sharon sanders
Editor-in-Chief & President
Saturday, September 06, 2008
Supply Chain Of Fools
# 2282
http://afludiary.blogspot.com/2008_09_01_archive.html
Over the past 40 years or so, we've seen an amazing transformation of how business is conducted in developed nations.
We've streamlined our production capabilities to match demand, we've created JIT (Just-in-Time) Inventory delivery systems to eliminate warehouse costs, and we've increasingly come to rely on high-tech professionals to keep everything running smoothly.
While the rewards of this system have been numerous, including the ability to sell sophisticated electronics to consumers at amazingly low prices, there is a significant downside as well.
Our modern JIT supply system is fragile and vulnerable to attack.
And while our thoughts may immediately jump to thoughts of terrorism, there are far more likely, and much more disruptive threats out there to consider.
Hurricanes, earthquakes, and pandemics to name just three. And they all can, and will, happen again.
After 9/11 and Hurricane Katrina there has been a growing understanding of how major disasters can compromise, and eventually destroy, businesses.
It is a sobering realization when you discover that, according to the 9/11 Commission report, 85% of our nation's critical infrastructure are in the hands of the private sector.
No agency can operate, for example, without fuel for their vehicles, or electricity in their offices. These are both vital resources provided by the private sector.
And the power company, and the gasoline refinery - like nearly every other business out there - are both highly dependent upon a long and increasingly fragile chain of private sector businesses providing parts, services and supplies to keep them going.
Source of Electrical Generation In the United States.
Nearly half of our nation's electrical generation is through burning coal. Take away the coal, or a way to deliver it to the power plant, and power generating plants will go dark.
And to get that vital coal to the power plants, literally hundreds of small, medium, and large enterprises must be up and operating.
Everything from the local gas stations in Montana where employees fill their tanks to get to work at the coal mines, to the maintenance yards where the coal trains are serviced, to the front offices where payrolls are processed for the workers.
Not to pick on any one enterprise, but the Bailey Yard is a good example.
Located in North Platte, Nebraska - the Bailey yard employs more than 2,600 people and is the world's largest railroad classification yard. A place where thousands of railroad cars are matched up to locomotives and their destinations every 24 hours.
According to the wikipedia, the yard also includes a locomotive fueling and servicing center that handles more than 8,500 locomotives per month, a locomotive repair shop that can repair 750 locomotives monthly, and a car repair facility that handles nearly 50 cars daily.
Now, imagine what happens during a pandemic when 40% or more of the employees at the Bailey yard are absent from their jobs. Imagine the chaos if a handful of key employees - many of whom have nearly irreplaceable skills in today's marketplace - are killed, disabled, or otherwise sidelined by a pandemic.
How much coal do you suppose will get through each day to its intended destination?
Assuming of course, the coal gets mined, and loaded on railcars, and sent on its way to the Bailey Yard in the first place; that pandemic related absenteeism hasn't already derailed the process further down the line.
One of the most effective voices urging that we take strong steps to address supply chain issues during a pandemic- particularly for our coal fired power generating facilities -is Dr. Michael Osterholm of CIDRAP.
He makes the case for other industries, including offshore pharmaceutical manufacturing, PPE's, and other critical supplies as well.
If you have never listened to one of his presentations, I would urge you to seek one out.
Next week Dr. Osterholm's presentation at the The Pandemic Threat: Preparing an Organizational Response conference should be available online.
I'll post when that video becomes available.
For almost every business out there one needn't look very long or hard to find a vulnerability in their supply chain.
And it needn't be as dramatic as a lack of coal for power plants.
On a smaller scale, if emergency vehicles can't get serviced during a pandemic, due to absenteeism of mechanics - or disruptions anywhere in the parts supply line - then they go 10-7.
Out of service.
Ambulances, and to a lesser extent, police cars, go through brake linings at an astounding rate. It isn't unusual to put one of the big modular ambulances into the shop once a month.
If brake pads suddenly aren't available, or the local auto parts store is closed, then the ambulance doesn't run. If ambulances don't run - people die.
All for the want of a brake pad.
You can come up with thousands of similar examples, and they all boil down to one concept:
As a child, most of us learned the old proverb below. It illustrates how even a minor failure can cascade into a major catastrophe.
Obviously, we aren't going to undo 30 years of progress and go back to the `good old days' where we warehoused everything at great expense.
The point here is, that when it works (which is most of the time), the JIT system works great. The fact that you can afford a computer or an Internet connection to allow you to read this blog is a testament to how well the `new economy' has worked.
But toss a pandemic into the mix and the equation could quickly change. Suddenly, worldwide, businesses would be dealing with 40% absenteeism or more.
