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Keeping the supply chain afloat
UECC invests in dual fuel
LNG car carriers European short-sea
operator UECC has ordered
two pure car and truck
carriers…
Keeping the supply chain afloat
20 February 2014 | Mark Morley
As extreme weather continues to disrupt production,
Mark Morley (left) writes that manufacturers need to take
a closer look at how they are protecting their supply
chains both physically and digitally.
Gefco provides valueadded services for
Citroën - Gefco is providing
value-added vehicle
services for Citroën
Berlingo…
The current flooding crisis gripping much of the UK highlights how
vulnerable global supply chain and transport networks are to
disruption.
Korea demands drastic
tariff cuts from India South Korea has asked the
government of India to
undertake major tariff cuts
on…
Globalisation has helped to fuel trade, consumption and economic
growth, but also means events such as natural disasters and extreme
weather have even more widespread economic consequences, including for the automotive
supply chain. As if the rain and winds weren't enough, snow and extreme cold have even been
disrupting car production in unexpected places, including the US south and Japan.
UK auto industry
receives £45m funding
boost - UK Business
Secretary Vince Cable
announced the
implementation of…
Looking out further, the risks go beyond the
operational into the digital space as well, where so
much supply chain information is exchanged.
ACS reports auto
contracts helping charter
increase - Aircraft charter
provider, Air Charter
Service, has reported a
22% year-on-year…
Research conducted by Accenture showed significant
continuity issues can cut the share price of a company
affected by supply chain disruption by 7% on average.
Alongside the increasing impact of natural disasters in
recent years, the past 24 months has seen a
substantial shift in the main causes of disruption, with
extreme weather now the second most common cause.
This demonstrates the need for supply chain directors
to shift their focus from reactive to proactive risk
management.
In light of these devastating consequences, it is in each
country’s interest to ensure that they are prepared
when disaster strikes. Increasing supply chain
resilience was one of the key themes at last year’s
World Economic Forum, and building this should be on
every CEO’s agenda, especially if they operate a truly
global supply chain.
But what exactly is resilience? The Accenture report
A recent history of
disaster
Recent examples of extreme weather
and natural disasters disrupting
supply chains include:
UK floods (2013-2014) – The
highest rainfall levels since 1910
have led to prolonged flooding
across the country. Businesses have
been severely impacted, and there
has been substantial disruption to
road and rail infrastructure. Some
analysts have predicted costs of
more than £1 billion ($1.66 billion) to
the UK economy.
European floods (2013) –
Significant rainfall in Eastern Europe
had a major impact on manufacturing
companies last year. Porsche was
forced to temporarily close its factory
more news
Live Updates
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Gerry
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speaking at
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Andrea Eck
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2014

2. defines it as “the ability of a system to return to its
original or desired state after being disturbed.”
Consequently, with resilience now a top priority for
supply chain directors, various operational based
changes have been implemented to try and remove the
potential for risk. Examples include:
in Germany after floods in the Czech
Republic halted the supply of
Cayenne bodies by rail from the
Volkswagen plant where they are built
in Bratislava, Slovakia.
Near shoring – also referred to as ‘reverse
Superstorm Sandy (2012) – This
storm was the deadliest to hit the
north-eastern coast of the United
globalisation’, the term is used to describe a way of
shortening logistics networks. Rises in wages in China
and an increase in natural disasters have led many
companies to consider relocating manufacturing
States, causing over $68 billion in
damage to buildings and
infrastructure, including ports and rail
lines. It prompted the worst fuel
capacity back to their home market. For example,
Caterpillar moved production of its small bobcat
excavator from Japan back to North America.
shortages in North America since the
1970s.
Establish a global plant floor – this is a term coined
by the analyst firm IDC, and describes how
manufacturers are spreading production capacity to
differing plants around the world. Therefore, if disaster
strikes again and a manufacturing plant is taken offline,
they can switch to an alternative to maintain production
capacity. For automotive, this is also referred to as ‘colocation’ of production for vehicle models.
Japanese tsunami (2011) – The
tsunami brought long-term disruption
to global supply chains, particularly in
automotive, with production at many
factories suspended as a result of
flooding.
Dual sourcing strategies – constant disruption
combined with a need to source from the Far East has
meant many companies now implement dual sourcing
strategies. This means that when disruption occurs
across a supply chain, the manufacturing company can
quickly switch to an alternative provider of components.
Concerns also remain in relation to oil dependencies
and increasing insurance and trade finance costs. This
added to the impacts of natural disasters means more
than 80% of companies are now worried about supply
chain resilience. Subsequently, risk management must
be an explicit but integral part of supply chain
governance. Accenture’s own recommendations
include establishing a multi-stakeholder supply chain
risk assessment process, the creation of global
resilience standards and expanding the use of data
Thailand Floods (2011) – Hi-tech
supply and automotive supply chains
were severely impacted by the floods
in Thailand, which led to a shortage
of key components within the
computer industry. Over 1,000
factories were affected and
subsequent insurance claims
reached $20 billion.
sharing platforms for risk identification and responses.
Digital resilience
So far I have only covered risk management across the physical supply chain. As more traditional
supply chains evolve into the digital market however, effective risk management will also need to
include these areas. As information is increasingly transmitted digitally, there is also a greater
chance of cyber risks disrupting supply chains.
Therefore, in addition to introducing operational-based changes, supply chain directors should
likewise look to improve their information and communication technology (ICT) infrastructures. If
configured correctly, such technology would provide significant resilience gains, according to
Accenture.
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3. The corner stone of IT-based resilience is data and information sharing. Business continuity is
enabled through access to real time data, followed by rapid dissemination of data-driven supply
chain fixes. However, information-sharing infrastructures depend on a resilient core network,
appropriate communication tools and an element of redundancy.
Combined, this requires an ICT infrastructure that is flexible, scalable, secure and re-routable.
Mark Morley is director of industry marketing for manufacturing at GXS.
2
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