During the 1970s, crewmembers of Apollo 13 became international heroes when they returned to earth safely-even though they hadn't reached the moon as originally planned. Technically speaking, their mission was a failure. Yet, we remember it today because it exemplifies how the right approach to handling adversity can make the difference when disaster strikes.

It is a lesson that everyone engaged in global supply chain management should take to heart, because over the past few years, contingencies have gone from being distant possibilities to distinct realities.

Some say it began with the events of September 11, 2001. Others will point to the onset of SARS, the U.S. West Coast port shutdown, the recent power outage that hit the U.S. Northeast and Canada or the wave of computer viruses. Regardless, it is clear that Murphy's Law has once again been ratified.

Although you can't control the fact that exceptions happen, you do have a measure of control about how dramatically they will affect your supply chain, especially if you expand your view of what a contingency plan means.

Diversify

When most companies make contingency plans, they think in terms of what to do after something goes wrong. But the most successful contingency planners are the ones who think of Plan B in more proactive terms, doing what they can to tweak their supply chains before the fact. That way, if a setback does occur, it will impact only a small portion, not the whole process.

One ideal way to do this is through diversification. Anyone who considers himself a prudent investor understands this strategy. Common sense dictates that you don't put all your eggs in one basket, but in the case of international sourcing there are several kinds of eggs-and several kinds of baskets-to consider.

For one thing, you can diversify your suppliers. Although it is sometimes advantageous to use just one supplier for a particular component, you need to carefully consider what happens if some event temporarily cuts you off from that supplier. With that in mind, it can be advantageous to increase the number of suppliers you deal with, and to spread them out geographically.

You also can diversify your transportation modes. The economics of doing business in particular industries usually dictate a dominant mode of transit. However, anticipating the fact that there may be times when your dominant mode is temporarily at risk or out of commission, it is always good to know you have an alternate mode you can lean on-and to routinely use that mode for a small portion of your shipments so it's been tested.

Diversifying routes is also effective. For example, although the Asia-to-West Coast route gets your goods to the United States most quickly, many companies are finding that the Asia-to-East Coast option is a viable one for a portion of their goods.

Finally, don't underestimate the value of geographic diversification both in terms of where you store your inventory and where you make it. Many contingencies are strictly regional in nature, and having the ability to access your inventory at several places throughout the globe could give you an advantage over competitors who are less prepared.

One word of warning: There is a fine line between diversification and fragmentation. While there is safety in numbers, it's important not to become so spread out and decentralized that you don't have full control of your inventory and processes.

Tighten

Another effective contingency management strategy is tightening. Although this may sound like it runs counter to diversification, the two techniques actually can and do co-exist quite successfully, because the tightening referred to here relates to the way you operate and how you run your business processes.

While contingencies affect both well-run and poorly run businesses, many of them are more likely to hit and substantially damage supply chains with noticeable operational problems.

Begin by tightening your security. The more vigilant your company is about this critical function, the less attractive it becomes to terrorists or criminals looking for an easy mark-and the more secure we all will be.

Safety is another area that can always stand tightening. An effective safety program can ensure that your employees continue to operate sensibly if contingency strikes, because safety training is all about living with the possibility of things going wrong. Furthermore, training your employees to work safely could prevent the major accidents that become contingencies.

Consider tightening your communication, too. Clear and consistent lines of communication not only help you avoid the misunderstandings that can lead to contingencies, they also enable you to convey and activate your Plan B quickly and efficiently to employees and vendors. Just as important, they enable you to notify your customers about any temporary lapses in service a contingency will cause-a courtesy they will no doubt appreciate.

Tightened standards for vendor management are also beneficial, especially in terms of vendors you rely on quite heavily. After all, if a contingency strikes these companies, it has indirectly struck yours.

Last but certainly not least, you should consider tightening your overall supply chain through better integration. The silo or island approach to logistics-where each individual location or function is responsible for its own performance-is no longer a useful model in today's world, especially not as supply chains become more global. No matter how many locations you operate in or how many logistics providers you use, or how close together or far-flung they are, it is vital that you have quality information systems that tie them altogether as well as someone who's responsible for acting as their integrator.

Plan

Although diversification and tightening can be very effective contingency management strategies, they do not eliminate the need for a formal, step-by-step supply chain contingency plan. Ideally, this plan must begin with a realistic assessment of what your supply chain's breaking point is. The more specific you can get about what each lost minute, hour or day costs you, the more definitively you can assess the risks, benefits and expenses of various options.

For example, if you know that a lost day of production will cost your company several million dollars, it could make the prospect of chartering 747s to carry emergency supplies much more palatable.

You also may wish to put together several different plans instead of one generic, catchall plan, bearing in mind those different kinds of contingencies call for different actions. An inventory shortage created by a strike calls for a very different set of solutions than an inventory shortage created by a natural disaster, for instance.

These plans should be accessible to all of your key logistics personnel, who should be well versed in who's authorized to begin implementing them and under what circumstances. At the same time, they should in no way dominate your overall logistics landscape-because despite all of the things that can and have gone wrong with supply chains, the reality is that contingencies are still the exception to the rule.

While you may wish to change some of your supply chain management practices in light of recent events, it still doesn't make good business sense to base your global logistics strategy on worst-case scenarios. After all, there's a fine line between pragmatism and pessimism.

The key is finding out where that line exists for you.

Sidebar: Getting the "bugs" out of the supply chain
by Lara L. Sowinski

The complexities associated with the shipment of goods over foreign borders are sometimes boggling even for the most experienced traders. And often times, the seemingly simple turns into the truly trying. The issue of wooden pallets, specifically the efforts aimed at assuring the pallets are free from pests that can damage native ecosystems, is a case in point.

Five years ago, shippers and carriers in the U.S. were introduced to the Asian long-horned beetle, which called China and other countries in Southeast Asia "home." The beetle's discovery on wooden pallets coming into the U.S. set off alarms at the federal government's Animal and Plant Health Inspection Service (APHIS), prompting emergency regulations requiring wooden pallets and packing material be fumigated or heat-treated prior to importation and certifying documents be presented to U.S. Customs before shipments could clear. This was no small matter considering that 90 percent of shipments use some type of wooden packing such as pallets. The government wasn't about to relax the requirements either, given that the beetle had the potential to seriously harm industries like lumber, maple syrup, nursery, tourism, and commercial fruit growers, leaving them with over $41 billion in losses.

Global guidelines regarding the treatment of wooden packing materials are soon to be adopted. Yet, some shippers are considering alternatives such as metal and plastic pallets-anything other than "all timber" packaging. One company, Litco, is selling a press wood pallet that falls under the "newly manufactured wood packaging material" category, which under the new regulations would be exempt from additional treatment for pests.

Experts say each of the various materials used for pallets have advantages and disadvantages both, and shippers should find the right one for their company's operations.