Supplement 11 – Page 3 – The OM Blog by Heizer, Render, & Munson

OM in the News: Where is All the Toilet Paper?

“What does toilet paper have to do with a global pandemic? Nothing,” writes The Orlando Sentinel (April 9, 2020).

Yet millions of people have been panicking about their household supply. Stores shelves have been emptied. Amazon is often out of stock. And social media is bursting with jokes and pleas for a roll or two. Some were stockpiling last month in advance of government lockdown orders.

It’s a common reaction in times of a crisis, when consumers feel a need for control and security. Online and in-store U.S. toilet paper sales rose 51% between Feb. 24 and March 10, as buyers started getting uneasy about the growing number of virus cases. But sales rocketed a whopping 845% on March 11 and 12 as states announced lockdowns.

Toilet paper flows from paper mills to retail stores through a tight, efficient supply chain. It is bulky and not very profitable, so retailers don’t keep a lot of inventory on hand; they just get frequent shipments and restock their shelves. The amount of toilet paper the average American uses hasn’t changed; it’s around 141 rolls per year (compared to 134 rolls in Germany and just 49 rolls in China). But even small changes in buying habits can throw everything into disarray, as we see with the bullwhip effect discussed in Supplement 11 of your OM text.

With a regional disruption like a hurricane, stores can redirect some inventory to the affected area. But a global pandemic doesn’t leave a lot of wiggle room. The big three U.S. toilet paper companies — Georgia-Pacific, P&G, and Kimberly-Clark — were already running their toilet paper plants 24 hours a day before coronavirus hit. That’s the only way they can make a profit on such a low-margin product. But now the companies are trying to increase output by making fewer varieties of toilet paper.

Classroom discussion questions:

Explain the bullwhip effect.
What supply chain options are available?

Guest Post: Building A Robust Supply Chain During A Pandemic

Today’s Guest Post comes from Prof. Jonathan Opata, who teaches Operations & Supply Chain Management at George Mason University, Southern New Hampshire University and Northern Virginia Community College

China is critical to the supply chains of many companies because it is the world’s leading manufacturer and its 2nd-largest economy. Government directives on strict quarantine measures have led to economic and supply chain disruptions globally. Companies must ensure risk management in the face of the pandemic. This requires integrated supply chain visibility, better forecasting and intelligent capacity building to meet demand.

Currently, many companies have limited access to employees and logistics, and face the closure of factories because of the ongoing measures to control the spread. This has resulted in a bullwhip effect and high product costs. Here are 6 critical areas for organizations to focus on that you can discuss with your students:

1. Develop Alternative Supply Sources: Developing and looking for new sources of supply is the premier strategy.
2. Create Business Continuity Plans: These plans should pinpoint contingencies in critical areas and include backup plans for transportation, communications, supply, and cash flow. Suppliers and customers need be involved in developing these plans.
3. Create a Comprehensive Emergency Operations Center: This operations center will require integration of company-wide data sources to allow visibility into daily operations.
4. Develop a Collaborative Approach to deal with transportation suppliers to increase visibility of shipments in the supply chain pipeline. This means conducting risk analysis and teaming up with all suppliers to act on supply issues.
5. Redesign to Source from Local Content: Companies need to have production facilities with local sources of supply in each of their major markets, to spread the risk.
6. Align the procurement strategy with Supplier Relationships: Companies should rely on small groups of critical suppliers and maintain a mutually win-win relationship with each. Also, companies need to adjust for higher than normal demand and proactively design robustness into the network to minimize the impact of the bullwhip effect.

These strategies are critical for both short-term recovery and longer-term contingency planning. When companies work together, they can withstand this pandemic and come out more reliable than ever.

OM in the News: Where Will the Toys Come From?

Toy companies are delaying shipments and new product launches and struggling to fill retail orders as the coronavirus epidemic disrupts the industry’s supply chain, reports The Wall Street Journal (Mar. 2, 2020).

Some toy factories in China, where around 85% of the world’s toys are made, remain closed and others are operating at a fraction of capacity, either because of worker shortages or difficulties securing raw materials and molds to make their products. The disruption is threatening the carefully orchestrated schedule of manufacturing and shipments that delivers Barbie dolls and Nerf blasters to shelves. Some large retailers are searching for alternative products to fill holes in their inventories and considering delaying setting their shelves for the holiday season by a month.

