Friday, June 21, 2013

Oklahoma tornadoes: Do early warning systems help or hinder?


Oklahoma tornadoes: Do early warning systems help or hinder?
By Andriy Petronchak and Arash Azadegan,
Supply Chain Disruption Research Laboratory, Rutgers Business School
Remember the empty supermarket shelves before and after the Superstorm Sandy and Thanksgiving blizzard? The general public’s “panic mode” led to a huge disruption of the supply chains - simply because everyone was buying “a lot of everything”. Skyrocketing demand on household items that are normally not so popular, created a deficit and a “black market” (remember the overpriced generators, batteries and even hotel rooms, doubled in price during Sandy?). In turn, when the storm was over, supply chains are overwhelmed with reverse logistics activities, handling the unused “emergency supplies”. These swings cause huge losses to the distribution channels and force the companies to create excessive “safety” stocks that escalate the total cost, transferred onto the consumers. 
Similar to the Sandy hurricane, the recent Oklahoma tornadoes have shown how difficult it is to manage these natural phenomena. Tornadoes are hard to predict, they escalate their force rapidly, and cause ground damage immediately. As far as advanced notices, tornado warnings can rarely be issued more than thirty minutes in advance. Every minute and every second counts in these cases when someone is in the midst of such a situation. They often feel alone and sequestered from the rest of the society and actions that are often too excessive to survive the oncoming “armagedon”. While personal preparedness and awareness are the constructive aspects of dealing with the disruption, many of the citizens’ precautionary steps may not be the right choice.
The Moore, Oklahoma tornado on May 20, and associated storms, could cost up to $5 billion in insured losses, disaster modeling company Eqecat has estimated, making it the second costliest tornado after Tuscaloosa. Arguably, part of the issue is the mismatch between warning systems and available shelters. Because of the continuing advances in storm prediction have enabled forecasters to warn people before a funnel cloud is upon them, giving them precious time to seek shelter. But there are cases where shelters are not within reach during those previous minutes. The result is miscalculated decisions and imprudent reactions by the public. Some may try to drive madly across town to pick up a loved one, causing road accidents. Others may jam the phone lines with calls to 911 and other first respondents to get a better sense of the situation. This was the case during the Oklahoma events on May of 2013. As reported by Sean Murpy of AP, “many panicked residents opted to flee their homes, and interstates and roadways became gridlocked with people trying to outrun the approaching storm. Many were encouraged by a local television meteorologist who warned viewers that if they couldn’t get underground, they should leave the relative safety of their homes and drive south”.
While improvements in building safe rooms and reinforcing residents are important, perhaps the right approach is to make sure warning systems are corresponding to available resources. Yet this is a difficult task. The entire public culture needs to become a disaster-resistant way of thinking and the change must happen on all the levels: from the general public to the government. The public and the public servants need to recognize their role in the large system and avoid making early warning into early panic. Although resilient supply chains will recover eventually,  the number of innocent citizens that  get harmed, displaced or even killed by the natural disaster rises because of lack of coordination.  This is when the taxpayers money should finally come into play. Public safety is every society’s basic need and it’s the role of government to satisfy this need. Some residents insist that safe rooms should be a main concern in Oklahoma – above all in Moore, since it has a record of falling victim to tornadoes. “If they can afford a $5 million football stadium, they can afford a safe room,” 67-year-old John Lemmon, a Moore resident who lives near Plaza Towers Elementary School, told Bloomberg. “They should have done it right after they had the last big one.”
Large masses of people cannot be expected to work as the perfect mechanism, especially in time of crisis. Human traffic must be coordinated by the authorities, otherwise it will lead to disaster on its own, even without the external disturbance. Therefore, an early warning may not be the first priority when it comes to a bottom line-saving lives. Availability of the basic storm shelters and coordination of the evacuation efforts may play a far greater role in preparedness for the next disasters.

Tuesday, May 28, 2013

Ethics and risks in supply chain - Building Collapses in Bangladesh (Article from Christian Science Monitor)

Is it ethical to keep buying clothes from Bangladesh?

