What Can the Avian Flu Outbreak Teach You About Your Supply Chain?

Since May, 47 million birds across 15 ofthe United States have been put down as a result of hundreds of confirmed cases of the Avian Flu. 25% of the country’s egg production has been affected, drastically limiting the supply and raising the cost of eggs nationwide. Restaurants like McDonald’s are serving a limited number of eggs, and some restaurants have limited their breakfast hours. There have been total and partial restrictions on U.S. exports of eggs, with losses of over $700M being reported. The USDA announced recently that they will begin importing eggs from the Netherlands; the U.S. has previously only imported eggs from Canada. And while flu cases have declined, farmers are still faced with the task of replacing millions of egg-laying chickens, which will take months.

The USDA says it is unclear how the flu managed to spread, but it suspects that migrant birds carrying the virus came into contact with the farmed chickens. Humans may have unwittingly helped to spread the virus amongst different farms. Some farms have made complaints that the USDA does not provide clear guidelines on the disposal of infected chickens, and that has exacerbated the issue. The outbreak has already resulted in millions of dollars lost, a number of headaches, and a huge shift in the import and export of eggs.

It’s an issue that remains pretty specific to the food industry, but manufacturers in any industry should understand that sometimes, parts of any supply chain can get disrupted, sometimes catastrophically. While there’s not a lot to be done with millions of eggs being disposed of, industries that rely on manufactured parts and products should understand that there are precautions that can be taken to make sure that serious disruptions in one area of a supply chain do not delay the final product. The Harvard Business Review recently released an article on finding “weak links” in your supply chain, which concludes that understanding the risk inherent in each supplier can be hugely important if one of those suppliers gets disrupted. Something unforeseen, such as the avian flu outbreak or a natural disaster, may eradicate an aspect of your supply chain. The HBR coined a metric they called  “Time to Survive”, the maximum duration the supply chain can match supply with demand after one “node” of a supply chain goes down. “Time to Recovery” is defined as the time it takes for that disrupted node to get back to full functionality. For any node, if Time to Recovery is greater than Time to Survive, then that node is a big risk for the company.

There are certain nodes of any supply chain that pose huge risks. In order to mitigate those risks, companies should identify the biggest threats to their supply chain and begin making preparations. It’s a given that disaster can strike at any point, but understanding and preparing for those events at each step in your supply chain can give you a leg up in any situation. Cargill, for example, is faring well despite the avian flu, drought, and severe flooding that have affected many nodes of its supply chain. Because the company has suppliers in many areas of the country, it has managed to mitigate any huge losses by focusing on production in unaffected areas. The same goes for any manufacturer – when it comes to risky suppliers, make sure you have backup plans ready. You know what they say – don’t put all your eggs in one basket.

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