Many toy companies have convened war rooms with daily calls to their Chinese manufacturers for status updates. Some have said they might see their expected output fall by around 25% in the second quarter of the year. Zuru, which makes X-Shot blasters and Bunch O Balloons water balloons, said its factories have reopened in phases over the past few weeks. Zuru installed dividers between workspaces, added extra sanitation stations and implemented other precautionary measures. But the company is thinly staffed due to restrictions on China travel and is operating at just 20% of capacity.

Some larger companies have worked to reduce their dependence on Chinese factories in recent years, with trade disputes recently creating the need for a more diversified base. Hasbro gets about 2/3 of its products from China and aims to reduce that to 50% over the next few years. Mattel makes less than 2/3 of its products in China and most of its two largest brands, Barbie dolls and Hot Wheels cars, are made elsewhere.

Even if the factories start churning out toys faster soon, another challenge will be getting them out of China, as toys will have to compete with iPhones and other consumer products for transportation.

Classroom discussion questions:

What model in Supp. 11 (Supply Chain Analytics) did Hasbro and Mattel follow?
What logistics issues does the article refer to?

OM in the News: World Economy Shudders as Coronavirus Threatens Global Supply Chains

Travellers are few at this Chinese railway station.

The last time a virus outbreak hit China, in 2003, the global economy emerged unscathed. Now, nearly 2 decades later, the effects of the coronavirus threaten to ripple around a world transformed by China’s boom. Chinese consumption and production power growth from Asia to North America, Europe and beyond. Manufacturers world-wide are tethered to China by the tentacles of a supply chain that relies on the country’s factories for many intermediate and finished goods. “This is a once-in-a-generation event,” said one CEO.

With fears of contagion keeping Chinese workers home, production is getting pinched, writes The Wall Street Journal (Feb. 23, 2020). In the U.S., GM warned that a lack of China-made parts could slow assembly lines at plants in Michigan and Texas. Hyundai suspended one of its main assembly lines in Ulsan, S. Korea, because it couldn’t get parts from China. Asiana, S. Korea’s 2nd-largest airline, put its 10,500 employees on staggered shifts of 10 days’ unpaid leave. Videogame giant Nintendo said that shipments of its flagship Switch gaming console are delayed as it can’t get parts from Chinese factories. Apple won’t meet revenue projections for the first quarter as the epidemic shuts its China plants. Container-ship operators are preparing profit warnings as dozens of trips out of China are canceled. In Vietnam, an economy highly dependent on Chinese supply chains, exports in January fell 17%.

Major electronics producers that depend on Chinese parts also have suspended output because of the outbreak. Others are weighing relocation. Japan’s exports to China are expected to drop 7% this quarter from the prior one. An extended Chinese shutdown could cripple global manufacturing and cost the world up to $1 trillion in lost output. “The current situation is more serious than we thought,” said S. Korea’s president.

Classroom discussion questions:

How can companies evaluate disaster risk in their supply chains? (See Supp. 11 in your Heizer/Render/Munson OM text)
What impact will this virus have on supply chains in 90 days if it is not contained?

OM in the News: Coronavirus Tests Apple’s China Dependency

Coronavirus has given new meaning to something Apple executives have been saying for years: Apple needs another China. The rapid spread of the virus and the disruption it has caused is the latest test of Apple’s dependency on China as its manufacturing base for most of the iPhones, iPads and Macs sold world-wide.

To curtail the virus’s spread, local governments have asked people to stay away from work. Shipments of parts and components to the Apple assembly plants are curtailed, and workers who went home to celebrate the Lunar New Year may not return, out of caution. Foxconn, Apple’s main manufacturer, is contending with a strict quarantine in Zhengzhou city, home to its largest iPhone plant.

Apple has successfully weathered a number of challenges involving China in recent years, writes The Wall Street Journal (Feb. 8, 2020). But it is among the foreign companies most vulnerable to the outbreak because it hasn’t diversified its manufacturing. Though it looked at assembling iPhones outside China, it found the costs of facilities and training too high and opted to keep exporting from China. Apple’s leaders have long considered its reliance on China-based manufacturers as both a strength and a vulnerability. Apple worried more about a disruption in exports from the country than loss of sales inside Greater China, a market that accounts for 1/5 of revenue.

Samsung, the world’s largest smartphone maker, wound down production in China last year as part of a years-old strategy of diversifying its manufacturing base by shifting production to India, Vietnam and elsewhere.

