Why Government Shutdown Risk Assessments are Critical
Supply chain practitioners deal with risk every day. Lost materials, quality issues, late deliveries and shipping constraints are common. Good supply chain standard work processes should also include analysis of the supply chain when a government shutdown occurs. Building a government shutdown protocol into your standard processes will ensure supply chain continuity.
It is important to have a foundational understanding of government funding and budget cycles. As it turns out, these events are seasonal and generally repeat on a historical pattern. This means that there is an element of proactive prediction and preparation possible for these events.
What Are the Past Cycles of Government Shutdown?
Looking over the past twenty years there have been some similar shutdown occurrences. With key events occurring over the priori ten year period. It is clear there is a cyclical nature and repeating historical pattern to observe.
November 14–19, 1995 (5 days): Triggered by a veto from President Bill Clinton over a continuing resolution tied to budget cuts and policy disputes with the Republican-led Congress.
December 16, 1995–January 6, 1996 (21 days): Stemmed from similar clashes over spending priorities, including cuts to social programs, education, environment, and health initiatives. This was the longest shutdown until later ones surpassed it.
October 1–17, 2013 (16 days): Began at the start of FY2014 due to failure to pass a continuing resolution, largely over attempts to defund or delay the Affordable Care Act. The shutdown started on October 1, 2013.
Looking at these historical cycles we can make some predictions as to what future durations can be. In the case of the maximum durations of these shutdowns, it would be a reasonable assumption that future shutdowns may last beyond twenty-one (21) days.
What Month Can Be Predicted As the Highest Risk?
From the historical data, October is the riskiest and most predictable window due to the government fiscal year structure. Many shutdowns are averted by last-minute continuing resolutions (CR’s) for extended funding but when funding efforts do fail, October 1 of the fiscal year becomes the most likely flashpoint date. Beyond that, timing is unpredictable and may depend on politics, not seasons.
What Are Procurement and Supply Chain Leadership Considerations to Address a Government Shutdown?
Paul Teague from Procurement Leaders Magazine reached out to The Innovation Garage for some commentary and insights on this topic. Paul set up the discussion points as follows:
“As if there weren’t already enough risks for procurement to keep in its sights, politicians have handed CPOs another one: government paralysis. It has now been a week since The Great Shutdown – the closing (actually, partial closing) of the US federal government over a dispute regarding the passage of the government’s fiscal year budget. Has anyone beyond the 800,000 furloughed government workers and visitors to shuttered national parks and monuments noticed? Cynics would say, “no.” Realists would say, “not yet.” Procurement executives, like most business leaders, say, “it all depends,” hence, they are revising their risk management plans to cover potential supply chain problems.“
The Innovation Garage response to the set up was as follows:
“Many procurement executives say there may not be much of an effect right now on business due to the shutdown, but that if it continues very long there could be supply chain repercussions. Jon Washington, engineer, procurement executive and principal of consultancy The Innovation Garage, says companies importing parts and materials from offshore could be affected by slowdowns at ports due to a lack of federal workers to clear the imports for entry. CPOs will have to plan for that.“
What Are Three (3) Simple Steps to be Prepared?
The steps to be prepared are reasonably simple and outlined here:
Step 1: Understand the seasonality of the potential shutdowns and monitor government funding activities starting in mid Q3 (July) of each calendar year.
Step 2: If the mid Q3 monitoring indicates the potential funding uncertainty, start scenario planning that there is potential for a four (4) to six (6) week shutdown that will occur in Q4. The scenarios should identify critical components or services that would be impacted with a four (4) to six (6) week outage.
Step 3: Acquire buffer inventory or advance plan and pre-buy services to cover the potential down period.
Historical cycles being what they are, it is extremely likely that over the next twenty (20) year period, it’s a reasonable assumption that government shutdowns will occur on a more frequent basis. The above steps, when woven into your organizations standard work will help to make the unpredictable more predictable.
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