Natural Disasters & Supply Chains – A Human Approach

Kerry McCracken - Flex China Supply Chain Management

 

Kerry McCracken’s passport is almost the size of a small book. In her 17 years with Flex, she’s seen the company grow from $200 million in annual revenue to more than $24 billion today. She’s split her time between Operations and IT roles, jumping in when the company needed to roll out a new initiative or expand into new markets. True to form, in January 2016, Kerry took on a new role working to develop new products and services in the IoT space as Vice President of Connected Intelligence. In her Supply Chain, Ops and IT roles she’s visited almost every one of the 30 countries where Flex has sites, and built friendships around the world.

That’s why whenever a natural disaster or a major event happens, Kerry’s first thought is to check for texts from her colleagues and friends in that area. When Malaysia Airlines Flight 370 disappeared, she checked to see if for once, she didn’t have a team member on that flight (she didn’t).

When a major explosion happens in a port in China, or weeks of flooding paralyze a major region in India, then her team is impacted, and Flex’s clients are impacted as part supplies dry up, roads are blocked and people head to the hills to protect their family. We spoke to Kerry recently to find out how she deals with these situations in a way that supports her team and customers.

Mitigating the impact of natural disaster like floods

Natural Disaster and Flex Supply Chain Management

 

Who are some of the customers that you're usually working with, and what kind of roles are you working with? Operations staff? COOs?

When I engage with customers especially in the supply chain space it's a whole gamut. I'll go everywhere from the CEO to the CFO to a project manager in IT to a planner. Most of the time when we start working with a client, it's incredibly stressful - they come to us and they're basically saying, 'hey take over my supply chain.' And so the COO and the CFO really want to know, who's going to do that for them? So a lot of times I'll go in and sit down so they can really put a face to who is that person that's going to put the process together. I did a lot of that kind of work and then obviously you know, with a big team and support. Not just in IT but then obviously in integrating with the operations teams. Oftentimes (as we know at Flex) if we win a piece of business we don't staff immediately. We need to know, when is the product going to be ready to build? So there's a lot of up front work that you have to do with the client.

When a customer comes to Flex what kind of challenges do they usually have with their current supply chain? 

Usually what they find is, they just really don't have the ability to scale. You know, I love the new "sketch-to-scale™" slogan. When that was coined I was like, 'oh yes, that's exactly what we do!' People do draw things very well and articulate their ideas, but when it comes down to how do you do that over thousands of products in many countries, that's not a trivial thing. So they usually find themselves in either some kind of a technical knothole or oftentimes a financial or tax knothole, where maybe they don't even have entities in a jurisdiction where they want to do business. So Flex may have those entities, and we can go in and help using a combination of financial expertise, operational expertise and the IT expertise altogether. 

I think for a lot of consumers, when they think about the supply chain, they maybe think of the last part where it's coming over from Asia on a ship. But there's a lot more that goes into that. 

Thinking of a new entrepreneur, somebody has an idea they want to make. What are the processes and steps to get going? I've seen on the TV show "Shark Tank" that certain people actually fly over to China and camp out in the production facility to make sure everything's going well. That's probably not the best practice, but???

Not super effective! I've heard and seen some of that and I always laugh when people say 'oh I went to China and I slept in the cot next to the line to make sure everything was fine,' and I'm thinking, well you were sleeping. So how effective was that? I mean you could have gotten a really nice hotel room in China. And gotten a really good night's sleep. But I think that the biggest thing that young companies struggle with is realizing what they need to do to prep for volume. What kind of processes and procedures do they need to have as a company? And if they're small and they don't have them, how are they going to get it done?

A lot of times I think, maybe today things are a little bit too easy, they all seem very easy, you just see an app on your phone or somebody is watching TV and at the end of the day there's a lot of tasks that need to happen, and I think working with a big company like Flex, you know we've got the resources and the people to get it done. If they go and select a smaller firm, again, if their stuff takes off, they're just not going to be able to scale. No way, and very risky. Incredibly risky. 

