Terror impact leaves business reeling

19 September 2001
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20 September 2001 | David Arminas

As US business struggles with the mammoth task of rebuilding its confidence after last week's terrorist attacks in the US, supply chain professionals on both sides of the Atlantic will be counting the cost of tighter security measures for transportation of material and people.

"It is pretty clear we are going to see a tightening of security at airports and this will cause business people to put aside more time for travelling," Paul Novak, chief executive of the National Association of Purchasing Management in the US, told SM.

"It's just so early you don't really know what the long-term effects will be when you are dealing with such unprecedented events," he said. "I think the US will look more like Europe, where security is much tighter."

Logistics companies were scrambling for alternative delivery methods and business travellers were stranded when all US air traffic was grounded immediately after two hijacked planes slammed into the twin World Trade Center towers. The buildings crashed to the ground, killing thousands of people.

Many major logistics carriers in the US hurriedly moved cargo onto the roads. Some sectors of manufacturing - particularly automotive which relies heavily on just-in-time (JIT) - saw delays of parts cause serious production problems, raising questions about JIT philosophy.

"I think that will not be such a huge issue for the automotive sector, as most of the parts move by truck anyway," said Novak. "Purchasers who do JIT have little choice. You either do JIT or you have safety stock. Any time something happens, you review to see if you can avoid disruptions. But there is always some little thing that you don't anticipate, such as some company that might get microprocessor chips in by plane."

In the UK, companies can expect more customs and security processes, affecting supply chains that rely heavily on export and import operations, according to Melinda Johnson, policy adviser at CIPS.

"But we don't know when the measures will be put in place and for how long," she said. "And they might slacken a bit after a while. Increased security and time will cost."

First-tier suppliers operating JIT processes may not be too much affected because many are located on the doorstep of their major customers, she said. But second-tier suppliers that import goods could suffer schedule delays.

Novak believed purchasers should consider the bigger picture from effects from the tragedy. "The long-term consequence is that consumers may pull back from buying and this may tip us into a recession, although that is hard to predict," added Novak.

Increased pressure on companies to save and cut cost would mean lay-offs and more pressure on purchasers to meet ever-tightening budgets.

"When things get a little shaky in terms of what the future holds, everybody gets a little more conservative. That will really punish the economy."

SMsep2001

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