We published a piece recently discussing supply chain crises and how to anticipate and plan for them. (Missed this post? You can check it out here.) Today we're following up on this topic with specific questions to ask your organization to determine if you're actually equipped to handle a disaster, as well as the leadership skills needed to sufficiently manage and resolve a crisis from start to finish. Let's get started!
Merriam-Webster defines a crisis as “an unstable or crucial time or state of affairs in which a decisive change is impending; especially: one with the distinct possibility of a highly undesirable outcome.” When it comes to your supply chain, a crisis would be a situation where one or more activities are interrupted, resulting in a major disruption of the normal flow of goods or services.
In the manufacturing and supply chain world, three main types of crisis exist: natural disasters, accidents and labor shortages. You can read more about these categories of crises in our recently published article: How to Anticipate and Survive a Supply Chain Disaster. While crises can sometimes be anticipated, they typically come suddenly and shockingly, so your supply chain needs to be prepared at all times to handle whatever arises.
When asking whether your company could withstand a disaster, you need to look at it from multiple angles – operationally, financially, logistically, reputationally, etc. We usually spend our time planning how to tackle dreaded issues like a supplier failing or backing out, but this is something we can more easily anticipate, unlike a natural disaster, for instance. So rather than only planning for scenarios we could likely see coming, let's also plan for those spontaneous disturbances that have the power to catastrophically damage our supply chains. When getting started on your crisis management plan, here are some initial questions you should be asking:
Research conducted over a five-year period by Dr. Arash Azadegan, a professor of supply chain management at Rutgers University, shows that certain leadership skills are needed to properly handle a major supply chain disruption. What's more is that the appropriate skills and tactics vary from stage to stage throughout the crisis management process (per the graphic below).
Dr. Azadegan mentions that increased globalization and digitization of supply chains has created a sort of domino effect when it comes to disasters. What this means is that once one sector is affected, the successive sectors feel the effects very quickly after. As he puts it, the closer the metaphorical dominoes are, "the faster they fall." This requires quick responses.
Click image to view larger.
To sum up the chart above: As a supply chain manager moves through the four stages of a disaster, his or her leadership skills must adapt accordingly. For instance, starting off with a direct, decisive and controlling tone helps a manager take control of the situation. But somewhere in the middle of the process, it's important to become less decisive and more open to others' ideas to arrive at the best possible solution. Once the recovery period begins, switching back to a more controlling tone is appropriate to move forward with resilience.
Prior to Dr. Azadegan's research, the common perception was that a leaders needed to remain assertive and decisive throughout the entire crisis management process. These new findings are impactful and should shape your own crisis mitigation plan.