’s health and safety are paramount and take priority. Over time, HR departments may also need to address tangential issues such as mental health, morale issues, and ultimately, the employees’ return to work.

Systems plan

With cyberattacks increasing in frequency and magnitude, planning a response and backup systems plan is essential for business continuity. Cyberattacks can affect the whole company and can halt business in a matter of minutes.

While the IT department will likely take the lead in addressing the systems issues, other departments will play important supporting roles. Again, HR must address the needs of the employees, while finance and accounting must address banking issues affected by a systems attack. Manufacturing operations may be disrupted along with inventory management and logistics. Cyberattacks on a company’s IT systems can be so pervasive and crippling across every company operation, that every department must have a response plan. When company systems are down, nearly everyone in the company is affected.

Supply chain plan

Supply chain disaster preparedness is markedly complex because of the number of parties that are likely to be involved. If parts and materials are unavailable or get stuck in the supply chain due to logistics issues, the
production line may be stalled.

Wuhan, China—suspected “ground zero” for the pandemic—is China’s automotive city, just as Detroit is America’s motor city. In February 2020, the Chinese government completely shut down Wuhan, including closing all of its factories. Within a week, the Hyundai factory in Korea had to shut down the production of cars due to the lack of parts coming from Wuhan, and soon after that, shortages of parts began to affect the production of motorized vehicles around the world.

With so many companies adopting lean processes over the past decade, any disruption in the delicate balance of global supply chains has a whipsaw effect. Inventories have been reduced and single-source procurement has become commonplace. While lean processes have been very effective in cost reduction, they have also increased risks of stock-outs and other disruptions.

The pandemic was a major wake-up call for supply chain professionals. Focusing on how to reduce global risk is now a very important part of company strategy and disaster preparedness.

Global supply chains require a different kind of planning. To mitigate supply chain risk, many companies have established alternate suppliers, identified sub-suppliers and sub-sub suppliers and the associated risks, and initiated much closer management control over the entire value chain. Some companies have adopted a new class of supply chain software that uses Artificial Intelligence to identify new risks and provide early warning signals.

Advanced planning to reduce supply chain risks includes:

• changing purchasing policy to include multiple alternate sourcing in several regions of the world;
• identifying sub-suppliers and their vulnerabilities;
• planning for alternate logistics routes and transportation modes (air, ocean, rail)
• beefing up management oversight of suppliers to discover risks;
• improving supply chain communications to notice early warning signs and risks; and
• rethinking inventory levels to include some stockpiling of critical parts and materials, and to reduce the possibility of production shortages.

When emergencies do happen, the supply chain team needs to be prepared to respond to alternate sourcing and logistics requests. The team will also need access to funding for emergency buys in support of other teams and departments.

Conducting training and drills

It’s not enough to have written plans and designated teams. To be effective, you must also practice your responses to different kinds of emergencies. Companies with the best practices conduct drills at least once per year. Physical practice planning such as fire drills helps people to understand what to do and who is in charge. Other practice drills may include simulations and tabletop drills. Practicing for emergencies will identify areas of weakness and the specific areas in which your plans need more work.

Planning for disasters and conducting drills to test those plans may seem like a low priority when faced with the pressures of daily operations, but taking time to practice is a necessary part of effective preparedness.