Weathering the storm

Insider: Nick Wildgoose

“Risk shouldn’t be set aside, it should be part of your business decision-making within the supply chain,” says Nick Wildgoose, global supply chain product leader, Zurich Insurance Group

Who Nick Wildgoose, global supply chain product leader, Zurich Insurance Group; chairman of the Supply Chain Risk Leadership Council; former non-executive director of the Chartered Institute of Purchasing and Supply.

Involvement Wildgoose, based in London, consults with companies globally on supply chain risk, protection and strategy and is a frequent collaborator with the Business Continuity Institute. According to their research, supply chain disruptions from extreme weather are up 29% since 2012. Listed spoke to Wildgoose after Hurricane Harvey had inundated Houston, Tex., with the largest single rain event in U.S. history, and just as Hurricane Irma was on final approach to Florida.

Listed We’re witnessing major hurricanes, two weeks apart, wreak havoc in multiple major U.S. economic centres. What are you seeing in these events from a supply chain perspective?

Nick Wildgoose If I can say, you also shouldn’t forget the extreme events that are happening Asia. They come back to hit North America in some way or another. For example, Bangladesh, dealing with Monsoon flooding, is a big centre for the textile industry. And the typhoon that hit Hong Kong the other day will impact the electronics industry. It’s a very interconnected world.

Listed Hurricane Harvey, in Texas, probably hits closest to home for Canadian business. Can you expand on that example?

Nick Wildgoose Houston is a US$503-billion GDP economic centre. It’s the centre for oil and gas and chemical production. So they reckon that about a third of U.S. chemical production has been impacted in some way. And of course those chemicals can be things like caustic soda, chloride, polyvinyl chloride, things that impact on all kinds of supply chains and industries. You’re talking, of course, about automotive; you’re talking about packaging, as well as the plastics industry itself. And of course packaging can impact on many different industries in turn.

The issue isn’t just direct challenges, either. Yes, there’s the impact that comes from, in this case, the product sites needing time to recover. But one of the other challenges, when you look at extreme weather, is the impact that it’s had on transportation and damage to infrastructure. So even if your supplier gets their plant running again, the question becomes: have they got the infrastructure to get things in and out of the plant?

Listed We had some warning ahead of these storms. How can companies use that information?

Nick Wildgoose I was talking to a number of companies the week before Harvey hit. They were tracking it and they were already in touch with key production sites that might be hit, thinking about inventory and shipping stuff out.

Listed Are certain sectors better at this than others?

Nick Wildgoose The automotive industry went through this kind of concern—in particular, from 2011 through 2013—so they have now started to map out their critical suppliers at the tier one level and also at other levels where they’re critical to the manufacture, so they can start to do more proactive management of this.

Listed What happened in 2011 to 2013?

Nick Wildgoose It was in 2011 where I saw a significant change in people’s attitude, because you had the Japanese tsunami in March, and then you had the Thailand flood in the early autumn. And they had billion-dollar impacts on supply chains across the world, particularly in electronics and in automotive. In 2013, it was a fire at a German plant making resins for brake parts.

Listed What’s your advice for executives and directors at companies that haven’t had this awakening?

Nick Wildgoose Risk shouldn’t be set aside, it should be part of your business decision-making within the supply chain. One of the things I advise a client is to start to learn “black box thinking.” Like on an aircraft, capture the things that are near misses or small disruptions, and start understanding them and learn those lessons so hopefully you avoid some of the bigger disruptions.

Having a handle on your most profitable product is the place to start—knowing where your most critical suppliers are based for that product and, on occasion, the sub-tier suppliers. Then, with technology today, you can map out those sites and you can start to monitor them.

And then you can think as well about your inventory strategy. Because it may be that just driving down inventory and hitting that wonderful finance metric of minimizing working capital isn’t the best approach. Sometimes maybe you want to have a little bit of inventory, because there’s a lot of money riding on you having that available.

Listed What percentage of companies are currently doing this?

Nick Wildgoose It’s a growing number, but it’s still the minority. And all of those are on a journey towards maturity. I don’t think any of them can claim to get 10 out of 10. But it’s kind of like one of those games. As long as you’re one step ahead of your competitor, that might be enough.

Photography by Zurich Insurance Group

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