The JIT economic model, one that eschews the warehousing of materials, will take a tremendous hit. Resupply of everything from food in our grocery stores, to pharmaceuticals for our hospitals, to yes, even coal for our power plants, may be compromised.
The only defense to such an event is preparedness.
On a personal level, in your home for you and your family, and just as importantly, for your business.
The government urges every family to have at least 2-weeks emergency supplies (food, water, Rx meds) on hand in order to weather a crisis. Some agencies, and governments around the world, have advocated as much as a 90-day supply.
Why?
Because they recognize the fragility of our supply chains, particularly in the face of a global crisis such as a pandemic. They understand that resupply may be difficult or impossible during a crisis.
Businesses should look to see how long they can survive without resupply, and take steps to find alternate sources of critical supplies during a crisis. No business wants do discover they are dead in the water for want of a `nail'.
While a simple example, and certainly only one of a thousand problems that an EMS director would face during a pandemic crisis, the above illustrates the need for preparedness. The need to see where you are most vulnerable, and then finding ways around it.
Businesses that hope to survive the next pandemic need to be actively preparing for it today. Yes, it's expensive and time consuming.
But preparedness is vital to survival.
Those that simply intend to go out of business, can feel free to ignore the preceding message.
Supply Chain Of Fools
# 2282
http://afludiary.blogspot.com/2008_09_01_archive.html
Over the past 40 years or so, we've seen an amazing transformation of how business is conducted in developed nations.
We've streamlined our production capabilities to match demand, we've created JIT (Just-in-Time) Inventory delivery systems to eliminate warehouse costs, and we've increasingly come to rely on high-tech professionals to keep everything running smoothly.
While the rewards of this system have been numerous, including the ability to sell sophisticated electronics to consumers at amazingly low prices, there is a significant downside as well.
Our modern JIT supply system is fragile and vulnerable to attack.
And while our thoughts may immediately jump to thoughts of terrorism, there are far more likely, and much more disruptive threats out there to consider.
Hurricanes, earthquakes, and pandemics to name just three. And they all can, and will, happen again.
The worst, of course, would be a severe pandemic. One could literally last for months, and would occur more or less simultaneously world-wide. In that aspect, pandemics are unique in their ability to disrupt the world's supply lines.
After 9/11 and Hurricane Katrina there has been a growing understanding of how major disasters can compromise, and eventually destroy, businesses.
According to SCORE:
- A Company that experiences a computer outage lasting more than 10 days will never fully recover financially. 50 percent will be out of business within five years.
- An estimated 25 percent of businesses do not reopen following a major disaster
- 70 percent of small firms that experience a major data loss go out of business within a year.
It is a sobering realization when you discover that, according to the 9/11 Commission report, 85% of our nation's critical infrastructure are in the hands of the private sector.
But the truth is, 100% of our critical infrastructure is reliant, to some degree, on the continued operation and success of the private sector.
No agency can operate, for example, without fuel for their vehicles, or electricity in their offices. These are both vital resources provided by the private sector.
And the power company, and the gasoline refinery - like nearly every other business out there - are both highly dependent upon a long and increasingly fragile chain of private sector businesses providing parts, services and supplies to keep them going.
Source of Electrical Generation In the United States.
Nearly half of our nation's electrical generation is through burning coal. Take away the coal, or a way to deliver it to the power plant, and power generating plants will go dark.
And to get that vital coal to the power plants, literally hundreds of small, medium, and large enterprises must be up and operating.
Everything from the local gas stations in Montana where employees fill their tanks to get to work at the coal mines, to the maintenance yards where the coal trains are serviced, to the front offices where payrolls are processed for the workers.
Not to pick on any one enterprise, but the Bailey Yard is a good example.
Located in North Platte, Nebraska - the Bailey yard employs more than 2,600 people and is the world's largest railroad classification yard. A place where thousands of railroad cars are matched up to locomotives and their destinations every 24 hours.
According to the wikipedia, the yard also includes a locomotive fueling and servicing center that handles more than 8,500 locomotives per month, a locomotive repair shop that can repair 750 locomotives monthly, and a car repair facility that handles nearly 50 cars daily.
Now, imagine what happens during a pandemic when 40% or more of the employees at the Bailey yard are absent from their jobs. Imagine the chaos if a handful of key employees - many of whom have nearly irreplaceable skills in today's marketplace - are killed, disabled, or otherwise sidelined by a pandemic.
How much coal do you suppose will get through each day to its intended destination?
None of which is to suggest that Union Pacific, or the management of the Bailey yard have ignored the problem or are in any way negligent in their preparations. I've no knowledge one way or the other about their internal pandemic plans, but assume they have them.
But thus far, the transportation sector, even at such a critical chokepoint as this Bailey yard, isn't considered a `high priority' for receiving a pandemic vaccine. And that policy could prove disastrous to the nation as a whole if their operations are severely compromised by a pandemic.
