Business continuity and supply chain management

Management Services, Aug 2002

* The preferred technique was ensuring lines of communication in the supply chain (48%), followed by encouraging the supply network to share information on risk exposures and interdependencies (40%).

Measures against supply chain failure

* Asked what measures organisations take to protect themselves against failure, imposing delivery obligations on suppliers was the most favoured measure with 35% practising this. This was closely followed by joint development of continuity plans with suppliers, with 30% practising collective ownership of risk.

* Insurance against the losses caused by supply chain disruption and imposing business continuity management requirements on suppliers are both measures taken by 12% of respondents' organisations.

The extent of supply chain disruption

* Over a quarter (26%) of organisations had experienced a supply chain disruption in the past five years.

* The respondents were given the opportunity to specify what form the disruption had taken. Unsurprisingly, a significant proportion related to the fuel crisis and the floods of 2000, and the foot-and-mouth crisis of 2001. Other disruptions included unavailability of raw materials, industrial action, major plant failure and foreign border closure, down to the more prosaic example of scarce replacement printer cartridges.

Key motivators

* Respondents were asked to agree or disagree with statements concerning the purpose of BCM in supply chains. A clear majority (76%) concur with the statement that their organisation is mainly motivated by the wish to reduce exposure to commercial risks. A smaller number (49%) were motivated by a desire to avoid threats to health and life and fewer still (39%) by the failure to achieve compliance with policy and standards.

Outsourcing and supply chain management

* A clear majority (68%) say that their organisations outsource their facilities or services. However, only 9% insist on their outsource suppliers having BCPs, which is a major concern and needs addressing.

* When asked how they assessed whether their critical suppliers could cause serious disruption, for the most part managers claimed that they applied simple commonsense procedures. Past experience (45%) and industry sector awareness (25%) were the most favoured way of making this assessment. Only 1990 favoured using a risk management tool to analyse risks in this area, which reveals a disturbing lack of proper analysis of suppliers.

Conclusions

* There is considerable evidence supporting a case for Business Continuity Management (BCM). For those organisations who had Business Continuity Plans (BCP) in place, the impact of recent crises and disruptions had been significantly minimised.

* When looking at the issue of what organisations' fear, what they plan for, and what disrupts them, there is a considerable discrepancy between what they fear and plan for and what actually happens to them. For example, IT failure is much planned for and loss of skills a great deal less so, yet it is loss of skills that are perceived as having the greater potential impact on organisational costs and revenues.