Apple is known for its operational prowess and has a record of navigating supply-chain challenges. After an earthquake triggered the Fukushima nuclear crisis in Japan in 2011, Apple quickly created a new factory to maintain production of optical drives it needed for its devices. When monsoons flooded factories in Thailand later that year, Apple turned to the Thai Navy to load boats with the heavy equipment necessary for production. But those events only affected a sliver of Apple’s supply chain. Coronavirus affects the very heart of it.

Classroom discussion questions:

Referring to Supplement 11 in your Heizer/Render/Munson text, draw a decision tree for Apple’s disaster risk.
What can Apple do at this point if it thinks the virus will have a 6-month impact on supply chains?

OM in the News: As Ice Melts, Shippers Look to Arctic Route

An Sovcomflot icebreaking supply vessel moored in Murmansk, Russia.

As we note our discussion of Transportation Mode Analysis (Example S4) in Supplement 11 (Supply Chain Management Analytics), speed of transportation is critical.

So it is no surprise, writes The Wall Street Journal (June 6, 2019), that Arctic routes are drawing greater attention as the global climate warms and polar ice recedes, potentially opening new paths between Asia and Europe. The mostly frozen Northern Sea Route (NSR) seaway is considered a likely commercial lane because it already is used in warmer seasons to move part of Russia’s extensive energy exports. Russia is promoting the lane as the shortest distance to ship containers from Asia to Europe, and a possible rival for routes that now take ships through the Suez Canal.

Russian shipping giant Sovcomflot tankers crossed the NSR more than 100 times last year, handling crude exports from Gazprom’s port oil facility in northern Russia. Crude tankers account for about 45% of ship traffic on the NSR. “The driver for transportation economy is basically distance, and the NSR cuts sailing time by around 20% compared to the route across the Suez,” says the CEO of Sovcomflot. “Cargo will always find the fastest way to move.”

Denmark’s A.P. Moller-Maersk, the world’s largest container ship operator, sent a small container vessel across the NSR last summer from Vladivostok to St. Petersburg. The Venta Maersk saved more than 10 days of sailing time compared with travel via the Suez.

Classroom discussion questions:

What country will lose out if the NSR is successful more months?
Is the time it takes to ship from China to the U.S. becoming an issue for suppliers?

OM in the News: Where OM Data Analytics Meets Chocolate

Todd Ferris uses advanced analytics to find solution to problems like ways to route peanuts.

Todd Ferris is a principal data scientist for Hershey Chocolates. He can track a cocoa bean from harvest to chocolate bar on a store shelf. Here are some excerpts from The Wall Street Journal (March 29, 2019) interview that you might use in class when you cover our new chapter, Module G, Applying Analytics to Big Data in Operations Management:

Our team goes after complex problems across the supply chain. Can we see our products from sourcing a cocoa bean in Western Africa all the way to manufacturing, shipping and getting it to the customers? It’s very difficult to keep track of all that data.

We are always fighting this bullwhip effect, the phenomenon of small changes at one end of the supply chain creating huge issues once you get back to manufacturing. If customer demand varies by 100 chocolate bars at retail, by the time that information gets back to us at manufacturing that signal may be 1,000 bars. This creates a lot of inefficiencies.

We use a programming language called R, a counterpart to Python. You’ll do your modeling inside one of those programs; we’ll use SQL to access, manipulate and filter data before we bring it into analytical tools.

You can do procurement, like forecasting the health of crops or their availability. I’ve worked on manpower analysis—how we shape our manpower in our manufacturing plants in the best manner possible. We just worked on the best way to route peanuts from our suppliers to our plants. On one side we are forecasting crops and on the other we’re at the store level trying to determine if we have too much inventory or too little. We try to predict what’s going to happen and then make sense of how we need to respond.

Classroom discussion questions:

Describe the “bullwhip effect” and its importance in OM.
How would you describe “data analytics” to an executive and explain its role?

OM in the News: The Weak Link in the Supply Chain

In Supplement 11, we discuss the risks of natural disasters (such as the Japanese tsunami) to global supply chains. But as Supply & Demand Chain Executive (July 13, 2018) rightly points out, today’s supply chains, though increasingly efficient, are highly vulnerable to digital threats. Since global organizations can support operations with partners in countries with varying infrastructure reliability, streamlining communications is a severe and sometimes impossible challenge to overcome.

In an era when real-time transfer of information between international stakeholders is critical to business, secure communications are the most important, and the most frequently overlooked, component to response planning. A recent survey found that supply chain managers are “very concerned” about data security, natural disaster and war. As mass-connectivity has made it easier than ever to source partners, most businesses now have touchpoints across the global supply chain, regardless of their location or the markets in which they serve. This connectivity has brought tremendous financial, productivity and efficiency benefits. However, it has also created a dependence on a globally-connected, real-time communication system that has fears of disruption proliferating among manufacturers that are adopting JIT supply chains. What might start as a little ripple in a supplier country on the other side of globe can turn into a wave of failure by the time issues reach a production facility.

