Business Continuity and Disruption Prevention: Supply Chain Resilience

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September 8, 2022 - Every part of the value chain from sourcing of raw materials to reaching retail shelves has been challenged over the past two-and-a-half years. And while the pandemic aggravated and essentially halted an already stressed global supply chain system, additional disruptions caused by climate change, workforce challenges, and political instability will be felt for the foreseeable future. Today, as manufacturing facilities face power shutdowns in the wake of extreme heat and as freight costs continue to skyrocket against a backdrop of driver shortages and shipping containers piling up, the urgency for supply chain resilience is now.

How we address business continuity and disruption prevention must change. Currently, most professionals think about business continuity planning from a single site perspective:

  • Have we done a business impact analysis for this site?
  • What's the impact of losing this site?
  • What's the impact of losing this part of the operation internally?

Based on those answers, a business continuity plan (BCP) is developed to mitigate risks or quickly get a particular site back up and running if a disruption has occurred.

However, when it comes to the supply chain, you're not just looking at one specific site, you're looking at several facilities, some of which are owned by you and some of which are owned by the third parties you work with. External manufacturers, external component suppliers, or transportation providers will have an impact on the core functions of your business. However, external suppliers are often not considered as part of the core business.

I encourage business continuity professionals to think about their entire supply chains as a core part of their business similar to the way a headquarters site or a large data center is considered. Instead of thinking about business continuity planning as a site-by-site exercise, look at it as a supply chain by supply chain exercise to identify what the critical points are within those supply chains. This provides better visibility on the impact of a disruption or loss within the entire business.

This method of broader planning is a bit trickier and more difficult to do. When looking at internal sites (as with traditional planning) and one of those sites fail, another site may be able to temporarily pick up the slack. This isn’t the case if one of your overseas suppliers is delayed or is suddenly unable to operate. It's a lot more difficult to source a different supplier.

A broader approach requires more forward planning throughout your organization’s entire supply chain and addresses bigger concerns:

  • Should you have more suppliers who can source those same products?
  • Should you have alternate arrangements with different carriers and transportation providers?
  • Should you stockpile more inventory than usual to prepare for a delay?
  • Should you draw down or utilize that extra stock rather than waiting for items that are delayed?
  • What are the extra carrying costs and logistical challenges involved?

These aren’t just questions pertaining to whether another site can perform a similar function, but it's making arrangements and building in necessary redundancies to protect your core business functions. Typically, there is little to no redundancy within supply chains and that is where things can fall apart very quickly.

In doing this, business continuity professionals will need to engage with folks beyond just the traditional site managers. Consider coordinating with people handling your supply chain IT network, internal and external supply chain teams, third-party logistics teams, procurement, and potentially legal when dealing with supplier contracts.

It is critical for proper planning to find out:

  • Which factories or manufacturing sites are you using?
  • How do you reach them?
  • What does their capacity or ability to recover from a disaster look like?
  • Did the supplier provide the inventory they said they would?
  • Was it on time? Can it be done faster? Cheaper?
  • Were there any unplanned interruptions this month?
  • How did they respond to those unplanned interruptions?

Asking these questions can help you develop a comprehensive plan to respond to unexpected interruptions. Encourage your suppliers to develop business continuity plans themselves and then audit your plan against theirs.

This broader planning approach is a multi-layered process and can feel like a heavy lift, but the good news is that you don't have to do it alone. If you're a business continuity professional trying to build resilience into your supply chain, everybody, including supply chain logistics, procurement, etc., has an interest in in seeing that improve.

Tony Pelli, along with other BSI experts, will be sharing his insights and recommendations on business continuity strategies at Disaster Recovery Journal's 2022 conference on September 11 to 14 in Phoenix. Follow along as our Security & Resilience practice experts address the future of organizational security in the ongoing Business Continuity and Disruption Prevention Thought Leadership series. Discover this and other EHS topics that should be at the top of your list at BSI’s Experts Corner.