In an initial update posting on Monday, I sounded a call to supply chain risk management teams to begin preparations for any consequences related to the ongoing swine flu outbreak.  As I pen this posting on the evening of April 29, the World Health Organization (WHO) has warned that a swine flu pandemic is imminent.  The Geneva based WHO raised the official alert level to phase 5, the last step before an actual pandemic. The death toll within Mexico has risen to 159, and one infant has died in the U.S. of more concern, both U.S. and EU officials anticipate further deaths attributed to this outbreak.

From a supply chain perspective, certain observations can be made.  First, it’s becoming rather obvious that the virus is spreading as a result of contact among persons. As both the threat level and infected populations continue to increase, I believe we should anticipate more forms of travel restrictions, as countries will surely step-up efforts to protect their populations.  A video story featured by the Reuters News Service shows how the government of Japan has already escalated its response to incoming flights from Mexico.  Transportation across supply chains will be subject to interruptions, as carriers get tangled in these cross-border restrictions, similar to what occurred during the SARS outbreak in Asia.

Other industry-related supply chain impacts are still emerging.  An article in siliconvalley.com outlines the extra precautions that certain high-tech and consumer electronic companies are currently taking.  A major high tech contract manufacturing center is located in the Guadalajara Mexico area with the presence of firms such as Flextronics, Sanmina/SCI, and other manufacturers.  There are also concentrations of automotive assembly and parts suppliers concentrated near the Mexican and U.S. border.  The situation right now is reported as precautionary, with restricted travel directives, and close monitoring of the overall situation.

Finally, as the saying goes, crisis does bring opportunity.  Manufacturers of protective masks, cleaning materials, and antiviral drugs are experiencing a rather positive effect from this crisis, as demand for these products explodes beyond normal levels.

Continue to stay informed on current developments and be prepared to act on all supply chain fronts.

If you would like to share observations of what precautions your organization has undertaken as a result of this potential pandemic, please share them in the comments section related to this post.

Bob Ferrari

There is an excellent article (Broken links in food-safety chain hide peanut plants’ risk) penned by Julie Schmit of USA Today that should be mandatory reading if you or your company is involved with food-related supply chains.

This article outlines the events leading up to the actual discovery of the salmonella contamination that originated from the Peanut Corporation of America’s Blakely, Georgia plant, the post-discovery events leading to a criminal investigation, and the obvious lessons for the food industry.  From reading the story, I came to the conclusion that quality and inspection reforms are way overdue, and the events seem to have the same litany of the failed oversight process that brought about the recent world financial crisis.

Among the takeaways within the article were:

• A quote from William Hubbard, a former FDA associate commissioner indicating that the outbreak “is a poster child for everything that went wrong” with the U.S.’s food-safety system. “The whole idea (of third party audits) isn’t working.  Inspectors are either telling the client what they want to hear, or doing a perfunctory audit or they’re poorly trained“.
• The fact that the U.S. FDA can only inspect food facilities, on average, every five to ten years unless they are deemed high risk, which peanut processors were not.  The FDA last inspection of the PCA Blakely plant was in 2001, while Georgia inspectors visited the plant in the last three years and cited only minor problems.

If the litany of events doesn’t catch your attention, than the quote from a former employee should.  The plant roof leaked so badly, “It rained in the plan.””

As a consumer, I’m going to hold food companies more accountable for the overall quality and safety of their products.  As an experienced supply chain observer, I believe that time is long overdue for a new model of supplier and production audits.

 Bob Ferrari

Supply chain specialty recruiting firm TopGrading Solutions called my attention to their recent survey related to how long unemployed supply chain planning, purchasing, and consulting focused candidates will wait before taking a job with a lower salary.  Since TopGrading Solutions specializes in candidates in these specific sectors, there was unique survey base to test current thinking.

The results indicate a potential split in opinion, but that the majority of these professionals realize the overall worth of their specialized supply chain skills.  The majority of the contributor candidates surveyed (over 50%)indicate that even with this unprecedented global recession, they would wait from 2 months, to at least 4 months, before considering a cut in their previous annual salary. Only roughly 17% of survey respondents would consider a cut in annual salary in their first 90 days of job search.  Executives on the other hand view salary as one of other components in searching for a new position. 

