Creating Resilience in Logistics Chains (part 2)

John Vogt, former Halliburton vice president of global logistics and a visiting professor at the University of Houston-Downtown, presents the latest in his series on Incoterms, the internationally recognized set of trade rules that sellers and buyers must follow when devising a contract for the shipment of goods. This week, John examines how effective logistics requires proactive, data-driven responses to potential impacts, and managers who quickly report events and trigger action.

New installments are published each month on the Breakbulk news page and in our online BreakbulkONE newsletter.


In previous articles we have looked at the nature of resilience and the preparation phase of how to cope when an event occurs and restore your organization to normal business as soon as possible. The phases of anticipation-plan-respond-normalize can be viewed as a cycle and the previous article explored the first two; in this article, we turn to the second two.


Response

It requires that the details of an event or disruption be made available to, and shared quickly with, the whole logistics chain, and beyond. It must be reported to all levels of the organization, with a central capability to assemble the data, recognize the issues and implications and then disseminate them with actions to this event in a coordinated response.

Consider a simple example of a cyclone in the South China Sea. The impact is not just in the areas around the South China Sea, but on all the movements of ships that transit this area. The rerouting of vessels and aircraft will affect schedules in large parts of Asia, the Americas and the Middle East. The ships can be tracked using AIS and the arrival forecast for discharge ports. Congestion can be estimated, and customers alerted. Waiting until the cyclone impacts movement is too late if other shippers have already started utilizing other routes.

All this sounds simple, but it requires the data, assembled into information and given directly to the affected parties with estimates of the impact and actions that need to be taken. There is a school of thought that the data driven logistics chain should reflect the event, but this is triggered by the impact of the event. The truly professional logistics team will respond before the impacts are seen, and that is different.

This is not the normal thought of “gee, there is a cyclone in the Pacific.” It requires a different type of organization where the local manager must be tasked with, and have the authority, to report this event to his superiors, and up to the central resilience control team (RCT, see later) capability without having to move through structured reporting lines which may take days. The phone call at 3:00am to senior managers must be rewarded with a “thank you”, not a “why wake me” from them. And then it must be responded to with instructions globally to implement the best solution for the known facts.

This latter is important. This is not a case where the management waits for full and complete information. The decisions must be made when the information is understood and is most likely to be reasonably complete. Action can be modified as better information becomes available; inaction is a failure of management.

The RCT must be senior people who are committed to overcoming a crisis. Their skill-base must cover all aspects of the logistics business, and they must be innovative and structured in their capabilities and responses. One aspect of crisis management is communication. Senior members of the resilience team must craft their communications, so the broader organization is aware of this issue, what is being done and when. This probably means phone calls to executive staff to brief them, written communication to senior executives and general updates to the organization.

This needs to be done with facts, actions, consequences and estimated times. The worst possible situation is when communication fails to happen, is emotional or contains incorrect information. Any of these implies the resilience team is not coping and confidence will rapidly erode.


Return to Normal

This work must be focused on and adapted as more information flows to the resilience control team, until the issue is no longer influencing normal operations. This implies the resilience control members must either work much longer hours for a short period to cover their normal duties or, if this is going to span days or even weeks, to hand off normal work to subordinates and concentrate on getting their response correct, complete and comprehensive. The worst issue for “returning to normal” is when the team overseeing this process loses focus or stops too early so the problem continues to disrupt operations for a much longer time than is realistic or necessary.

The final issue to address is to plan a review of the response, who did what correctly and who did what less than perfectly. This is not a blame game, but a learning issue so the next time all the parties involved will perform to a higher level. The classic learning curve which allows for improvements by repetition is not going to work here – these events occur infrequently so people need to be aware of what went right, what was acceptable and what was not.


Conclusion

It should be evident that resilience must be viewed in two parts. The structural or strategic design aspect is where the logistics chain is established with the appropriate logistics service providers to build in resilience and broad capability for the long-term. This is essential and rarely done comprehensively. The resilience management program is the preparation for events that will impact this designed logistics capability, and the process for overcoming these.

This process is iterative and cyclical, as it looks to anticipate, plan, respond and normalize as fast as is possible, knowing that the likelihood is that another event will need to be dealt with in the near future. As in life and business, it never rains but it pours!


Do you have an Incoterms experience to share that you'd like John to comment on and that could be included in a future article? Submit to Breakbulk's Leslie Meredith at [email protected] and include description, locations (origin and delivery), Incoterm used, and lesson learned if applicable.

MAIN PHOTO CREDIT: Comark