MIT Expert on Corporate Disruptions Discusses How Companies Can Prepare for the Unexpected
August 12, 2005, CAMBRIDGE, MASS – British Airways could have, and should have, spared its customers most of the aggravation resulting from the strike that brought its Heathrow operations to a standstill, according to MIT Professor Yossi Sheffi. The strike alienated customers, and generated negative publicity that will take a significant effort to overcome. The debacle has important lessons for other companies, he noted.
“A company’s survival in the face of such disruptions depends on how well the company prepares BEFORE disaster strikes. In the case of British Airways, the airline should have anticipated the action of its catering supplier, the resulting strike and the possibility of sympathy strikes. Thus the airline could have and should have had a contingency plan,” said Sheffi, a renowned trade expert and Director of the MIT Center for Transportation and Logistics.
Sheffi compared the BA preparations with those of Northwest Airlines, whose machinist union is threatening to strike. Not only has Northwest been training replacement machinists, but it has also arranged to outsource its maintenance services to keep its planes flying. In addition, Northwest is training replacement flight attendants – in case they decide to join the strike.
In his soon-to-be-released book The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage, Sheffi argues that a company’s prosperity depends more on what it does before an unpredictable event occurs than on the actions it takes as the event unfolds.
Specifically, Sheffi points out that a company can be brought to its knees by a disruption at a key supplier, especially when they are the sole provider of a specific good or service. Therefore, companies must either have close relationships with their suppliers, such as Gate Gourment, and be aware of their financial, technological or human-resources environment; or they should have multiple suppliers and change them frequently, so they do not depend on any one of them.
“For British Airways, having a close relationship with Gate Gourmet may have alerted them to the possibility of a strike, giving them time to prepare and possibly stop the strike before it started,” Sheffi said. “It certainly would have given them time to mitigate the effects on their customers by preparing to re-route passengers, staffing the airport with more agents to provide information, and making arrangements with area hotels. These actions would not only have lessened the likelihood of a strike, but they would have blunted the impact on the customers caught in the event,” Sheffi added.
Yossi Sheffi is the author of the soon-to-be-released “The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage.” Sheffi, an international expert in supply chain management, is Professor of Engineering Systems at MIT, and Director of the MIT Center for Transportation and Logistics.