You see on Kickstarter, some of the ones that have had the biggest problems have been situations with a great new product, they go a thousand times above their goal, and all the sudden they have to build a hundred thousand of these things. 

And they don't know what to do. Sometimes even the supply base that they pick, if they themselves are small and then they go with another really small partner on a component, who also can't scale. So even the selection process that they go through, people are so focused on, 'I need to get this demo out,' or whatever. They don't really think about, ‘well, what if I'm successful?’ I can't remember who said this, but there was a quote that companies usually don't die because they don't have business, they die because they try to do too much. And they basically choke because they can't get the product out.

You get major events, there will be flooding, earthquakes, things like that. How does Flex deal with that?

We've got a really amazing team under Tom Linton for the supply chain. We have our strategic supply chain managers who are generally customer facing and we also have the commodity management organization which is supply facing. So when a big event happens it's a combination of alerting that entire organization to the fact that we may have a disruption. There are tools on the back end that send out alerts to management to address it and work on those problems. Of course the operational guys also get the same messages. That's one of the reasons why the Flex Pulse Center is being worked on. Over time, if something's really a crisis, you want to have some of these strategic centers that folks can coalesce around. But the concept of Pulse isn't even just the center, it's you need to take the content there and also make it available from a mobile perspective.

Everyone lives mobile these days, and with a global lifestyle, you may get that alert in the middle of the night, and you need to make a quick decision as the customer – how do you deal with that? 

We have certainly seen this in the past when there was flooding in Thailand and it basically shut down all disk drive production. As soon as that happens, you want to be the first group that can react to it. First of all you may go out and possibly buy up everything. Because you want to secure your supply. Then you have to very quickly turn around and say, what is the impact to my customer? Which customer is the most impacted? And what is our allocation strategy potentially going to be if that supply chain completely becomes allocated out. We've got to make sure that we know how to do that and then a communication process to the clients on how we're handling it.

Natural disasters like sinkholes can impact global businesses

Natural disasters like earthquakes require coordinated responses

In August of 2015, there was a massive series of explosions in Tianjin China. Jaguar Land Rover had to write off $379 million in damaged products. The first explosion had the power of a 2.3 earthquake, and the second explosion was even bigger. And this all started around 11pm at night in China. So tell me what happened, and how your team responded?

I found out about it because I had team members there and I started receiving texts almost immediately. Like “Holy #@%@ Kerry! You won't believe what just happened here.” You know whenever something like that happens, my first concern and I know that I speak for Flex in this, is the employees, and who’s on the ground? Which oftentimes can be customers as well. You get on the phone with people and find out where everyone is. Luckily in this case, most people were in hotels and so they were easy to find and track down and confirm that they were OK. People were concerned about breathing the fumes from the fires, and couldn’t go out with broken glass everywhere. So basically you make sure that everyone was safe. That’s the first thing.

Then you enlist help from who you know within the company to launch into action. For folks who aren't familiar with shipping in and out Tianjin, it’s one of the major ports in China right near Beijing. We also have a factory that is very near there. At the time, we were in the middle of implementing several updates to the factory there, so I had a fairly large number of team members there. So what do you do next? Obviously the port shut down for several days while they're trying to evaluate it, and you've got this factory that standing by and trying to roll out and do some upgrades. And what are your next steps then? Well, we immediately find out if there was anything at the port that was needed by the factory to get them up to speed. Luckily they actually had enough material to keep running.

Then our Supply Chain organization sprang into action. They were able to determine very quickly what was needed, and then we were able to move material that was at other locations inside Flex and get it through other routes into the factory. So we were very fortunate.

Flooding in Asia can disrupt the flow of global manufacturing operations

Flooding in India impacts business sector

Looking at one of the other big events from last year, the flooding in Chennai in southern India. This is a major manufacturing area, and they had the worst storms in recorded history. Almost two million people displaced, 500 people lost their lives. The rains started in mid-November and kept going into early December. Just an incredibly tragic event. And there were quite a few Flex employees based out of there – how did we deal with that?

