Managing for catastrophes: Building a resilient supply chain
Editor’s Note: This is the first of a three-part feature authored by Dr. Alan Kosansky and Michael Taus, Profit Point, which originally ran in LM’s sister publication Supply Chain Management Review.
Once a futuristic ideal, the post-industrial, globally-interconnected economy has arrived. With it have come countless benefits, including unprecedentedly high international trade, lean supply chains that deliver low cost consumer goods and an improved standard of living in many developing countries. Along with these advances, this interdependent global economy has amplified collective exposure to catastrophic events. At the epicenter of the global economy is a series of interconnected supply chains whose core function is to continue to supply the world’s population with essential goods, whether or not a catastrophe strikes.
In the last several years, a number of man-made and natural events have lead to significant disruption within supply chains. Hurricane Sandy closed shipping lanes in the northeastern U.S., triggering the worst fuel shortages since the 1970s and incurring associated costs exceeding $70 billion. The 2011 earthquake and tsunami that struck the coast of Japan, home to the world’s 3rd largest economy representing almost nine percent of global GDP caused nearly $300 billion in damages. The catastrophic impact included significant impairment of country-wide infrastructure and had a ripple effect on global supply chains that were dependent on Japanese manufacturing and transportation lanes. Due to interconnected supply chains across a global economy, persistent disruption has become the new norm.
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