Batten Down The Hatches

On the brink of destruction, assessing risk at the plant level is key to minimizing damage.

Who'll stop the rain -- and hail and gale-force winds and flying debris and shifting tectonic plates when disaster strikes and your manufacturing facility is right in the path of destruction?

The short answer: No one. After all, we are talking about Mother Nature, and to date she is a formidable force that has stopped for no one.

Just ask Toyota Motor Corp., which lost tens of thousands of units of vehicle production when most of its factories were brought to a halt after mid-July's earthquake in Japan. One of Toyota's suppliers, Riken Corp., suffered damage from the earthquake, including damage to some of its warehouses and equipment.

"Some pieces of the equipment got lopsided or toppled over. Some of the products that were finished or in process, molds, jigs and tools, and measuring instruments fell to the floor," according to a statement on Riken's Web site (.pdf format).

"While you can't stop the storm, you can mitigate the loss," says Mark Gryc, vice president and chief engineer for FM Global, a commercial and industrial property insurance and risk management organization that insures 53% of the companies on the 2007 IW U.S. 500 list of largest publicly traded manufacturing companies.

According to Gryc, there are three main ways to lessen loss:

  • prevention (use less hazardous materials or locate in safer areas)
  • protection (adequate roofing, windows, etc.)
  • and planning (having materials on hand to face the storm).

To offer best practices in risk management, FM Global's research campus in West Glocester, R.I., re-creates the fury of Mother Nature via such devices of destruction as debris cannons, which shoot wood projectiles at doors, windows and siding at speeds of up to 50 mph to determine impact resistance (hint: two pieces of half-inch plywood are better than one unless you want a two-by-four to slice through your facility with the ease of a knife through butter); hail guns, which launch golf ball-sized ice balls or a handful of bearings at windows (unprotected glass panes shatter, while a window with a protective coating merely spider webs) and the mother of all wind machines that draws its power from a Ford V-10 engine (120 mph winds cause roof shingles to become dangerous projectiles).

The research campus also hosts several fire technology labs that have movable ceilings to simulate various warehouse situations.

Gryc and his team have set many things on fire -- tires, cola concentrates, aerosol products and 35-foot power boats -- all in the name of science. The power boat blaze, for instance, was ignited to determine if the manufacturer's sprinkler system was adequate and would reach internal areas of the boats and prevent a fire from spreading from boat to boat.

Cease Fire

Engineers at FM Global determine which sprinklers are appropriate for different scenarios by measuring heat output of various products used by clients. The research campus also provides third-party certification of products, including sprinklers and shingles.

To certify that sprinklers are FM-approved, sprinkler heads are heated, dropped, vibrated, corroded, painted, pressurized and compressed, among other things.

Claude Bosio, technical team manager, FM Approvals, has a "petting zoo" of various sprinkler heads that have seen better times. Some of the herd was approved, while some didn't make the grade. It's the ones that were rejected that make the process so important. Determining why a failure occurred means that FM Global can pass along knowledge that will help a manufacturer prevent loss.

"We have engaged FM Global to test roll paper storage at our mills that make paper or might have paper for producing boxes," explains Joel Gaither, property insurance and fire protection manager, at Federal Way, Wash.-based Weyerhaeuser Co., maker of pulp, newsprint, packaging, building products and homes. "These can be a high fire load. If they do catch fire, depending on how they are stored and how they might be protected; they can create a high challenge to the warehouse that's holding them. We have utilized FM Global to understand the fire load that would be in these warehouses so we can properly design fire protection if we do have a fire."

Weyerhaeuser also sends dust that some of its operations might produce for explosion testing.

"They will test it to see what its explosion hazard is and then depending on those results we can design our equipment accordingly to be best protected against explosion," Gaither adds.

Dust from anything that was alive can ignite, Gryc says. It's his team's duty to test for worst-case scenarios.

Unfortunately for Weyerhaeuser, it has indeed experienced worst-case scenarios. The company has had recovery boilers explode, roofs that have collapsed due to inclement weather, and warehouses that have burned down, according to Gaither.

"In all of these cases we work with FM Global to help determine what happened and help prevent the occurrence from happening again. Inspections take place, but unfortunately between inspections we might have a loss."

Fault Lines

When a loss happens, it's not just inconvenient -- the company's bottom line is at risk.

"FM Global will reimburse us if there is a loss, but they are not going to put the product back on the shelf," says Michael Justice, senior manager of environmental affairs at power tool manufacturer The Black & Decker Corp. "We rely on them to make adequate suggestions to protect our facilities, and in turn we are protecting our market share and our product flow."

Some of Black & Decker's facilities are located in earthquake zones, making risk that much more prominent.

"We can't predict when the earthquake is going to come, but if there is a storm approaching one of our facilities, FM Global will contact that facility with a list of their recommendations to make preparations ahead of time," says Clayton Roop, director of corporate risk management at Black & Decker. "Luckily we haven't had any major storm problems over the years."

Indeed, Justice recalls the hurricane season a few years ago that brought four hurricanes through Florida. "The hurricanes rolled through and the facility had no damage to it. That was in part because we implemented the recommendations at that facility."

"In a hurricane you can't go out and nail down the roof, but there are things you can do to mitigate the potential damage," adds Roop, who notes that when the facility was built Black & Decker listened to FM Global's advice about incorporating safeguards during construction.

Unlike Weyerhaeuser, Black & Decker has not incurred losses from fires.

The company takes special care of chemicals and flammable materials by storing them away from ignition sources, says Roop.

But one of the dangers of never having a major loss is complacency. "Just because you haven't had a fire you may have a tendency to relax," says Justice. "You have to make sure [loss prevention] is a major issue at your facility and you pay attention to it."

Manufacturers can't remove all risks from their operations. If they did, great inventions and products would never meet the market. The key is learning how to manage the risk.

"Weyerhaeuser is a company that chooses to retain risk. We don't buy insurance with a very low deductible," says Gaither. "If you do that, you end up paying through the nose. We choose to assume our risk; we feel we have excellent loss control in the field, ensuring that our plants are operating in a safe mode."

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