So, in addition to natural disasters, cybersecurity is now a major concern. Partnerships with third-party cloud services, off-premises data storage providers, unauthorized mobile device usage, email phishing and aging infrastructure are all boosting risk. One in 5 firms in tech, defense and aerospace, for example, use outdated browsers that make them vulnerable to malware. Email especially, is inherently subjected to security threats. One survey found 77% of businesses expect to fall victim to email fraud in the next 12 months. Three-quarters also said that they have experienced at least one targeted email fraud attack in the past 2 years.

No entity within the global supply chain can prevent natural disasters and mass cyber incidents. But they do need to be prepared, as we point out in the text.

Classroom discussion questions:

What can operations mangers do to prepare for these digital threats?
What forms can the communications threats take?

OM in the News: Ford Discovers a Damaged Supply Chain

“Ford expects to lay off several thousand workers temporarily at a Michigan factory that assembles its top-selling F-150 pickup truck after a fire last week damaged the premises of a parts supplier,” reports The Wall Street Journal (May 9, 2018). The blaze, which occurred at a Michigan plant operated by Meridian Lightweight Technologies, has already disrupted production of Ford’s pickup trucks at a factory in Missouri. Meridian is an automotive-interiors supplier owned by China’s Wanfeng Auto Group, which makes components for Ford and other car makers. Ford’s F-150 factory in Dearborn, Mich., is expected to run out of Meridian-supplied parts and halt production as early as Wednesday.

Ford’s other main F-150 plant, in Kansas City, Mo., would be idled this week because certain parts are in short supply after the fire. The two plants, which together employ 7,600 people, could face several weeks of down time as the auto maker seeks ways to make up the parts shortfall.

The F-150 is Ford’s best-selling vehicle and generates the bulk of its global profit. A prolonged shutdown of the plants could dent revenue and profit. The two plants combined produce 10,000 to 15,000 F-150s a week. The company would face cost pressures from paying workers during idle time and while ramping back up to offset lost production. The fire also disrupted production at a Fiat-Chrysler Automobiles minivan plant in Windsor, Ontario, and a BMW sport-utility factory in South Carolina.

Classroom discussion questions:

What are the advantages and disadvantages of a single-source supplier?
What strategy (see Supplement 11) might Ford employ?

OM in the News: Humanitarian Efforts of a Houston Supermarket Chain

A flooded H-E-B store. Three of the chain’s 83 stores in Houston will need to be rebuilt; the interior of one store shown.

One of the colleges within the POMS academic society is called Humanitarian Operations and Crisis Management. Hurricane Harvey, which slammed Houston, provides a great example of how OM steps up to the plate in times of a disaster. At a time when retail watchers question the future of brick-and-mortar stores due to Amazon’s continued ascendance, retailer H-E-B is drawing widespread praise after managing to open 60 of its 83 stores in Houston, hours after the hurricane struck, writes LinkedIn’s Work in Progress (Aug. 2, 2017).

When employees couldn’t get to work, some stores still operated with as few as 5 people: one stationed at the door as crowd control and 4 working the registers, trying to get people out as quickly as possible. The behind-the-scenes operation is a complicated dance involving multiple command centers, a helicopter, private planes, military style vehicles and frequent calls to suppliers, urging them to send toilet paper.

Here are the word’s of H-E-B’s Houston president: “Coming out of a hurricane, if there’s been flooding, they’re going to want mops and bleach. I’ll take all the bread I can possibly get. Then you’re going to start to get produce. We don’t care about flowers in the middle of a hurricane. You only have so many trucks and so much space. We brought over 2,000 partners from Austin, San Antonio, the Rio Grande Valley. They hopped into cars and they just drove to Houston. For 18 hours a day, they’re going to help us restock and then they’ll go sleep on the couch at somebody’s house. We’ve called P&G and said: Send entire trailer loads of toilet paper directly to our stores. Bypass our warehouse, so you can just get it to us. I called Frito-Lay and said manufacture your bestsellers. I need Lay’s, I need Doritos, I need Fritos. I won’t turn down any delivery. We’ll take it as fast as we can.”

Classroom discussion questions:

How was H-E-B able to reopen so quickly?
What OM tools can be used in times of a disaster?

