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1、Planning for Supply Chain DisruptionsYossi SheffiMIT, Cambridge MAOutlinewThe threatwPast disasterswSupply chain preparednesswpreliminary research findingsTerror Threats:wPhysicalwChemical/biologicalwNuclear/dirtywCyber attackThe Economic Targets: InfrastructurenAgriculturenTourismnTransportationnEl

2、ectric gridnBanking & finance systems nOil and gasnCommunicationsnContinuity of governmentnMedical services delivery nWater supplynFood supplyLearn From Past DisasterswKobe Earthquake - Jan 16 2019, 6,300 killed, 100K buildings destroyed, 80K damaged. Total damage: $250BBhopal - Dec 2nd, 1984, Union

3、 carbide factory, 2500 dead, 50,000 hospitalized.Chernobyl April 26, 1986, 15M people affected, Belarus still affectedLearn From Past DisasterswInfluenza 1918 675,000 dead in the US alone; Started in army barracks and prisons in the US; 30 50 million worldwide (“the Spanish Flu)The Mont Blanc - Dec.

4、 6, 1917 the Mont Blanc explodes in Halifax port (400,000 lbs. Of TNT, 2,300 ton of Citric Acid, 10 tons of gun cotton, 35 tons of Benzol). 2500 dead; 9,000 injured; shock wave felt in Cape Bretton (270 miles away).Foot and Mouth Disease (FMD) and Mad Cow Disease UK, 2019, quarantines and slaughter

5、of suspected animals; $3B - $5B hit.Danger Government ResponsewOn 9/11:wFord idled several production lines intermittently due to delays at the Canadian borderwToyota came within hours of halting production since a supplier was waiting for steering wheels shipped by air from GermanywAfter Flight 587

6、 crashed, Nov. 12, 2019wBridges to NY were closed for several hourswIn UK FMD wFarmers costs $1BwTourism costs (after the government issued a ban) $2B - $4BwJapanese government bankrupted many private hospitals in the Kobe areaPreparing for Another DisruptionwSupplier relationshipswCore suppliers vs

7、. public auctionswUse of off-shore supplierswDual supply relationshipswInventory managementwThe vulnerability of JIT manufacturingwAdvantages of JIT manufacturingwStrategic Inventory (SoSo management)wKnowledge backupwDeveloping backup processeswBacking up the companys knowledgewStandardization and

8、cross-trainingwCRM and customer relationshipsSupply Chains under UncertaintywBetter visibilitywTransportation visibility involves multiple handoffswNeed for full supply chain visibility, including detailed handlingwIndependent data acquisition sourceswBetter collaborationwLast decade: VMI, CMI, EDR,

9、 QR, JIT, JIT II, CPD, CPFR Now: implementationwNew: joint emergency planning (alternate shipping methods; alternate suppliers)wAlso: security knowledge sharingwBetter forecastingwPostponementwBuild-to-orderwProduct variability reductionswCentralized inventory managementIndustry-Government partnersh

10、ipswClear role for cooperation happening alreadywIndustry participation in Free and Secure Trade (FAST) and Customs Trade Partnership Against Terrorism (C-TPAT)w“Known shipper and “known carrier programswDifficult to get terrorism insurance role of government as insurer of last resortwInsurance comp

11、anies are only starting to model terrorism threats.wEfficiency vs. redundancy (who pays for cells, electricity, medicines, etc.)wCollaboration Vs. Secrecy (example: hazmat placards)wCentralization vs. dispersion (physical vs. I/T attack)wLowest bidder vs. known supplier (whats in the container)wSecu

12、rity vs. privacy (vs. efficiency of search)New Business Trade-offs:When Disaster StrikesCrisisImpactPrepared ManagementUnprepared managementHurricane Mitch(Nov. 2019)Floods destroyed banana plantationsChiquita leveraged existing alternative sourcesDole took time to find alternatives and lost sales a

13、ndTaiwan Earthquake(Sep. 21 2019)Component supplies to PC OEMs disruptedDell priced to steer customers to available componentsApple could not change config.- faced backlogs and lost salesMad Cow & FMD(Spring 2019)Shortage of hides for leather manufacturersGucci, Wilson supply contracts; Naturalizer,

14、 Danier - inventoriesEtienne-Agner suffered cost increases9/11Closed bordersDaimler-Chrysler Alt. modes based on contingency plansFord idled several plantsPreliminary Research DatawTwo responses: active and “do nothingwActive:wPast bad experiencewCorporate culture (defense business, work in dangerou

15、s places around the world, etc.)wSecurity departments staffed with experiencew“Do nothing:wBelieve 9/11 is a one-time eventwCannot find a way to paywBelieve government will helpwAll companies most concerned about government response to terrorist attackswAll companies report a large increase in cyber

16、 attacksPreliminary Research Data(Active Respondent)wBuild redundancieswTighten collaboration with partnerswWork with government to understand and influence security initiativeswLook for technology to help (RFID, GPS, e-cargo seals, biometrics, sensors, etc.)wEducationwAwarenesswContingency planning (including drills with supply chain partners)SummarywA long term adjustmentwIn past incidents: the economic

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