September 11th, 2001: No More “Business as Usual” for Supply Chain Systems
On September 11th, 2001, two airplanes commandeered by terrorists crashed into the World Trade Center and a third crashed into the Pentagon, taking the lives of over 3000 people. In addition to damaging financial industry firms, these horrific attacks created serious supply chain disruptions throughout the United States. All air and ground transportation across U.S. borders was halted for several days, causing extensive delays in the arrival of production materials.
Companies using lean-inventory management were seriously impacted. Lean inventory requires many parts to be delivered in small batches only minutes before they are needed, resulting in little or no inventory storage. In the days following September 11th, parts shipments were interrupted and these deliveries could not be made on time. Assembly line shutdowns can cost some manufacturers as much as $10,000 per minute.
Ford had to close five North American plants for several days when the grounding of all aircraft meant that parts were not available. Chrysler experienced 18-hour delays just for trucks crossing the Canadian-U.S. borders. The company immediately responded to the WTC attacks by assessing which parts were critical at each plant. It then closed all U.S. plants for the next day (September 12) and added a second driver to many trucks so time would not be wasted as drivers stopped to rest. DaimlerChrysler was already using its extranet to send alerts to its suppliers up to five times daily, and by the evening of September 11th it had notified its 150 largest suppliers to ship 12 hours’ worth of parts, a dramatic increase in buffer stock. “If you don’t put that extra float in the system,” said David Hodgson, who oversees the timeliness of parts deliveries for DaimlerChrysler plants, “you’re going to run out of parts.” It also informed its suppliers to adjust delivery plans based on anticipated delays. The Canadian Pacific Railway agreed to activate its emergency shuttle service to speed deliveries from Canada. When commercial flights resumed on September 13, Chrysler ordered many of its drivers to their closest airports where Chrysler-chartered planes would be waiting to pick up their loads.
Some companies are considering stockpiling critical parts to put more float into their production systems. Ford, GM, and others that have invested heavily in warehouses and systems designed specifically for lean inventory are re-evaluating these systems. Ford is stockpiling critical parts to make sure its production lines keep moving, and GM has developed a contingency plan for stockpiling parts as well. Both believe that September 11th changed the meaning of “business as usual” and that the shipment of parts from around the world could be subject to unpredictable disruptions and delays for many years to come.
Supply chain software systems will have to change as well. They may need to introduce more flexibility in lead times for production planning so that the software can dynamically handle the “surge and ebb” of lead times in unusual situations. Supply chain software must also reflect longer delivery times when companies must switch from air to ground transportation.
Sources: Jeffrey Ball, “Chrysler Averts a Parts Crisis,” The Wall Street Journal,” September 24, 2001; Steve Konicki, “Automakers Look to Reconstruct Supply Chains,” Information Week, September 24, 2001; Richard Karpinski, “E-Business Aftermath,” Transformation Today, September 24, 2001; and Jim Ericson, “Addressing Supply-Chain Disruptions,” Line56, October 4, 2001.