Good OM Reading: Supply Chains and Data Analytics

The OM field will soon face a major change in the way we make decisions. Big data, data analytics, and business intelligence are all skill sets our OM students will need. The Gartner Group has just issued an interesting report on these concepts. Gartner identifies 4 core skill sets to support the successful adoption of analytics: Data engineers who make the appropriate data accessible and available for data scientists. Supply chain expert analysts who understand supply chain requirements and priorities to ensure the right tools are used. Data scientists who create predictive and prescriptive models. Citizen data scientists who are lighter versions of a data scientist who can build or choose models, but within a platform.

There is, of course, a shortage of data scientists. This is compounded for supply chain, which might not be viewed as attractive as finance, sales and marketing. But analytical platforms can alleviate this shortage. This is because within the platform environment, “citizen data scientists” can build new apps and solutions.

As the line between the physical and digital world blurs in business, the algorithmic supply chain affords companies the ability to leverage massive data from increasing connections among people, businesses and things. This allows them to respond quickly and profitably to changes in market demand. In an algorithmic supply chain, decision-making relies on the company’s intellectual property (IP) that captures data and encapsulates it into reusable, unique and optimized information assets. Embedding this IP in supply chain processes, the company can solve large-scale, dynamic problems and create competitive advantage.

UPS provides a powerful example of using analytical platforms to build On the Road Integrated Optimization and Navigation (ORION) to support its core business processes. ORION generates daily routing manifests to 55,000 UPS drivers. The platform incorporates optimization, heuristics, predictive analytics and custom mapping. It generates $300-$400 million in annual benefits, based on reducing fuel consumption by 10 million gallons, carbon emissions by 100,000 metric tons and driven miles by 100 million, annually.

Good OM Reading: Automating Supply Chain Resilience

“Substantial investments in supply chain resilience have enabled companies to vastly improve their capacity for bouncing back after a disruption,” writes MIT Sloan Management Review (Jan. 2017). With the benefit of digital technologies, companies are using Big Data to identify supply chain risks and create early warning systems with much greater speed and precision. A digital supply chain is defined as “a customer-centric platform model that captures and uses real-time data coming from a variety of sources.” If a potential disruption is detected, the system decides on the best mitigation strategy and executes that strategy.

A recent survey of 30 global companies found that 88% have incorporated elements of the digital supply chain into their business model. All of the companies surveyed were working to adopt game-changing technologies such as the internet of things and robotics. To keep pace, companies need to develop ways to automate resiliency. There are various strategies to make the supply chains more resilient, including diversification of the supplier base, establishing safety stocks, and planning for spare transportation capacity.

One example is a loaded freight container equipped with sensors that track the temperature and humidity of the goods in real-time. The data is analyzed using business intelligence rules and shared with authorized entities in the extended supply chain. These parties can take action should a problem be detected. For example, if the container readings indicate that perishable cargo has been damaged due to an equipment malfunction, an order is automatically placed for replacement supplies while the damaged shipment is still in transit. Such remedial actions are not confined to logistics; financial and contractual terms can also be adjusted when an unexpected disruption occurs.

Risk-prone supply chains are generally perceived as less secure by governments, and for that reason are more frequently selected for auditing, control, and inspection. These activities create unnecessary delays in supply chains.

OM in the News: Planning for Japan’s Next Earthquake–The Really Big One

A huge earthquake in the Japan’s industrial heartland — costing as much as 40% of GDP and disrupting supply chains at companies such as Toyota — is seen as inevitable, reports The Financial Times (May 19, 2016). Understanding the risk and reducing damage is critical (as we discuss in Supplement 11). The recent magnitude 7.3 earthquake in Kyushu, which killed 49 and destroyed thousands of homes, is a reminder that Japan remains exposed to frequent natural disasters. But a big earthquake directly below Tokyo, in the Nankai Trough, would be an economic shock of global significance. The government puts the odds of a magnitude 8.0-plus Tokyo earthquake at 50% in the next 20 years, 70% in the next 30 years and 90% in the next 50!

A Tokyo region earthquake could be more devastating than the one in 2011 at Tohoku, which left 18,800 dead, thousands homeless and crippled the Fukushima nuclear facility. The global impact of the Tohoku earthquake surprised many. Car plants as far afield as Louisiana and Ohio had to halt production for a lack of parts, from microcontrollers to paint.

