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Good OM Reading: Superstorm Sandy and Supply Chains, One Year Later

August 27, 2013

flooded carsA month or 2 into dreaded hurricane season, and the US has so far dodged the bullet. Still, with 7 hurricanes expected to hit, what can be learned from Superstorm Sandy is a topic for discussion among supply chain managers. Though Sandy hit shore last year as “only” a tropical storm, it was one the most devastating weather events since Hurricane Katrina, in part because many supply chains were caught off guard.

In the aftermath of Sandy, the Securities and Exchange Commission led a just-released study of mid-Atlantic companies to understand how this event affected them and how they recovered. Here is a quick summary of the results:

  1. Consider all the possibilities of widespread disruption: Business continuity plans should take into account all possible sources for electricity, fuel, water and telecommunications in an effected area. Consideration should be given to multiple, redundant services and the proximity of vendors to the potential disaster area. Companies also should consider solutions that allow employees to work remotely.
  2. Consider alternative locations: Companies should consider diverse alternative locations with adequate resources to stay up and running and how they will get enough employees there.
  3. Examine critical vendor relationships: Companies should take a look at vendors that provide critical services or products, from fuel to banking and finance, and line up Plan B vendors (including pre-arranged contracts) if they should be knocked off-line.
  4. Telecommunications and technology: Contract with multiple carriers rather than relying on a single provider.
  5. Communications plans: In addition to staying in close touch with customers and trading partners, firms should consider establishing relationships with multiple broker-dealers to facilitate alternative market entry points.
  6. Take into account time-sensitive regulatory requirements: A crisis can happen at any time, potentially interrupting month-end data for regulatory computations and financial reporting. This is a good reason to dump paper solutions.
  7. Review and test the plan: Business continuity plans, including vendor and customer lists and other critical data, should be updated continually and tested at least annually.

The recommendations in this short SEC report may have been drafted with financial firms in mind, but the advice applies to all businesses and their supply chains.

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