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Supply Chain Business Continuity: Have you Planned for Disruptions?

Posted on Thu, Jun 25, 2015

Weather, natural disasters, and other uncontrollable events can interrupt transportation flow and your supply chain – anytime, anywhere, and with little warning. - FedEx.com service alert

In January and February of 2015, blizzards, ice, and frigid cold temperatures targeted the eastern half of the United States. The deluge of extreme weather brought residents, cities, and supply chains to their knees. Meanwhile on the west coast, labor disputes between the International Longshore and Warehouse Union and the Pacific Maritime Association created the partial closure of 29 ports. The Port of Oakland experienced a 39% drop in cargo imports because of the circumstances (Wall Street Journal). The trucking and railroad industries lost valuable time and money, and customers experienced delayed delivery of tons of expected goods. The ripple effect of delayed shipments forced many customers to stockpile goods when available, and alter contracted shipping means when time sensitive goods were required.

Ensuring ample supplies in the midst of an incident can be challenging, especially when external forces create delays. Supply continuity and preparedness efforts are becoming more important as more companies depend on world-wide suppliers. These recent major supply disruptions, both on the east and west coasts, emphasize the need to develop business continuity plans (BCPs) that identify primary and secondary suppliers and alternate resources. By identifying and contracting with vendors and alternate suppliers prior to an incident, a company improves its ability to quickly and successfully respond to unforeseen disruptions.

Pre-emptive identification and mitigation efforts are crucial to preventing supply chain interruptions and costly consequences. Factors to consider in the identification of critical suppliers are complex and extend well beyond first glance analyses. While suppliers of material goods and business-specific products may be critical to business practices, suppliers may also include those that provide the following services, utilities, or infrastructures:

  • Sole source services
  • Electrical power
  • Water
  • Fuel
  • Telecommunications
  • Transportation
  • Staffing
  • Waste Management
  • Facilities

Companies should utilize BCPs to prepare for incidents that could impair or impede the ability to operate as a result of a temporary or permanent loss of required supplies, equipment, critical staff, data, and necessary infrastructure. A BCP can help minimize or counteract many of the potential impacts of a supply interruption or set procedures in motion that limit the effects on operations.

Identification of risks and business impact analyses (BIA) should be performed for critical supply chains as part of the development of BCPs. For common disruptions, inept supplier performance, required resources forecasting errors, and transportation and delivery breakdowns, companies can typically utilize historical data to quantify the level of risk and necessary response effort. However, when extraordinary events impact the supply chain, such as the east and west coast incidents, companies may encounter atypical and domino effect impacts. Continuity plans with supply chain response measure must be in place to mitigate the disruption, sustain operations, and restore “business as usual”.  The following supply chain related questions, while not all-inclusive, can be used as response planning discussion points to identify necessary supply-related business continuity and response elements:

  • How would a potential critical material supply disruption affect both internal and external resources?
  • Have critical supplies, interdependencies, and potential bottleneck scenarios been identified?
  • Have critical materials and response equipment needs, minimum levels, and recovery time limits been evaluated and defined?
  • Are processes in place to monitor internal and external supply chains that identify potential delivery disruption?
  • Have back up suppliers been identified and communicated with?
  • Are memorandum of understandings (MOUs) for services, and equipment or supply contracts been established and/or up-to-date?
  • Do business continuity initiation procedures encompass verified primary and secondary supply chain contacts?
  • Is there historical data that indicates potential impacts and durations that can be used for planning?
  • Are “Best Practices” supply chain continuity procedures available from like-companies and industry experts?
  • Do critical suppliers have alternate processes and delivery methods in case an event affects their operations?
  • Have supply disruption scenarios been included in emergency response and business continuity exercises?
  • Are employees trained in the event of supply disruption?
  • Have mitigation measures been examined and implemented based on BIAs?

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Tags: BCM Standards, Business Continuity key points, Business Continuity Plan, Business Disruption, Mitigation