“Black Swan” Event Stops Ford F-150 Production In Its Tracks

What happens when a fire at a parts factory disrupts a fragile supply chain and shuts down a major manufacturing operation?

It’s happened before. In past articles I’ve shared stories of “Black Swan” events shutting down supply chains and almost destroying companies. Well, it’s happened again … this time at the tenth largest US company, Ford. You can read about it here.

About two weeks ago a fire at Chinese-owned Meridian Magnesium Products in Eaton Rapids, Michigan halted production of the magnesium radiator support structure that holds radiators on Ford trucks. It is a critical part.

As a result, the Ford Kansas City Assembly Plant and the Dearborn Truck Plant have shut down. These are the only two sites that build the F-150 truck.

Now, I am not suggesting that this disruption will have a huge impact on Ford overall, and company spokespersons have downplayed the impact of this disruption, saying “vehicle supplies are fine and customers shouldn’t experience problems.”

However, industry experts have also acknowledged that:

“This company is the only supplier in North America that has the ability to supply this product at the volume Ford requires,”

“[Ford has] to rebuild the whole supply chain,” and

“For Ford, this is potentially enormous.”

Low-probability, high-impact events occur. And while in most instances you may not be able to predict them, you can prepare for them.

In the past I have shared four overarching principles that will help companies prepare for and respond effectively to unexpected events: Awareness, Agility, Resilience and Redundancy. Here they are again:

Awareness

• Enhanced knowledge of primary and adjacent areas that could impact your business
• Acceptance, awareness and anticipation that there are things you don’t know (known unknowns) and things you do not even realize you don’t know (unknown unknowns)
• Viewing each risk as one of many possible disruptions across the value chain and during the life of your organization – all of which interact as part of a whole system
• Expansive thinking about possibilities – pushing the knowledge frontier envelope and looking for asymmetries
• Enhanced business intelligence across broad, multidisciplinary networks and through diverse eyes
• Active use of decision analysis tools

Agility

• Development of multiple alternative strategic/action plans incorporating diversification
• Commitment of rapid deployment of any one of them – “just in time” – when unexpected events occur
• Regular deployment exercises to instill agility and rapidity in responding to unexpected “trigger events”
• Enhanced scenario analysis and “role playing”
• Open mindedness to different, even unorthodox, business models and structures
• Aversion to oversimplification

Resilience

• Streamlined and decentralized/distributed organizational structures to enable faster, “just in time” decision making and deployment
• Encourage active debate and deliberation across vertical and horizontal lines – no groupthink
• Regular workshop-based learning exercises
• Expansion of thinking across various approaches
• Regular surfacing and “fleshing out” of critical issues before they occur
• Aggressive credit exposure management

Redundancy

• Establishment of multiple sources of critical raw materials
• Establishment of a redundant infrastructure that affords the ability to produce, deliver and distribute products and services in the event of unexpected disruptions
• Supply chain management that incorporates redundant inbound and outbound channels to defend against unexpected disruptions
• Building robust organizations with talent redundancy
• Establishment of alternative information systems
• Establishment of multiple organizational lines of decision making

What are you doing to prepare for unexpected events that could disrupt your company’s operations … events that, while unlikely, could have a huge impact on your business?

Please reach out to me. I’d love to hear your thoughts.

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