When Disaster Strikes: The
Power of Contingency Planning
By Bill Quarless
The earthquake in Sichuan, China is one of the
year’s most tragic events, and the deadliest
earthquake in recent times. The loss of life and
the human suffering has been heartbreaking,
making business concerns seem petty in contrast. Still,
several clients have raised concerns about the earthquake and how it may affect future China production.
Now that an appropriate amount of time has passed, I
decided to write about this aspect of this event.
A little known fact is that China is one of the
world’s most affected countries when it comes to
natural disasters. Every year, more than 200 million
Chinese suffer through earthquakes, floods, typhoons,
droughts and fires. In fact, China has had three major
earthquakes in the past three years. Any of these events
could have a catastrophic effect on a DRTV project in
rollout. And it doesn’t take a major disaster to cause
production delays, either.
This past winter, as factories were closing for the
Chinese New Year holiday, China was hit with the
worst winter storm in 50 years. More than 500,000 migrant workers making their annual journey back home
were stranded at bus and train stations throughout the
country. The transportation problems had ripple effects in northern and central China for weeks. In the
summer, when China’s power grids are overloaded,
blackouts are a routine problem. Indeed, several manufacturing areas are only allowed to use power for three
or four days per week.
So will a random “act of god” end your next campaign? Not if you think ahead. Here are some suggestions:
1. Plan on problems. When it comes to preparation,
don’t be an optimist. Assume something will go
wrong, and start by padding your production and
delivery dates. Make your schedule flexible, and
add an extra week or so to
every shipment. Calculate
the daily production you will
need, and open the required
molds and tooling to meet
your schedule. Then, increase
your required production by
15 percent. This should create a nice buffer and
allow you to weather production issues.
2. Carefully select your suppliers. Many factories
have backup generators and experience with
problems like the ones mentioned above. But it
always pays to check. Make sure your factory has
multiple suppliers for raw materials. Ask intelligent questions: What did they do the last time
disaster struck? Do they have contingency plans
for future problems? How many suppliers do they
have for parts and components? What happens if a
component supplier can’t deliver? Pay attention to
how the factory answers these questions and probe
further if you don’t like what you hear.
3. Dual-source and separate factories by region or
province. For every major project, our business
utilizes at least two factories that are strategically
chosen for their geographic location. This should
be a golden rule for every DRTV project in rollout.
If typhoons hammer central China or floods hit
the south, the impact on our production is minimal. That’s because each factory runs independently of the other and ships from a different port.
When disaster strikes, we simply shift production
and continue shipping with little or no effect.
4. Source and set up sub-suppliers for your parts
and raw materials. Most people don’t think about
this, but it can take up to 10 factories to make a
single product. Most DRTV sourcing managers
only tour the main assembly factory, but there are
several material suppliers providing that factory
with raw plastic or metal, screws and bolts, motors,
retail or corrugated boxes, instruction manuals
and so on. In our experience, these sub-suppliers
are extremely important to keeping production
schedules because they are the single biggest cause
of production delays. By proactively evaluating
and selecting these suppliers, and backup suppliers,
you can ensure that assembly delays are quickly
By “expecting the unexpected” with contingency
planning, smart DRTV players can make all of their
hard-earned hits weather and disaster-proof.