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,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,Click to edit Master title style,Click to edit Master text styles,Second level,Third level,Fourth level,Fifth level,*,Planning for Supply Chain Disruptions,Yossi Sheffi,MIT,Cambridge MA,Outline,The threat,Past disasters,Supply chain preparedness,preliminary research findings,Terror Threats:,Physical,Chemical/biological,Nuclear/”dirty”,Cyber attack,The Economic Targets:Infrastructure,Agriculture,Tourism,Transportation,Electric grid,Banking&finance systems,Oil and gas,Communications,Continuity of government,Medical services delivery,Water supply,Food supply,Learn From Past Disasters,Kobe Earthquake,-Jan 16 1995,6,300 killed,100K buildings destroyed,80K damaged.Total damage:$250B,Bhopal,-Dec 2,nd,1984,Union carbide factory,2500 dead,50,000 hospitalized.,Chernobyl,April 26,1986,15M people affected,Belarus still affected,Learn From Past Disasters,Influenza 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.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,2001,quarantines and slaughter of suspected animals;$3B-$5B hit.,Danger Government Response,On 9/11:,Ford idled several production lines intermittently due to delays at the Canadian border,Toyota came within hours of halting production since a supplier was waiting for steering wheels shipped by air from Germany,After Flight 587 crashed,Nov.12,2001,Bridges to NY were closed for several hours,In UK FMD,Farmers costs$1B,Tourism costs(after the government issued a ban)$2B-$4B,Japanese government bankrupted many private hospitals in the Kobe area,Preparing for Another Disruption,Supplier relationships,Core suppliers vs.public auctions,Use of off-shore suppliers,Dual supply relationships,Inventory management,The vulnerability of JIT manufacturing,Advantages of JIT manufacturing,Strategic Inventory(SoSo management),Knowledge backup,Developing backup processes,Backing up the companys knowledge,Standardization and cross-training,CRM and customer relationships,Supply Chains under Uncertainty,Better,visibility,Transportation visibility involves multiple handoffs,Need for full supply chain visibility,including detailed handling,Independent data acquisition sources,Better,collaboration,Last decade:VMI,CMI,EDR,QR,JIT,JIT II,CPD,CPFR Now:implementation,New:joint emergency planning(alternate shipping methods;alternate suppliers),Also:security knowledge sharing,Better,forecasting,Postponement,Build-to-order,Product variability reductions,Centralized inventory management,Industry-Government partnerships,Clear role for cooperation happening already,Industry participation in Free and Secure Trade(FAST)and Customs Trade Partnership Against Terrorism(C-TPAT),“Known shipper”and“known carrier”programs,Difficult to get terrorism insurance role of government as insurer of last resort,Insurance companies are only starting to model terrorism threats.,Efficiency vs.redundancy,(who pays for cells,electricity,medicines,etc.),Collaboration Vs.Secrecy,(example:hazmat placards),Centralization vs.dispersion,(physical vs.I/T attack),Lowest bidder vs.known supplier,(whats in the container),Security vs.privacy,(vs.efficiency of search),New Business Trade-offs:,When Disaster Strikes,Crisis,Impact,Prepared Management,Unprepared management,Hurricane Mitch,(Nov.1998),Floods destroyed banana plantations,Chiquita leveraged existing alternative sources,Dole took time to find alternatives and lost sales and,Taiwan Earthquake,(Sep.21 1999),Component supplies to PC OEMs disrupted,Dell priced to steer customers to available components,Apple could not change config.-faced backlogs and lost sales,Mad Cow&FMD,(Spring 2001),Shortage of hides for leather manufacturers,Gucci,Wilson supply contracts;Naturalizer,Danier-inventories,Etienne-Agner suffered cost increases,9/11,Closed borders,Daimler-Chrysler Alt.modes based on contingency plans,Ford idled several plants,Preliminary Research Data,Two responses:active and“do nothing”,Active:,Past bad experience,Corporate culture(defense business,work in dangerous places around the world,etc.),Security departments staffed with experience,“Do nothing”:,Believe 9/11 is a one-time event,Cannot find a way to pay,Believe government will help,All companies most concerned about government response to terrorist attacks,All companies report a large increase in cyber attacks,Preliminary Research Data,(Active Respondent),Build redundancies,Tighten collaboration with partners,Work with government to understand and influence security initiatives,Look for technology to help(RFID,GPS,e-cargo seals,biometrics,sensors,etc.),Education,Awareness,Contingency planning(including drills with supply chain partners),Summary,A long term adjustment,In past incidents:the economic impact was,a lot,less than initially feared,“collateral benefits”of preparedness:,Better collaboration,Better supply chain operations,Better controls(less theft,IP loss,better standards),Participation in communities,Any Questions?,?,?,?,Yossi Sheffi,?,?,
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