We already wrote about Sandy and its impact on operations immediately after the storm here. Several stories began to emerge on how firms managed to handle the storm. Recently, the NY Times had an article on how Eileen Fisher managed the pre-storm preparation and the recovery (“Retailer Shakes Off the Storm“).
Recovery was both an urgent and a daunting task. A broad insurance policy helped a lot. So did some planning and a good amount of luck. As did an almost out-of-body detachment on executives’ parts to see past the emotion of sewage-soaked shirts and stained rolls of fabric to the prize of reopening a ravaged business.
When we talk about Disruption Risk Management, we discuss the three levels that need to be managed well: strategic, tactical and execution. The strategic level requires creating a resilient operations network (internal and external) and instituting effective risk-management process. The tactical level requires identifying and mitigating vulnerabilities in the current operations network, including threat identification and outlining an action plans. The execution level includes monitoring evolving risks and activating pre-planned contingencies. The article provides an excellent example of the interplay between the tactical level and the execution one.
On the tactical side, the article tells about contacting a remediation company that had done work for Eileen Fisher in the past and obtaining a promise that if anything went wrong, the company would be on site within two hours. In preparation for the storm, employees worked through the weekend, piling sandbags and encasing the second floor of headquarters in plastic. But most of the article details the execution level, and the role of management in handling the details. We tend to focus on the strategic level decision, but part of business continuity is the ability to move forward quickly and execute the different action plans.
Even the cash in the register at the Irvington store had to be taken home and blown dry. Almost $1.5 million, 12 Dumpsters and eight moving-truck-size mobile storage units of damaged goods later, Eileen Fisher was — for the most part — back.
It’s also about making decision on shifting resources to make sure customers are satisfied, and revenues keep the cash flow needed to handle the problems:
The Secaucus warehouse opened Nov. 1, with a backlog of 1,500 e-commerce orders. Because items shipped from Asia were still stuck at the ports, employees who usually worked on unloading were rerouted to filling e-commerce orders, and with an overnight shift, they were caught up by Friday.
Managing the disruption risk is also making sure the insurance is managed well:
The remediation firm arrived at noon on Tuesday. Mr. Joslin asked the moving company to take away high-value items that were damaged, and, a day later, called in Dumpsters and mobile storage units to hold ruined items (one lesson he learned last year from Hurricane Irene was not to throw anything out until the insurance company had seen it).
What next? Now, it’s time to develop a strategy for the future: Given its riverfront location, the company has started finishing the floors without carpets and raise file cabinets off the floor as well as researching merchandise racks that could be raised in case of a storm. I also see the next paragraph has part of the plan:
Managers sent texts and made calls to employees. Ms. Simberkoff, of human resources, and Mr. Pollak, the financial officer, decided to pay everyone, including hourly store workers, whatever they would have made for the week, even though stores and offices were closed. They also decided to offer interest-free loans or profit-sharing advances to people who needed cash.
As the recovery demonstrated: one has to rely heavily on the ability to execute the plan. Treating your employees well is a good way to build these capabilities.