Mother Hubbard’s Cupboard, Supply Risks and National Security

               I know what you are thinking.  What could a nursery rhyme possibly have to do with national security?  Well, a lot actually.  You may recall what happened with Mother Hubbard’s cupboard.  She went to her cupboard, discovered it was bare, and couldn’t give her dog a bone.  There is no mention of what the rest of her family did, but the dog certainly had to go without. 

Unfortunately, we’ve seen a lot of potential risks recently, especially in regards to supply chain risk.  Supply chain risks are something that businesses have to deal with on every level.  School districts already looking at making budget cuts, still have to buy fuel for school buses.  Businesses need to buy supplies or goods to manufacture their products or to use in their businesses.  Even service companies have to deal with supply issues.  Imagine if you have uniformed staff and the overseas company that normally supplies a part of your uniform is no longer available.

Generally, these kinds of supply chain failings happen on a micro level and go unnoticed by most of us.  However, recently there have been a number of high-profile cases that stress the importance of supply chain risk management, not just on a small level that affects individual organizations, but also on a national level.  Some examples even affect our national security posture around the world.

First, there was the earthquake in Japan.  The financial aftershocks still rock businesses internationally.  Among all the horror stories and the loss of life, the impact on Japan’s economy has been becoming clear.  One example of the impact has been on the auto industry.  The line between American-made cars and Japanese cars has become more and more blurred in a global market and even American car companies realized that many of their parts were made in Japan and the supply was interrupted as a result of the quake.

As this was going on in Asia, the Ivory Coast has been embroiled in revolution and violence.  About 34% of the world’s cocoa beans for chocolate come from the Ivory Coast.  The exportation of cocoa has been on hold for months affecting the prices.  Some analysts think that the situation is nearing the end and cocoa prices have started to drop (of course, how much of the savings gets passed back to the consumer versus lining corporate pockets remains to be seen).  Who would have thought that political unrest in the Ivory Coast would influence the price of chocolate?

Last, there is the Middle East.  The civil unrest has been spreading from one country to another, Egypt to Libya, Syria, Yemen and even Jordan.  The clear risk lies in the supply of oil, a commodity that industrial countries cannot do without.  Even the risk of closing the Suez Canal sent fuel prices skyrocketing.

So what are the real life lessons?  Certainly, you cannot predict every potential problem.  However, this is where a risk assessment can help identify the risks associated with certain supply chains.  And more importantly, once you’ve looked at your risks, take the necessary corrective action.  As with many security issues, one of the biggest, often fatal, mistakes is to ignore the warnings and go own our merry way.  That is the equivalent as walking down a street and seeing a gang of thugs blocking the sidewalk and you decide to push right through.  Pride aside, the safer course would be to cross the street and avoid the problem – but who does that?

Once you have identified your risks, create a back-up plan – a business continuity plan.  What will you do if a key ingredient is missing?  It could be a simple solution or complex, depending on your organization.  If you run a coffee shop, what is the risk if the newspapers aren’t delivered before your morning customers arrive?  Minimal, maybe, but you still risk having a first-time customer not coming back.  What if you manufacture some type of good or product?  Do you have a back up in case a critical product piece is not available?  A snowstorm or natural disaster or dockworker strike could interrupt your flow from thousands of miles away.  Identify a replacement part from another supplier, preferably one that even comes from a different part of the world.

The simple, step-by-step process is:

1.      Review the goods that go into your business.  Do not overlook the small things.  Imagine shopping for Christmas, buying all the presents to give out, selecting the wrapping paper, go home to wrap on Christmas Eve, only to discover that you have no tape.

2.     Find out where your supplies come from.  How stable or secure are those vendors and also the regions or countries where they are located.  In turn, each of those vendors has suppliers of their own, so the ripples could run several layers deep.

3.     Develop a back-up plan.  Either have a plan to use alternate materials or build a store on hand for interruptions.

4.     Follow the plan.  All the best intentions in the world will do you no good, if you do not follow through.  It is the equivalent of having a great recipe for your favorite dinner, but no ingredients to cook it with.

            And as for our oil supplies?  Clearly, we are making a huge mistake being dependent on one region of the world for a critical supply where a large number of people want to destroy or fight against Western civilization.  The obvious alternative is to develop other sources of fuel; both for our current needs, such as oil, and also develop future sources of energy.  Otherwise, we will truly wake-up and find that our cupboard is as bare as Mother Hubbard’s.