Many supply chain professional and industry groups, as well as this author, have pointed to the increased gap for broader, and more experienced supply chain professionals.  Last July, The Global Supply Chain Professional Development Committee, a sub-team to the Supply Chain Operations Council (SCOR), commissioned AMR Research to conduct a research study that outlined the current extent of this skills gap, which affirms the view that gaps exist today and into the future. So in my view, talented supply chain professionals should continue to recognize their current and future worth in the skills marketplace.

One other worthy observation cited by TopGrading Solutions specialty recruiter Jason Breault, is that certain companies seem to be now recognizing that their teams were spread too thin during recent cutbacks, and that the job market for certain specialists may be beginning to bounce back. 

Let’s continue to hope that this continues.

 Bob Ferrari

It seems that a constant opening paragraph on this blog this year has been the following: As if we did not have enough news on a potential significant supply chain disruption, there is news that…… 

Unfortunately, here we go again, and this time it’s the potential for a swine flu pandemic.  The latest update from Reuters and other media outlets this evening indicates that the World Health Organization moved closer to declaring the first flu pandemic in 40 years, raising the alert level to phase four, which indicates a significantly increased risk of a pandemic. Tragically, 149 human deaths have been reported in Mexico thus far, with probably more to come. The reactions from various countries has already spun into action and range from restricted travel, to outright bans on the sale or import of certain pork products that may have originated from infected areas.  While the spreading of the virus has not been directly linked to eating food products, that hasn’t stopped governments and consumers from forming their own opinions.

The blogsphere has already swung into action commenting on the potential supply chain impacts related to a pandemic, and I won’t attempt to duplicate.  Two insightful posts include an Andrian Gonzalez posting on his Logistics Viewpoints blog, and Jason Busch on his Spend Matters blog.  The common theme of recommendations is to stay informed with current developments, especially if you have suppliers or facilities within the impacted region.  As Jason points out, even if this current outbreak is contained, there are no assurances that another cross-border mutated version does not break out later in the year.

The time is now for supply chain risk management teams to begin their assessments of potential threats to the business, or disruptions that could impact supply or demand for products.  I sounded this warning last year concerning the powdered milk scandal in China, and this year with the salmonella in peanut products incident in January.

Supply Chain Matters will continue to provide additional commentary as well as insights as this crisis unfolds.

Bob Ferrari

Recent announcements regarding the hiring of noted private sector executives to drive needed innovation across the U.S. government got me thinking:  Why not a Chief Supply Chain Officer?

The most recent appointment was that of a Chief Technology Officer as an assistant to President Obama (Wall Street Journal Article).   In his April 18^th weekly address to the nation (video link and transcript), President Obama further named Jeffrey Zients, a leading CEO, management consultant and entrepreneur, to be Chief Performance Officer, along with Aneesch Chopra to serve as America’s Chief Technology Officer. Based on U.S. Senate confirmation, Mr. Zients and Mr. Chopra will join the previously announced Vivek Kundra, Chief Information Officer, in a combined effort to streamline government processes, cut costs, and facilitate best practices throughout our government. 

Don’t misinterpret, driving innovation and new thinking across the U.S. government is certainly long overdue, and I applaud the President for his initiatives, but if the U.S. does want to drive innovation, cost control, and more responsiveness across all agencies, than don’t stop here, include operations and supply chain.  Here are my arguments:

• When you consider all of the federal government’s activities, including all of the military agencies, the U.S. government would probably represent the world’s largest supply chain with overall spend in the billions of dollars.

• It does not take a rocket scientist to conclude an overall umbrella of strategy related to shared services, policies and logistics across the multitude of U.S. government supply chains is sorely lacking. Did you ever stop to consider the overall procurement spending of the combined U.S. government?  How much leverage would that has have on existing or future suppliers?

• The size of the U.S. government morphs the largest transportation and logistics suppliers such as Fedex or UPS, including transportation assets.  Each of these private companies has executive oversight of strategy, operations and technology.  So why not the federal government.

• Finally, think of the possibilities of how advanced supply chain technology, software applications, and supply chain analytics can do if effectively coordinated and deployed across key U.S. governmental agencies.

The appointments of key private sector leaders to drive necessary change is a step in the right direction, but don’t stop there.  A Chief Supply Chain Officer would bolster the President’s plan for restoring a sense of responsibility, transparency and accountability to the U.S. federal budget.  Many companies have leveraged efficiency as well as bolstered agility in their supply chains through dynamic executive leadership.  Why not include such a role for the U.S. government.

What’s your view?  Do you believe that there is a need for a Chief Supply Chain Officer for the U.S.? 

Bob Ferrari