Supply chain complexity - top business continuity concern for manufacturing industry

HERNDON, Va - March 16, 2015

A third (35%) of businesses in the manufacturing industry are extremely concerned about potential supply chain disruption according to research released by BSI, the business standards company and the Business Continuity Institute (BCI). More than three quarters of manufacturing firms (77%) report increasing supply chain complexity as the fastest growing risk in business continuity, with malicious attacks via the internet (68%) and increased regulatory scrutiny (58%) taking second and
third place.

Global sourcing across supply chains creates severe business continuity challenges for manufacturers, with the research showing that suppliers operating in riskier countries are the fastest growing business continuity risk. BSI’s proprietary intelligence paints a clear picture of how manufacturing across different sectors can be disrupted by natural disasters, man-made disruption (conflicts) and a lack of resiliency in different countries ability to handle such events.    

Risk exposure varies by sector. The proportion of supply chains exposed to elevated, high or severe risk of natural disaster is highest for the apparel (85.6%), automotive (53%) and aerospace (51%) sectors, all of which have a high proportion of manufacturing and raw material sourcing based in politically and geologically unstable regions.

While the relative risks differ, the key lesson for organizations to consider is their planning for potential disruption. For example, the automotive sector suffered heavily from the 2011 Japanese tsunami due to a global reliance on a single manufacturer of a particular pigment essential for metallic paint finishes. As a result of the disruption, production in the factory was halted for three months before normal operations resumed, causing long lasting effects across the automotive marketplace.

Shereen Abuzobaa, Commercial Director at BSI Supply Chain Solutions said:

“Recent global business continuity related incidents, such as the two days of strikes in Belgium that delayed 49,315 twenty-foot equivalent units (TEUs) of cargo at the port of Antwerp, and the droughts in Sao Paulo that forced companies to delay or halt production have been thrown into the spotlight. Our data shows an alarming percentage of suppliers in a variety of the industries are based in areas with significant risk of natural disaster or man-made disruption such as these.

Our experience shows that while companies are aware of and test for internal risks, they are failing to map or assess risk effectively across their supply chain. More often than not, only the first tier of suppliers is considered with no thought given to those further down the supply chain. Testing and assessing every supplier across every tier is prohibitively time consuming for businesses. By concentrating on higher risk suppliers, companies can be more effective and confident in mitigating risks.”

BSI’s Supply Chain Risk Exposure Evaluation Network (SCREEN) is a comprehensive intelligence resource that helps organizations to proactively identify business continuity geographic risk. SCREEN analyzes and quantifies specific business continuity risk factors, such as natural disasters, man-made disruptions and political and economic stability to show organizations not only where the risks lie, but when they are most likely to occur. This intelligence is also infused into BSI’s audit analysis solution, Supplier Compliance Manager (SCM), allows organizations to identify, assess, and correct the business continuity risks throughout a number of assessment channels and supply chain actors.

BSI’s top ten tips for business continuity planning

1. Identify critical business functions – Once critical business functions have been identified, it is possible to apply a methodical approach to the threats that are posed to them and implement the most effective plans.

2. Remember the seven ‘P’s needed to keep your business operational – Providers, performance, processes, people, premises, profile (your brand) and preparation. 

3. Understand and track past incidents with suppliers – Obtain country-level intelligence so you understand what factors may cause a supply chain disruption e.g. working conditions, natural disasters, and political unrest.

4. Assess and Understand Vulnerabilities and Weak Points – Conduct risk assessments to evaluate supplier capabilities to effectively adhere to your business continuity plans and requirements. 

5. Agree and document your plans – These should never just be hidden away in the mind of the MD.  Assess your ‘critical’ suppliers to make sure their business continuity plans fit with your objectives and are defined within your contract.

6. Make sure plans are communicated to key staff and suppliers – Equally, share them with other key stakeholders to boost their confidence in your ability to maintain ‘business as usual’. This is particularly important for small businesses or those working with suppliers / buyers for the first time.

7. Try your plans out in mock scenarios – If possible include suppliers in your exercises and remember to test them not only in scenarios where there may be a physical risk, such as poor weather conditions making premises inaccessible, but people risks such as supply chain challenges and boardroom departures.

8. Expect the unexpected – While lean and efficient supply chains make good economic sense, unexpected events can have a significant impact on the operations and reputation of businesses.

9. Make sure your continuity plans are nimble and can evolve quickly – If your plans look the same as they did 10 years ago, then they probably won’t meet current requirements.  Organizations engaged in business continuity management will be actively learning from their internal audits, tests, management reviews and even from incidents themselves. 

10. Make sure you’re not just ‘box-ticking’ – Plans which get the tick against the ‘to do’ list but don’t actually reflect the organization’s strategy and objectives can lack credibility and are unlikely to succeed in the long-term. Instead, make sure your plans allow you to get back up and running in a way that aligns with your organization’s objectives.

To learn more about business continuity risk management, download BSI’s Supply Chain Insight: Risk vs Resilience White Paper and register for BSI’s upcoming Business Continuity Awareness Webinar co-presented with BCI.

About BSI Supply Chain Solutions
BSI Supply Chain Solutions is the leading global provider of supply chain intelligence, auditing services, audit compliance and risk management software solutions, and advisory services. Our mission is to help corporations, governments and associations identify, manage and mitigate global supply chain risks and maintain world class governance risk and compliance programs.  Our holistic supply chain risk management suite is designed to predict and visualize risk, and develop robust risk mitigation and compliance management programs to protect your supply chain, brand and reputation. Our intelligence-infused supply chain solutions and global network empower our clients to understand global supply chain risk with unequalled precision.

To learn more, please visit our website: supply chain solutions

Shereen Abuzobaa
Commercial Director
BSI America Professional Services, Inc.