Massive winter storms this year have caught many off guard, blanketing two-thirds of the U.S. in snow and preventing the safe transportation of goods.
This type of weather event is more than a major headache for third-party logistics companies. It can be a financial disaster for those that rely on an undisrupted supply chain to move their goods to market.
Companies risk losing more than 40% of annual profit once every decade due to supply-chain shocks. The financial damage can come in a variety of ways, from a manufacturer’s inability to produce sufficient supply to a bottleneck in shipping that adds expense along the way. These disruptions have a ripple effect that ultimately hurts the bottom line.
Natural disasters, infrastructure challenges, financial disruptions, and, of course, global pandemics are unavoidable and largely unpredictable. No one can say when the next major cybersecurity attack or infectious disease will wreak havoc. Logistics service providers, however, can take steps to map out a plan and be prepared to quickly adapt and minimize disruptions.
Following are five things to keep in mind to weather the “storms” that impact supply-chain stability.
Establish strategic alliances to mitigate risk. Strategic alliances with providers and service companies help mitigate the risk of your supply chain being interrupted. These partnerships can include logistical expertise as well as asset-based entities, to facilitate operations and ensure that space is available to alleviate both short- and long-term disruptions to the supply chain.
It’s all about trust. With strong strategic alliances in place, your customers will be reassured that, no matter what happens, their raw materials or finished products will be prioritized and safely moved from Point A to Point B.
Have contingency plans, and budget accordingly. When disaster strikes, it’s difficult to commit to having an “open checkbook.” Conversely, being value-conscious is just as hard when you’re just trying to work through a crisis. That’s why contingency plans should include specified budget allowances.
For example, if one part of the country were to be decimated by a natural disaster, how would that impact overall operations? Would your backup options be able to support the capacity, and how much would that cost? In an era of lean supply chains, these contingency plans are as important as ever, but too few people take the time to formally assess supply-chain risks.
Communicate effectively. The companies that handle storms best will communicate clearly with all stakeholders. In the face of crisis, it’s tempting to rush out and forget the importance of clear communication. Calm decisions are necessary. Understand the specific needs and driving forces of each client, and customize services to offer a complete solution.
Be willing to adapt. Be willing to sacrifice “normal operations” in an abnormal time. For example, consider whether it’s necessary to move a product from Point A to Point B in the middle of a blizzard. If it doesn’t need to arrive until the next day or later, why not wait? Additionally, encourage your partners to make use of their backup plans. If a customer wants delivery during a prohibitive snowstorm, ask whether they have safety stock. After all, that’s what it’s there for.
Embrace technology. Technology should be embraced before, during, and after a crisis.
More specifically, tools such as geospatial tracking provide the power to find answers in real time. A concerned customer might ask about the location of a truck and, using satellite technology, immediately get the answers they need.
One of the great takeaways of COVID-19 is that powerful new virtual tools allow businesses to operate even in the face of physical obstacles.
Bottom line: plan for the worst. Man-made and natural disasters are becoming more common and costly, according to a report by McKinsey & Company. Whether it’s a winter storm, infectious disease, or something else entirely, managing the crisis comes down to planning for the worst-case scenario. Think of it like buying insurance for your home or car, and hoping you’ll never need it.
Recent events have proved that supply-chain leaders absolutely need contingency plans. Ultimately, we’re in the business of problem-solving as well as problem-preventing, and having the right contingency plan in place is good for everyone.
Andy Kirchner is owner and chief executive officer of Nots Logistics.