|E. Mitchell Swann, P.E., of MDCSystems® & James W. Haile Jr., C.P.M., of JWH & Associates
Over the past 9 – 12 months or so many parts of the world have been rocked by unforeseen events – “black swans” – which have called into question some of the ideas or principals we’ve centered much of our business planning around. Most notable of these in my mind is the Tohoku Japan earthquake and tsunami and the resulting Fukushima Nuclear Plant meltdown. One of the things that Tohoku did was take out a significant swath of Japan’s specialty automotive parts industry as the earthquake and tsunami affected regions were noted for being a hub for auto parts manufacturing for both Japanese and global car companies and those parts manufacturers were off line. What this means is that their link in the supply chains of an important global industry was cut. In the aftermath, many manufacturers have re-evaluated their supply chain strategies and are considering a broader diversity of suppliers both in number and regions. Many are also looking at the potential impact of ‘just in time’ production strategies and their supplier matrix. Last year MDC published in its Advisor an article written by James Haile on the importance of having a robust supply chain and how to consider the various aspects of same. In light of the Tohoku earthquake and how it put a glaring spotlight on the sensitivity of global economic productivity to what are local or regional impacts, MDC felt that it might benefit our readers to re-publish that article. Nothing teaches like experience and the Japanese earthquake, tsunami and power plant meltdown provided a very teachable moment (more like 6 months of moments) on the impact of black swans and the value of systems-based thinking.
*Article from James W. Haile Jr., C.P.M. – Risk Management: Insuring Continuity of Supply – Previously Published April 2010
In order to mitigate your supply chain risks, BCP must be developed and integrated into the annual planning process and into the everyday business behavior. The process must be proactively supported by top management and the necessary resources (people, time, money and training) must be available in order to execute all activities. Activities would include the following:
In terms of mitigation of risk solutions, you really must understand your supply chain, your suppliers, the products, materials and services you acquire, how they are used within your supply chain and the risks. In addition, developing solutions, prioritizing and implementing are not activities that are solely managed by the supply management professional. These activities should occur in team collaboration with your business partners including engineering, manufacturing, quality, finance and marketing. In terms of mitigation solutions, here is a list that should be considered:
It should be obvious that keeping the lines of communications open, both in and out of your company, is a very important tool that should be actively used as part of your BCP process. As an example for dealing with your supplier base, here are some samples of verbiage that could be put in contracts or just used in email correspondence:
A. Key Contract Clauses
It is expected that both Parties will make reasonable efforts to communicate thoroughly and within a timely manner any critical activities, business occurrences, potential issues or emerging problems that could jeopardize the quality and continuity of Services.
B. Email Correspondence or Contract Clause
For the purposes of this document, as related to your particular business, please provide in some detail your Business Continuity Plans and Communications Process that you provide to your customers.
As this article comes to a conclusion, you should have a good overview of BCP, why it is important, its’ components, who should be involved, some mitigation solutions and some verbiage to use with your supply base. Proactively managing your business risks is the only method available to insure continuity of supply for your products, materials and services. In today’s turbulent and unpredictable global business environment, BCP is a strategic management process that must be learned and utilized on an on-going basis in order to support the survival of your business assets, customer base and revenue.
This article was authored by James W. Haile Jr., C.P.M., of JWH & Associates, a supply management solutions company that specializes in supplier management & performance, negotiation training and supplier diversity development. For further contact, call 610-490-0470 or email: firstname.lastname@example.org