But thus far, the transportation sector, even at such a critical chokepoint as this Bailey yard, isn't considered a `high priority' for receiving a pandemic vaccine. And that policy could prove disastrous to the nation as a whole if their operations are severely compromised by a pandemic.
Assuming of course, the coal gets mined, and loaded on railcars, and sent on its way to the Bailey Yard in the first place; that pandemic related absenteeism hasn't already derailed the process further down the line.
One of the most effective voices urging that we take strong steps to address supply chain issues during a pandemic- particularly for our coal fired power generating facilities -is Dr. Michael Osterholm of CIDRAP.
He makes the case for other industries, including offshore pharmaceutical manufacturing, PPE's, and other critical supplies as well.
If you have never listened to one of his presentations, I would urge you to seek one out.
Next week Dr. Osterholm's presentation at the The Pandemic Threat: Preparing an Organizational Response conference should be available online.
I'll post when that video becomes available.
For almost every business out there one needn't look very long or hard to find a vulnerability in their supply chain.
And it needn't be as dramatic as a lack of coal for power plants.
On a smaller scale, if emergency vehicles can't get serviced during a pandemic, due to absenteeism of mechanics - or disruptions anywhere in the parts supply line - then they go 10-7.
Out of service.
Ambulances, and to a lesser extent, police cars, go through brake linings at an astounding rate. It isn't unusual to put one of the big modular ambulances into the shop once a month.
If brake pads suddenly aren't available, or the local auto parts store is closed, then the ambulance doesn't run. If ambulances don't run - people die.
All for the want of a brake pad.
You can come up with thousands of similar examples, and they all boil down to one concept:
The interconnectivity of our world, the interdependence of practically every facet of our economy, and our society, is both our greatest strength and our greatest vulnerability.
As a child, most of us learned the old proverb below. It illustrates how even a minor failure can cascade into a major catastrophe.
For want of a nail the shoe was lost.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
For want of a shoe the horse was lost.
For want of a horse the rider was lost.
For want of a rider the battle was lost.
For want of a battle the kingdom was lost.
And all for the want of a horseshoe nail.
Obviously, we aren't going to undo 30 years of progress and go back to the `good old days' where we warehoused everything at great expense.
For better or for worse, we've bought into the JIT system - and until it breaks - are unlikely to change it.
The point here is, that when it works (which is most of the time), the JIT system works great. The fact that you can afford a computer or an Internet connection to allow you to read this blog is a testament to how well the `new economy' has worked.
But toss a pandemic into the mix and the equation could quickly change. Suddenly, worldwide, businesses would be dealing with 40% absenteeism or more.
Key personnel, some with skills or knowledge vital to the operation of their business, may become absent, ill, or may even die.
The JIT economic model, one that eschews the warehousing of materials, will take a tremendous hit. Resupply of everything from food in our grocery stores, to pharmaceuticals for our hospitals, to yes, even coal for our power plants, may be compromised.
The only defense to such an event is preparedness.
On a personal level, in your home for you and your family, and just as importantly, for your business.
The government urges every family to have at least 2-weeks emergency supplies (food, water, Rx meds) on hand in order to weather a crisis. Some agencies, and governments around the world, have advocated as much as a 90-day supply.
Why?
Because they recognize the fragility of our supply chains, particularly in the face of a global crisis such as a pandemic. They understand that resupply may be difficult or impossible during a crisis.
Businesses should look to see how long they can survive without resupply, and take steps to find alternate sources of critical supplies during a crisis. No business wants do discover they are dead in the water for want of a `nail'.
For example, if I ran an EMS service, I'd certainly order in some extra brake pads for my rigs. I know I'm gonna need them, regardless. It just makes sense to keep extra on hand instead of relying on the auto parts store that may - or may not- be open or getting deliveries during a crisis.
While a simple example, and certainly only one of a thousand problems that an EMS director would face during a pandemic crisis, the above illustrates the need for preparedness. The need to see where you are most vulnerable, and then finding ways around it.
Businesses that hope to survive the next pandemic need to be actively preparing for it today. Yes, it's expensive and time consuming.
But preparedness is vital to survival.
Those that simply intend to go out of business, can feel free to ignore the preceding message.
This is the first in a series of essays directed directly at the business community and their need for pandemic planning that I expect to produce over the next couple of weeks (dependent upon Hurricane Ike, of course).
Posted by FLA_MEDIC at <a class="timestamp-link" href="http://afludiary.blogspot.com/2008/09/supply-chain-of-fools.html" rel="bookmark" title="permanent link"><abbr class="published" title="2008-09-06T10:54:00-04:00">10:54 AM</abbr>
