Materials handling: Effective disaster recovery

by Dave Luton

Even though it happened over 30 years ago, the situation is still fresh in my memory: It was the end of a nice, long, summer weekend at the cottage. After unpacking the car I turned on the TV to watch the last part of early edition of the evening news. I caught the tail end of a news report from a small Canadian province. The coverage showed the after- math of a very, very bad warehouse fire. Everything was destroyed and the entire building structure had collapsed because the steel beams supporting the roof had melted. I think only the floor and the loading docks were saved. At the time, it was the worst commercial fire in that province’s history. Apparently, it was caused by a natural gas leak. And the results were not only damage to the building and the goods it stored, but also a number of major lawsuits.

The company—a smaller, capable regional 3PL that is still in business today—had three warehouses. And one of those warehouses was storing my goods. Believe me, I spent an anxious two hours waiting for a later newscast hoping to hear more about which warehouse was destroyed. Fortunately, the warehouse with my inventory escaped the blaze.

For anybody facing a disaster—be it a fire, a flood or something else—the first and most important objective is to survive. Almost as pressing is the need to return to regular operations as soon as possible. But as much you want to return to normal, normal operations may be suspended or superseded during the expected duration of the interruption.

Think about an organization that, due to a disaster, can’t meet market demand. Decisions must be made about allocating the remaining, limited supply, and this needs to be done quickly. Operations in an unaffected part of the country may have to be altered in order to support the region hurt by the disaster. In these types of circumstances, it’s important that decisions about allotments be made at the senior management level, even if that’s not the normal procedure.

There are a number of events that can interrupt the supply chain: some predictable and some completely unexpected. The date of a business interruption, like a labour strike, can be known in advance and therefore can be planned for. Disasters like the fires, cannot be forecast, so other than general disaster planning, the amount of preparation is limited.

When creating your disaster plan, some of the elements that must be considered are:

  • scope and objectives of the plan
  • overall description of the disaster type and available pre-warning (ie hurricane versus earthquake)
  • vulnerability and impact on your business from the interruption (from very limited to catastrophic) likely length of the disaster
  • timing required to mobilize emergency support and return to regular supply
  • overall organizational control and responsibility resources required including staffing and costs when is the plan to be initiated and by whom
  • plan approval, updates and maintenance.

For predictable disasters (or ones that come with early warnings) the key planning steps are first to ensure you have a working alert system and second to stay on top of the situation. For example, it’s well worth setting up a notification system to warn of expiring labour agreements and to send updates on the progress of negotiations. A backup plan should identify what action is recommended, such as turning to alternate supply points in the case of a warehouse strike.

The next element is to identify what actions are viable and which ones are not and what alternate action(s) should be taken in advance. For example, some companies pre-build inventory at the alternate supply locations when they are facing potential strikes.

It’s critical to take into account the likely duration of the problem during the planning phase. Think about how a logistician must deal with a rail strike. There is only so much truck capacity and it is not sufficient to offset the loss of rail capacity. However the duration of a rail strike is usually limited, because of back-to-work legislation. Still, it takes a few days to resume operations, even after a back-to-work order, and that time must be taken into consideration.

Another type of foreseeable disturbance would be something like a warehouse strike by your customer’s employees. Planning for direct-to-store delivery scenarios is not a bad idea. But keep in mind just because a date is set, it doesn’t mean disruptions won’t happen before that date. It’s also worth deciding what actions to take if the customer insists on operating from the warehouse while the workers are on strike. Remember, many carriers refuse to cross picket lines.

Of course even in the worst situations having a sense of humour helps. For the businesses that lost inventory in the fire I mentioned at the beginning, that is one time they were truly able to say to the taxman, “Gee, my records went up in smoke.”

Dave Luton is a consultant in the greater Toronto area.