Supply Chain at Risk: Managing an Infectious Disease Outbreak
By JESSICA PAGE, consultant, enterprise risk management, Aon Global Risk Consulting; KENNETH F. GROH, vice president, human capital, Aon Consulting; MIKE GIACOBBE, director, enterprise risk management, Aon Global Risk Consulting; LAURIE CHAMPION, director, enterprise risk management, Aon Global Risk Consulting; CHRISTOPHER (KIP) BOHN, director and actuary, enterprise risk management, Aon Global Risk Consulting
Every day, between 2 percent and 3 percent of the average employer's workforce fails to clock in due to unscheduled absences. On average, 35 percent of these unscheduled absences are due to various forms of illness. Typically, at least 15 percent of employees are out of the office each year due to the flu alone. In the event of a severe flu pandemic, absenteeism may reach 40 percent during the peak of an outbreak, according to the Environmental Protection Agency.
But infectious diseases do not need to reach pandemic levels to create significant business disruption.
In 2006, a contract employee from India infected with measles arrived at his workplace, Investors Bank & Trust in Boston, causing a measles outbreak that lasted from April until July. As a result of one employee's infectious illness, thousands of workers were exposed, including those at restaurants, health centers and churches. At one point, more than 1,200 people were quarantined throughout Boston, and hundreds at Investor's Bank & Trust were ordered to stay at home, although many were able to work remotely. By the end of the outbreak, the state had distributed or ordered 23,000 doses of vaccine to mitigate the outbreak.
Imagine a similar event producing significant absenteeism and illness in your organization's supply chain, perhaps at a key supplier site or with a concentration of customers. It can potentially create a significant impact on your employee absenteeism and workforce productivity ? leading to revenue reductions, increased healthcare costs, and disappointed customers.
In 2008, researchers at Sandia National Laboratory and Cornell University analyzed various severities of pandemic flu outbreaks and their impact on the continuity of critical infrastructures in the United States, specifically the freight transportation sector.
They concluded that a low absenteeism rate--approximately 6 percent--caused by a mild pandemic would result in an estimated two-day delay in rail shipments; however, a severe pandemic with an absenteeism rate of greater than 28 percent would result in a 45 percent reduction in rail capacity.
Although this particular study's results did not capture the estimated dollar impact, a separate supply chain disruption study performed by Sandia and Cornell suggests that disruption in the sector alone can cause an economic impact of billions of dollars.
GAPS IN TODAY'S BCPS
Among global organizations, many firms have some form of a business-continuity plan in place. Yet the plans may not be comprehensive enough to handle severe disease outbreaks, and they may have inconsistencies or conflicts in plans among individual supply chain locations.
Additionally, many plans focus on physical disruption events--fire, explosions, natural disasters or technology system breakdowns or breaches--not infectious disease scenarios. This may be because the focus is on facilities at risk, instead of people at risk.
Infectious diseases cause employee disruption first, and may cause physical disruption if there is a quarantine or seizure of a site or other assets. As a result, employee communication and response plans for managing infectious disease risks are different than those for managing physical disruption risks and may vary according to the disease, because the infectious disease disruption may occur in waves as the infection moves across a geographic region.
The impact of an infectious disease outbreak is also amplified by supply chain trends, including ongoing efficiency initiatives. In the current economic environment, where plants are closing and spending is strictly monitored, supply chain redundancies are often eliminated even when such redundancies can improve the chance for proactive management in the event of a major disruption.
PLANNING FOR SUPPLY CHAIN CONTINUITY
In these circumstances, evaluating the continuity strength of trading partners, both suppliers and customers, is more important than ever before. Vulnerabilities in the food-processing chain, recently highlighted by the salmonella outbreak in peanuts, demonstrate the impact sensitivity in most supply chain and value delivery systems.
So how can you protect your supply chain from an onset of infectious disease? Are you relying upon expert knowledge regarding the precise location and time the next significant outbreak will occur, or on sufficient medications and vaccines to completely suppress an outbreak? According to a pandemic influenza white paper produced by Aon, such expectations are no more than hopeful myths and are not realities.
You may have no control over an outbreak, but you can prepare a plan that addresses supply chain and employee disruption to minimize the impact on your business and your employees' well-being.
Infectious disease planning for supply chain continuity and people management needs to involve key stakeholders from your suppliers, operations, human resources, corporate communications, risk management and environmental, health and safety professionals.
Major planning elements are:
1. Understand the objectives of your company's response to an infectious disease outbreak.
2. Review current business-continuity plans for their adequacy in addressing infectious disease scenarios.
3. Understand what it takes to keep your critical operations up and running over various time periods--two weeks, one month and three months or longer.
4. Review and update crisis communication plans (especially call trees for efficient contact with employees).
5. Review your health, time-off and disability plans for application during an outbreak.
6. Identify the skill sets and resources needed to maintain operations at a minimum level.
7. Review the business-continuity and crisis communication plans of critical suppliers and customers, as well as your business contracts with them. Determine if adjustments are needed to address your commitments during a disease outbreak.
8. Test the plan--some institutions and organizations run table-top simulations, responding to a randomly selected absentee population of 20 percent or more.
Infectious disease preparation checklists, available at public Internet sites such as www.pandemicflu.gov/ provide a basic framework to begin planning, but your company should not fall into a "check the box" mentality.
Instead, the effectiveness of your continuity and communication plans needs to be challenged and tested to optimize your response to an infectious disease crisis.
April 1, 2009
Copyright 2009© LRP Publications