Whether looking at upstream or downstream partners, Melander points out that transferring risk is a smart business practice. “When we think of transferring risk, we want to make sure our insureds are entering solid contractual relationships with their suppliers and their customers so that, if something were to happen, it is very clearly outlined who is responsible for what,” she said. “This eliminates some of the finger pointing and puts more emphasis on resolution of problems. “
Prepare to repair
When bringing additional equipment into a plant and getting it online, Travelers recommends that manufacturers prepare not only for the inevitable breakdowns that will happen over time but also for any custom modifications required at installation. Will costly or time-consuming modifications be needed before a new machine goes online, and will those modifications complicate future repairs? Facilities that are prepared for repair also estimate lead times for technician visits, calculate the time necessary for repair part deliveries and confirm that new parts will be available for older machines. Having an on-site repair team can be part of a contingency plan, but Melander stressed that this isn’t always feasible. “Some facilities have the luxury of having a formalized repair or service group, but it’s most important to consider whether replacement parts are on hand or if they quickly can be obtained. Do you have employees locally with the skillsets to make repairs, or do you need to reach out to the manufacturer for support with repairs or equipment? It’s things like these that can have an impact, but you don’t really realize how great an impact they can have – until something goes wrong.”
Recognize the most valuable players
Travelers understands that manufacturers rely on specialized machinery that is, in turn, operated by specialized, highly trained employees. If those players are sidelined or worse, bottlenecks or even complete production shutdowns may occur. A continuity plan should identify the most valuable players (MVPs) in the facility, ensure that the alternative operators have adequate training and real-time practice, and draw up a succession plan for key players. Melander explained, “It’s more than the folks who sit in a corner office. It’s really those individuals who meaningfully contribute to the operation and help the manufacturing plant stay effective and efficient. In our Bottleneck White Paper, we reference a very experienced technician who was let go because of contraction within the company’s workforce, and this individual was not seen as a key employee. Once the person was let go, the company realized the mistake in that a lot of their equipment wasn’t running as smoothly. They had more downtime, and they
Facilities that are prepared for repair also estimate lead times for technician visits, calculate the time necessary for repair part deliveries and confirm that new parts will be available for older machines. didn’t have the knowledge or resource to repair the equipment quickly, and so the long-term impacts were something they hadn’t considered when they let this person go.”
Locate unique pressure points
Each company is different, with a complex set of upstream, in-plant and downstream components. Travelers realizes that a strain or a break in any link in these unique supply chains may disrupt production or order fulfillment. “Managing a risk and determining the supply chain link that is at most risk in a company is all very individualized, and it’s always evolving,” Melander said. “A tool like Travelers’ Supply Chain Pressure Test is a quick way to keep tabs on those parts of your supply chain that are continuously evolving and that might then need a different response so that your supply chain and the way you manage it does not go stale.” Melander sums up the supply chain risk challenge succinctly: “The overarching theme is the recognition that the supply chain is ever-evolving and that we see businesses using their planning and strategy around the supply chain as a competitive advantage. If you look at the contrary – that is, if you don’t have a good process in place – we have that statistic that 40% of businesses fail after a disaster. That’s certainly a competitive disadvantage.” n The Travelers Supply Chain Pressure Test (https://www.travelers. com/quiz/supply-chain-management/supply-chain-pressure) presents a short series of questions to gauge a company’s distinct supply chain strengths and weaknesses and, in response, provides useful suggestions. The tips help manufacturers assess the possible risks upstream with their supplier/material sources, identify the most crucial players and processes in-plant, and imagine complications that may arise downstream such as logistics snags and product recalls. More information: https://www.travelers.com/resources/ business-industries/manufacturing
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