Supply chain risk management is often synonymous with natural disasters like earthquakes and floods, and as we witnessed last year, those types of events can significantly disrupt supply chain operations. Economic conditions, political unrest, oil and commodity prices, quality issues, capacity constraints, and the financial stability of suppliers are also on the “risk radar” for most supply chain executives.

But what about social media? Can what people say on Facebook, Twitter, YouTube, and blogs bring your supply chain operations to a halt — or even put your company out of business?

You bet it can, as the recent outcry over “pink slime” in beef shows.

Last April, celebrity chef James Oliver aired a segment on his television show about pink slime (aka “lean, finely textured beef” or LFTB) that went viral on YouTube.

But that was just the smoke coming out of the volcano. The big eruption occurred earlier this month when ABC News published a blog posting titled “70 Percent of Ground Beef at Supermarkets Contains ‘Pink Slime’.” At the same time, blogger Bettina Siegel launched a petition on Change.org to “Tell USDA to STOP Using Pink Slime in School Food,” which received 200,000 signatures in nine days. A few days later, major grocery chains started announcing that they will stop selling ground beef with LFTB, and the USDA announced that it will give school districts a choice of offering beef with or without the filler starting in the fall.

Yesterday, the manufacturer of LFTB, Beef Products, Inc. (BPI), announced that it is shutting down three of its four plants in Texas, Kansas and Iowa. The company will continue to pay its workers for 60 days as it launches “a public relations program designed to restore confidence in its product,” as reported by ABC News. Here are some excerpts from the article:

“After that 60-day period is over, if we haven’t been able to resume operations again by then, we believe we won’t have a decision other than to formally terminate those employees’ employment,” said Rich Jochum, the company’s corporate administrator.

 

The company blamed social media and news organizations [emphasis mine], specifically ABC News, for what it called a gross misrepresentation of its product and process.

 

[Regina Roth, BPI’s executive vice president] said that the company would “attack” the misconceptions in consumers’ minds through social media. [For example, see the company’s video rebuttal to James Oliver’s television segment].

 

“What we’re going through is not something any other companies want to … have to endure,” Roth said.

And all of this happened in less than a month, triggered by a video, some blog postings, and thousands of angry comments on social media sites — the online equivalent of a major earthquake or flood.

Many supply chain executives don’t see the business value of social media beyond marketing and customer service. But as this “pink slime” incident shows, social media can cause demand for your product to disappear almost overnight, or seriously disrupt the operations of a key supplier or customer, and the effects will quickly ripple up and down your supply chain. And it doesn’t matter if the information being dispersed is true, false, or somewhere in between. When you’re caught in a social media storm, the tendency is to run for cover quickly, and decisions are made (and sometimes reversed) in haste.

The bottom line is that supply chain executives need to have social media on their risk radar, and they need to assess the potential consequences of a social media incident, just like they do for a natural disaster and other types of risks, and develop response plans to minimize the impact. The last thing you want, as Ms. Roth alluded to in her comment, is a pink slime incident on your hands with no idea of what to do.

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