The Swine Flu: Your Supply Chain Moment of Truth?

May 1, 2009
Mutual real-time visibility and collaboration between your company and those in your supply chain will determine how effectively you respond to any shocks to production.

The supply chain has faced significant obstacles in 2009 with the prolonged recession and economic fears and then the Somali pirates terrorizing merchant ships along the high seas. Now, another potential problem has emerged with the swine flu that not only threatens the lives of thousands, but the economic lifeline of businesses.

This isn't the first time that an infectious disease impacted the supply chain. Severe Acute Respiratory Syndrome (SARS) struck Asia in 2003 resulting in a huge disruption in manufacturing and high-tech production with business-changing ramifications leading back here in the U.S. poultry markets. The swine flu is no different than other problems of the past, but combined with economic and political uncertainty and the always looming natural disaster creates a unique perfect storm for supply chain disruptions. The global nature of today's economy also makes the spread of diseases easier due to the mobility of the population and the distribution of global commerce. According to estimates, the economic impact of a pandemic on the U.S. alone would exceed $100 billion affecting businesses and the workforce so companies can ill afford any more hits to revenues.

Many organizations know the value of their supply chain but have little understanding of what keeps it alive and healthy. Think of the supply chain as the heart of any business operation with many different areas feeding into it (e.g., partners or customers). Conversely, the supply chain is a source of nourishment for others in terms of products and services. With the recent piracy incidents off the African horn and now the swine flu outbreak, the supply chain is under attack, and the risks have never been greater to organizations. The key to addressing this is simple in principle but difficult in practice: real-time inventory visibility and ongoing collaboration across the supply chain.

Companies must know what is in their warehouses as well as in the warehouses of partners and vice versa. They also should track where they are sourcing from and plan accordingly to reduce any potentially negative effects on production. Can you honestly say you're doing this effectively or at all?

For example, 99% of companies have suffered a supply chain disruption in the past year, with 58% suffering financial losses as a result. Yet, less than one-third have a plan. Do you know if your supply chain is operating efficiently or a have clear idea of what's in your supply chain? Chances are you don't, and that will cost you dearly tomorrow either because your competition is already light years ahead of you or a disruption will irreparably damage your business.

In the past few days, the swine flu even in its infancy has already created havoc on the business lifeline both globally and domestically. Russia is banning all meat imports from Mexico and the southern U.S., and China is banning meat from Mexico, California, Texas, and Kansas. In the scheme of things, it takes very little to create a disruption. Consider this worse-case scenario for any organization: if an employee at one of your suppliers or customers in Mexico or at one of your warehouses becomes infected, what do you think will happen?

If the outbreak situation worsens in Mexico, many other areas of the supply chain will be severely impacted, creating a domino effect that reverberates throughout the world. If you didn't learn your lesson after the SARS outbreak of 2003, the Bird Flu, and Hurricane Katrina, and still don't have visibility across your supply chain, you're running out of time. Surprisingly, technology is the main reason you still have time.

In the past, implementing a warehouse and inventory management system required costly and time-consuming enterprise software. A typical implementation would take 6 months due to complex integration, and additional IT investments. However, with the maturity of software-as-a-service (Saas), an organization can have real-time visibility and shipping management is as little as 30 days. Because SaaS is web-based and operated offsite, another inherent benefit is less reliance on an in-house IT department. By deploying a new WMS, you not only raise inventory accuracy from 91% to over 99% accuracy and increase new customer acquisition, you prevent potential hardships in the days and weeks ahead.

History tends to repeat itself, and when it does, the livelihood of your business will depend heavily on what you do at this moment. Mutual real-time visibility and collaboration between your company and those in your supply chain will determine how effectively you respond to any shocks to production. Delaying the inevitable is no longer an option because while the fundamentals of business haven't changed, you have to be willing to change to keep up with it.

Jim Burleigh is CEO of SmartTurn. SmartTurn provides on-demand inventory and warehouse management solutions.

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