Yet Tohoku is on the periphery. Tokyo is a manufacturing heartland, a link in some of the world’s most important supply chains. Fanuc, the world’s leading maker of industrial robots, is based in the region, as are 1/2 the world’s musical instruments (manufactured by Yamaha and Roland), and 1/3 of the world’s Nand Flash memory (by Toshiba), built into every smartphone. But even in this region, two supply chains stand out: it is home to Toyota (which makes 1.6 million vehicles a year there) and to most of Boeing’s Japanese suppliers (which make the 777 and 787 fuselages).

Japanese business learned a lot from the Tohoku disaster. Companies changed their supply chain systems to increase redundancy and have extensive continuity plans. However, even if Toyota’s own plants managed to restart quickly, they are only as resilient as their weakest subcontractors and the regional infrastructure of roadway, ports, and airports.

Classroom discussion questions:

What can firms like Boeing do to protect their fuselage supply chain?
What models in Supplement 11 can be used to deal with this problem?

Guest Post: Tackling Risk in Global Supply Chains

Today’s Guest Post comes from Andreas Wieland, Assistant Professor of Supply Chain Management at Copenhagen Business School.

Managing risks in a global supply chain can be a difficult task. But there are substantial differences between 2 systems: the company and the supply chain. In a company, it might be relatively easy to get an overview about all the risks that might occur. But a supply chain consists of hundreds, sometimes 1,000s of companies. For example, if 30,000 parts are needed to build a car – many of them coming from different suppliers and suppliers’ suppliers – it should become obvious that the scalability of traditional risk management tools becomes quickly limited.

Identifying and assessing all types of risks from all suppliers, their suppliers, and all raw materials suppliers is simply impossible! Plus, doing this is also not always reasonable: many of the supply chain disruptions that happened in recent years were, in fact, caused by risks that had not appeared on risk category lists. Could we really imagine that a Tsunami in Japan would cause a nuclear accident? The harmful thing for Japanese car manufacturers was not that it was an earthquake that had happened. It was that many of their redundant suppliers were located in the same region. Worse, even the non-Japanese plants of these companies were affected, as they had failed to make the supply chains of different regions independent.

It’s not just the design of a supply chain that can help a company become more robust. It’s also the product design. Avoiding materials that can only be supplied from certain regions, such as rare-earth materials, or suppliers of non-standardized parts, can help ward off certain types of risk. Modular product design can help to at least semi-finish a product and to add missing modules at a later stage when they become available again. Such systemic solutions help companies cope with risk in the supply chain without paying too much attention on the exact causes of risk.

In my essay in Delivered (the DHL magazine), Managing the Unknown: How We Should Tackle Risk in Global Supply Chains I list 8 potential ways to increase the supply chain’s ability to avoid and resist risk.

Good OM Reading: Supply Chain Resilience

Semiconductor companies shaken by earthquakes; transportation companies battered by weather; retailers outwitted by rivals — nearly every company has endured some type of catastrophe, and then learned from its experience, disruption after disruption. For example, GM became more resilient with every crisis it faced, from the bankruptcy of its strategic supplier, Delphi, in 2005 to the Japan earthquake in 2012. “Technology is an increasingly important tool in the arsenal of resilience” writes MIT Sloan Management Review (Oct., 2015) .

From sensors to cloud computing to social media, various technologies can help prepare for, detect and manage disruption. Sensors can warn of impending events, from industrial accidents to earthquakes. When interconnected into Internet of Things networks, these smart devices can alert employees to a potential or existing disruption. During and after disasters, every human being on the scene can now be a sensor. Social media channels can provide an informal, real-time damage assessment. But even as technology makes it easier to detect and manage risk, it is also a major source of risk. A cyber-security breach can disrupt as much as an earthquake can– as the many retailers that fell victim to digital theft discovered in 2014. A large part of the problem is not rooted in sophisticated penetration of firewalls, but with insiders whose mobile devices are infected inside the firewall.

Collecting information from every source — weather reports, sensors, industrial intelligence — is only half the job. What organizations do with the information is key. The technology will sound the alarm, but the decision-making process that ensues is the real issue. Consider the actions taken by dispatchers when alerted to an earthquake in Mexico City a few years ago. Those empowered employees were able to shut down the subway system 40 seconds before the earthquake hit, avoiding a possible disaster. Employee empowerment illustrates a key difference between resilient and non-resilient companies: Resilient companies delegate to the lowest level. They organize in advance for disruption and consolidate crucial information in an emergency operations center. With the increasing use of cloud technologies, these centers can be virtual so that employees can work on the disruption, even from home.