BMP's Notes on the Supply Chain Disruption Report 2010
This report, written by the Business Continuity Report in conjunction with the Chartered Institute of Purchasing and Supply, was published in October 2010 and resulted from the findings of a 2009 survey that of all business continuity issues, companies were the most concerned about their supply chains.
I first heard about it on the Preparis webinar last week about the post earthquake and tsunami impacts on global supply chains. The report is free and easily available – just email Lee Glendon at BCI and nicely ask for a copy – you can say BMP sent you.
I highly recommend that you read the report yourself, but here are a few of my observations:
The #1 impact of supply chain disruption was loss of productivity.
The question that resulted in this response did allow multiple selections, and the other high-ranking answers were increased cost of working and service outcome impaired. I have to think that many companies selected loss of productivity because they were not able to measure the impact of disruptions more precisely, as in loss of revenue, delayed cash flow, or product release delay.
The primary goal of business continuity is not prevention of disruption but recovery from disruptions.
And yet it is hard to ignore the fact that companies with established business continuity strategies experience less disruptions as well as shorter downtime from the disruptions that do occur. Also interesting from this section was the review by industry sector of how much downtime they would tolerate before invoking their business continuity plans. 24 hours was a common response, but it had different meaning in each industry and the action required at that point also differed.
My favorite section of the report is ‘4.4 Building Trust & Confidence through Evidence & Validation’.
The eye-opening questions coming out of this section (bluntly – in my words) are 1. You may care very much about a particular supplier but do they are about you? And 2. Your supplier may have a fantastic continuity plan in place, but do you have any idea if it will actually work?
Most survey participants indicated that their validation of continuity planning was focused around paperwork and documentation. You can not truly be sure a plan will work without incurring some cost, so this additional step will probably only be undertaken for a small percentage of very strategic suppliers. Additionally, respondents were also more likely to continue working with a supplier experiencing supply disruptions than to replace them with an alternative.
Supply Chain Risk Management (or Mitigation) is an area where procurement has to be willing to look at harsh realities in order to be assigned any responsibility. Simply if suppliers have a plan is no longer sufficient. In fact, real continuity planning starts inside – what are your critical supply chains? What is the cost of downtime? How much downtime can you tolerate? Only then can you start evaluating supplier plans in terms of their effectiveness.