Yes, say international garment firms and a US diplomat, because the Bangladesh garment industry is ripe for reform. Many, but not all, retailers have agreed to a labor accord that commits them to independent inspections of suppliers' garment factories in Bangladesh  ;

By G. Jeffrey MacDonald, Correspondent / May 27, 2013
Wages are as low as $38 a month. Sweatshops proliferate. Labor conditions are so dangerous that an estimated 1,800 garment workers have lost their lives in factory fires and building collapses since 2005. The latest collapse claimed 1,127 lives, the world's worst industrial accident since 1984.
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Welcome to Bangladesh. Is this where you want your clothes made?
For many well-known global retailers, trying to remain true to their ethical standards, the answer is a resounding yes. One reason? Having profited from the cheap labor in Bangladesh's 5,000 garment factories, retailers are seen as having a duty to improve working conditions. Given the horrific scale of last month's collapse of the eight-story Rana Plaza building outside its capital, Dhaka, Bangladesh may be ripe for reform.
"On the labor issue, absolutely, buyers have a critical role and they must be engaged," Wendy Sherman, US under secretary of State for political affairs, said at a news conference Monday in Dhaka. The US backs the nation's reforms for the garment industry, she added.
Socially responsible investing groups echo the message.
"There is a moral imperative for companies that have been in Bangladesh for a substantial time and have benefited from the comparatively low wages there" to keep operations there, says David Schilling of the Interfaith Center on Corporate Responsibility (ICCR), a New York-based coalition of institutional investors. "The risks have jumped off the charts. But let's stay and minimize the risk factors."
Many retailers have signed an accord on fire and building safety in Bangladesh, led by the International Labor Organization, unions, and other activist groups.Among the retailers who signed up: H&M, Inditex (Zara), Primark, C&A, Tommy Hilfiger, PVH (Calvin Klein), Tesco, Benetton, Marks & Spencer, and Carrefour. The accord commits retailers to rigorous, independent inspections of their suppliers' factories.
The retailers' response is not monolithic. After voicing concern about conditions in the wake of a factory fire in Dhaka in November, which killed 112 workers, Disney announced earlier this year that its licensees would no longer source apparel in Bangladesh.
Disney's move drew sharp criticism from advocates. But Disney might have maximized its leverage for improving conditions in Bangladesh: It explained why it was leaving and told Bangladeshi officials what they would have to do to win back Disney's business.
"There are different ways of responding to [a qualitative] decline in a firm or a country," says Adam Kanzer, director of shareholder advocacy at Domini Social Investments, a socially responsible mutual fund firm based in New York."Disney left, but they did so in a noisy way. That's responsible. [Whereas] if you just sort of quietly disappear, [that's] not going to have much impact" on working conditions.
Other retailers, notably Wal-Mart, are shunning the accord and using their own methods to improve factory safety.
"While we agree with much of the proposal, the IndustriALL plan also introduces requirements ... on supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals," Wal-Mart said in a statement. Instead, the company says it will conduct its own in-depth safety inspections at all 279 Bangladesh factories with which it works and publicly release the names and inspection information. The Gap also declined to sign because of a dispute-resolution measure.
Bangladesh is such a big garment producer – No. 2 behind China – that a company that sources lots of apparel there can't immediately switch to other countries because they lack sufficient infrastructure to handle big volumes, notes Mr. Schilling of ICCR.
Still, companies will diversify away from Bangladesh, says Julia Hughes, head of the US Association of Im-porters of Textiles and Apparel.
As they do, that will goad some Bangladeshi operations to improve, says Arash Azadegan, director of the Supply Chain Disruption Research Laboratory at Rutgers Business School. Still, inherent risks will persist in Bangladesh. Government oversight is apt to remain weak since the industry is so powerful, he says.
Also, some factories could quietly let conditions worsen as they vie to offer lower-cost alternatives.
"It's a relationship, not unlike a marriage," says Mr. Azadegan. "There are times when people stay [in relationships], make improvements, and get things back on track.... There are other times when you decide things cannot be changed, and you just pull out."