The impact of major catastrophes on the global supply chain: Facility planning and inventory considerations

In this paper, the author extends a prior model of supply-chain commonalities [1] to incorporate the impact of major catastrophes. Such disastrous events as the September 11, 2001 attack on New York´s World Trade Center and the earthquake and tsunami that hit north-eastern Japan on March 11, 2011 wreak havoc with supply chains even when well-planned diversification and disaster-recovery strategies have been developed and implemented. Concepts are included from the author´s prior work [2] on how organizations must develop and test catastrophe contingency plans. These recommended practices are applied to supply chains in order that they will survive major catastrophic events, which might harm regular disaster-backup staff, and which might destroy or severely damage systems and facilities. We extend the scope of commonality beyond individual producers and factories to extensive physical geographical areas and to virtual regions. Since catastrophe risk mitigation strategies must be both financially and operationally effective, we examine the geographical and logical diversification of facilities and distribution channels and suggest inventory cushions needed to reduce the impact of extended recovery times. This paper examines factors that need to be included in the analysis and suggests investments needed to reduce corresponding risks.