Sunday, July 13, 2014


Mid-east conflict
Impacts supply chain


Years ago I worked for Tadiran, a multi-division company that dealt in everything from air conditioners and telephone systems to highly classified military material for use by armies around the world.

I worked for Tadiran's Electronics Division in Holon, Israel, and its Telecommunications Division in Clearwater FL, USA.

It was while working for the telecom division - analog and digital business systems - that I became aware of (potential) customer concerns about getting replacement parts for an Israeli product if normal operations were interrupted by rocket attacks from Israel's neighbors.

This was after the Begin-Sadat peace treaty but before the peace agreement with Jordan. The Palestinian Authority was then headed up by non-Palestinian Yasser Arafat.

Today, with rockets from Gaza and Lebanon indiscriminatingly falling on Israeli civilians the question raised by Tadiran's potential clients remains valid.

Is it safe to buy products from a country in conflict?

It really makes no difference which country is involved in a conflict, the question is a valid one.

What should a risk management practitioner recommend?

FIRST, Check the desired product's Mean Time Before Failure (MTBF). Most electronic gear has an established worst case MTBF based on testing and "aging" by the product's manufacturer. I define "worst case" as the part in the system with the lowest MTBF; the part most likely to fail.

At Tadiran in Holon we used to "age" product samples under carefully monitored, and recorded, conditions. We also performed a series of abuse tests. In the end, the aged and abused device was disassembled and thoroughly inspected.

SECOND, based on the MTBF confirm that the local (in-country) vendor has spares available; more for parts that have lower MTBFs. Also find out how many installations of equipment use the low-MTBF part. If the in-country vendor lacks sufficient known-good replacement equipment consider having your own reserves or looking at a competiting product.

It's not just terrorists that can jeopardize spares.

Consider strikes.

Strikes at, alphabetically,

  • Any transportation link (truck, rail, sea, air) and related (e.g., strikes at ports of all type)
  • Government agencies (e.g., Customs)
  • In-country vendor
  • Manufacturer
  • Manufacturer's vendors

And those are just the tip of the proverbial iceberg.

When I was with Tadiran in Clearwater FL, we had spares and replacement systems. If the Telecommunications Division was unable to ship parts from Israel for a month or two, we were covered; we had the parts our clients might need.

The threat of a conflict in the country where a product is manufactured should be only a minor concern; there are too many other things that can disrupt the supply chain.

The question to ask: does the in-country vendor have sufficient parts to meet all the clients' needs and, if not, what options does management want to consider?

No comments: