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Case
Study: Chengdu Earthquake Crisis Response One of the largest
earthquakes to hit China occurred on May 12, 2008. With a magnitude 7.9, its epicenter was 80 km northwest of
Chengdu, capital of Sichuan province. The violent tremors caused devastation
and huge loss of life; 70,000 dead and more than 18,000 still missing. This area suffered damages that run
into tens of billions of dollars. The world responded, as one human family, and
rushed to aid everyone affected in this area. Many companies, including Cisco
Systems, Procter & Gamble and others provided financial support as well as
technology and services to aid the recovery. Events like this are
when global supply chains are tested to the limit. In the case of Cisco
Systems, our Supply Chain Risk Management (SCRM) team swung into action to
ensure the safety of all supply chain personnel as well as to monitor and
ensure the uninterrupted flow of products to customers. Within 48 hours, Cisco’s
SCRM team had conducted a full impact analysis, evaluating affected sites,
parts and products. Their robust BCP (Business Continuity Program) platform
allowed the team to gain complete visibility into the supplier footprint in the
area. Using the emergency contact information for each affected site, the
Crisis Management reached out to assess the impact to each site. Meanwhile, the
SCRM team had also pulled up the potential revenue impact to Cisco for a variety
of scenarios. Using technology (in the form of dashboards and maps) and
people-to-people contact, they were able to verify that there had been no loss
of life or injuries to anyone in Cisco’s Supply Chain, which was their
paramount concern. Next, they moved to evaluate the risk exposure to Cisco, by
site, along with mitigation plans. Since Cisco updates the BCP at least twice a
year, all mitigation plans were up to date. The analysis revealed
that Cisco had around 20 suppliers in the affected area. While there was no
impact to any of the manufacturing sites and logistics centers, there were two
potential suppliers at risk. One large supplier (X) was within the affected
area and had quite a significant exposure to Cisco’s revenue in addition to
being single sourced. Another supplier (Y) of components with a smaller revenue
impact was also affected by damage to one of its buildings. It turned out that
the SCRM team had proactively worked to address the risk with Supplier X just
months before the earthquake. Fortuitously, this risk had been mitigated
through the identification of a second source. However, the situation with
supplier Y was still an issue. The
SCRM team worked with it’s internal partners on the procurement, planning and
operations teams to deploy previously identified second sourcing options as
well as gaining commitments on expanded capacity. Over a short period of time,
both sides were able to recover Supplier Y’s capacity across their current
campus, to an unaffected building. Despite facing a
natural disaster of huge proportions, the Cisco SCRM team was able to respond
rapidly, ensure safety of all in their extended supply chain, identify risk
exposure to the company and work with its partners to mitigate the risk and
ensure that there would be no impact to customer shipments. The BCP, Crisis
Management and Risk Mitigation arms of the SRCM team worked seamlessly in this
endeavor.  |
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