That gets back to the issue of just-in-time inventory. The alternative is to revert to older models of maintaining more inventory as a just-in-case approach. But it’s a catch-22, because that won’t be as cost-effective day-to-day, says Johann Selle, director of business resilience services at iJet, a risk management provider.
Despite the cost, Harrison says she is seeing companies slowly edge away from a blanket use of the just-in-time strategy, including the originator of the concept, Toyota. She says Toyota saw that Nissan was less hurt by last year’s Thailand floods because “Nissan had looked beyond just taking cost out.”
Companies will never completely abandon the cost-efficient just-in-time model. But they are more strategically assessing whether it might be wise to stockpile some components. For example, there was one commodity that a company Harrison worked with would have real trouble sourcing if a certain event recurred. “So we decided to stockpile that one commodity. And when the next event hit, the company was able to take market share from its competition,” Harrison says.
While the focus tends to be on facilities and supplies, companies must remember that crises also affect the workers who are needed for manufacturing and other aspects of the supply-chain process. Selle says that companies often don’t include locals in their plans because the thought is that they can fend for themselves. But in Japan, with the nuclear fallout and destruction, there was a need to provide ways for the workers to get out of the situation.
Companies should talk with their suppliers about personnel contingency issues, including what can be done to get workers to alternative locations when applicable. They should also discuss other relevant issues, including payment and cash flow, housing arrangements, and family considerations.