Cisco activates crisis management team as global manufacturing hits new low

By Brad Reese on Mon, 01/05/09 - 10:19pm.

Cisco has quietly activated a Manufacturing Crisis Management Team (MCMT) as the JPMorgan Global Manufacturing PMI (Purchasing Managers Index) posted its weakest ever reading:

Source: JPMorgan and Markit Economics in association with ISM and IFPSM.

According to a Shipping Digest article:

Fears of unprecedented disruptions to supply chains have prompted shippers to create formal crisis-management teams to keep their operations moving as the global recession worsens.

After finishing a three-week tour to discuss the fallout of the financial crisis with 250 executives at 150 companies around the world, Gary Lynch - Global Risk Intelligence Strategies and Resiliency Solutions Practice Leader Marsh, Inc. states:

"I don’t want to overstate anything, but this is the first time I’ve ever really seen fear."

Companies are racing to lock in financing and operating capacity as the economy deteriorates day by day. The collapse of nearly 2,700 smaller truckers through the third quarter of 2008 signals financial woes are coursing through logistics pipelines. With U.S. air freight volume in free-fall, DHL is withdrawing from U.S. domestic service.

Cisco activated its Manufacturing Crisis Management Team about two months ago.

"We found that the same structure and processes were applicable to the financial situation that Cisco used to weather the Sichuan, China, earthquake and its supply-chain aftershocks last May," said John O’Connor - Director of Cisco Global Supply Chains.

The Shipping Digest article added:

	Cisco began testing every node and partner in its network that posed a significant risk of disruption — more than 1,000 in all, finding a growing risk of default among its suppliers, and expects that risk to increase.
	Cisco directed at-risk partners to a mitigation program offering creative financing. At the same time, Cisco arranged secondary sourcing, just in case. Those suppliers are being monitored on a quarterly, sometimes monthly, basis.
	Globally, Cisco is identifying not only where disruption is mostly likely to occur, but to which products. Memory, optics and power supplies are thin-margin Cisco product categories where financial or operational disruption could hurt Cisco the most.
	Cisco is *over-capacitizing* its transportation network by building in alternate and even redundant lanes and carriers to make sure Cisco product gets where it needs to sell. Cisco's crisis-management team is meeting with chief financial officers and chief executives of carriers, logistics providers, manufacturing sources, sales and customer service organizations to assure uninterrupted operations.

Has Cisco's fabulous success at outsourcing the global manufacturing of its products become a potential liability?

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