I would say as far as disasters go, that was a bit different than an earthquake or the explosion in Tianjin, because it developed over a long time and it just kept raining and raining. It just didn’t stop and everything got to the point of saturation. The airport shut down, it was massive, and you have this ‘slow creep’ of watching this disaster build and build. Then I started getting texts and emails as people couldn’t get to work. The factory was running on generators, and we have a major Global Business Services (GBS) center right nearby. They were also working on generators, and we’re trying to keep doing work for customers. It became horrendous trying to track people down, and first and foremost, making sure that they were OK. Even if our employees were OK, you can imagine two million people out of their homes. You have people that work for Flex that may be fine, but they have family members that they need to take care of. Family first.

Then we worry about the work next. So we need to take all the work that’s going on in India and shift it to other regions. The GBS team conducts support activities for IT, for Finance, services that support the company. We have a tremendously talented team in India that supports quite a few Flex employees. 

That's very interesting because a lot of Flex is focused on manufacturing or designing products. But there's also this giant group in the business of providing services and such. And when the floods hit, those people are probably headed for the hills with their family. But a lot of people were actually able to keep working remotely at some companies. Was Flex able to do that as well?

Yes, some people were able to work remotely and people understood that they should make sure they’re safe. If they were able to work remotely that was tremendously helpful. Even moving the tasks to other people within the company is work in itself. So a lot of those people that were working remotely were actually helping us transition the workload around the world. I have to say that the way Mexico responded, the way our teams in Central Europe responded in order to support colleagues and friends, it was just really tremendous. There is a program called HealthTap that we work with. It’s provided as a service to employees in the US and it's a way that people connect with a doctor remotely or over a mobile app that we then expanded to a lot of the folks in India, to make sure that they could get any questions answered or an exam and stay healthy there. I think it was just tremendous that HealthTap came onboard as a tool that’s really needed especially for a company our size, where we really want to make sure that everyone is healthly and safe. If somebody's injured in a remote location, gosh, what a gift to have that right in your pocket.

How did the manufacturing plant adjust to the Chennai floods?

Teams there were working on trying to get the work to be picked up in other regions around the world. There were manufacturing disruptions but miraculously that particular facility did not. If anybody saw pictures of it, it was pretty epic. Entire areas would flood and then you'd have islands. So the factory itself is a bit of an island. We were still able to get gas brought in, food and things like that but it was still isolated. So they were able to continue working. But they had to wait for the roads to clear and all of that to really get product out the door. But at least they were able to keep working. Things got close in terms of how much fuel was left for them to continue going so that's part of the lessons learned, that people are looking at now to see how we can do better and be prepared for these events in the future, especially when it's something that goes on for days and days like this. And that's really a challenge in that there are different types of disasters. There are major events like Tianjin that happen and there there’s a ripple afterwards. But then you have floods which are a sustained event that just doesn’t stop. All this water shows up and you have alligators and snakes swimming around in there. And people are walking through that. This was a big, big deal. I mean, an alligator as you’re trying to wade through water to get to the grocery store is something you don't want to come across.

Are there any other kind of areas or situations we've run into that are similar?

We hear about these big events that are corporate-wide but there are also events that just generically happen in the world that can definitely impact Flex employees. And one that I recall is because the anniversary just came up for the Malaysian Airlines flight that went down over the ocean.

That was a particular flight route that was heavily used by my team members and many friends in Malaysia. While there are specific events that touch the entire corporation there are also events that can impact friends and colleagues. I'm always keeping my eye out and making sure that I'm thinking about my team members all the time even with those types of more specific events. But you know we are a big global company and so fortunately that means that I have friends in lots of places. So I just like to stay aware of what's going on pretty much everywhere.