Contingency and disaster inventory (CDI) insures against unexpected situations outside the realm of those covered by traditional safety stock inventory. Those situations include natural disasters, labor strikes, and other abnormal supply chain disruptions. For example, in our work with telecommunications and utilities clients we often plan for contingency and disaster inventory to maintain service in the event of hurricanes, floods, or snow storms.
Prophesied by Christ as the labor pains of the end times, the frequency and severity of highly unusual supply chain disruptions are increasing. In fact, according to the UN disaster risk reduction agency, UNISDR, 2011 was the most catastrophic year on record with 27,782 people killed in 302 incidents inflicting damage in excess of $366 billion. The most dramatic of those incidents was the simultaneous earthquake and tsunami that struck Japan, a place and people near and dear to my heart. Our small office in downtown Tokyo was damaged by the earthquake and one of our LogOS™ team members lost a relative in the tsunami. It is ironic that the incident exposing many of the risks in lean thinking would strike Japan, the birthplace of lean thinking. That incident is now the catalyst for re-thinking inventory levels and supply chains that are designed with dangerously naïve assumptions of supply chain certainties.