A Supply Chain Management Guide to Business Continuity - Hardcover

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BETTY A. KILDOW has been a Certified Business Continuity Professional (CBCP) with the Disaster Recovery Institute International since 1998, and was named a fellow of the Business Continuity Institute (FBCI) in 2002. She has specialized in business continuity, disaster recovery, and emergency management consulting for more than 18 years. She is the author of Front Desk Security and Safety (978-0-8144-0826-1).

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The smooth, consistent operation of your company’s supply chain—from procurement through delivery, and everything in between—is directly tied to cash flow, profitability, and growth, as well as essential factors such as customer trust, stakeholder confidence, and the protection of the brand. When the unexpected occurs—whether it’s in the form of environmental disaster, social disruptions such as strikes or sabotage, an accident that affects production, failure on the part of a supplier, terrorist attack, or the loss of a key staff member—your production and productivity can be ground to a halt, often with dire consequences. Yet despite growing awareness, many business continuity plans still fail to properly account for incidents affecting the supply chain.

Filled with powerful assessment tools, detailed disaster-preparedness checklists and scenarios, and instructive case studies in supply chain reliability, A Supply Chain Management Guide to Business Continuity focuses on supply chain business continuity within the framework of your over­all business continuity program. Easy to understand, and filled with practical solutions and suggestions, this essential guide shows you how to:

recognize and mitigate potential threats, risks, and hazards • evaluate and select suppliers, contractors, and service providers • develop, test, document, and maintain business continuity plans • follow globally accepted best practices • analyze the potential business impact of supply chain disruptions

The book gives you a foundation in business continuity basics, as well as an overview of the entire business continuity planning life­cycle. You’ll learn how to protect against risk in a way that’s right for your organization, integrating all the elements of the supply chain, from purchasing through distribution, and honestly assess your company’s current disaster management capabilities. The book provides a sequential process for developing supply chain business continuity strategies, writing actionable business continuity plan documents, performing a business impact analysis, and ensuring that you meet current business continuity standards, regulations, and requirements.

Whether your organization is large or small, no matter what type of business you do, failure to plan for events that can lead to supply chain disruptions can devastate company performance, damage profitability and stock prices, and result in irreparable harm to your organization. This book shows you how to take the precautions you need and be prepared to protect your supply chain…no matter what.

BETTY A. KILDOW has been a Certified Business Continuity Professional (CBCP) with the Disaster Recovery Institute International since 1998, and was named a fellow of the Business Continuity Institute (FBCI) in 2002. She has specialized in business continuity, disaster recovery, and emergency management consulting for more than 18 years. She is the author of Front Desk Security and Safety.

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Introduction

WHETHER YOUR BUSINESS is large or small,

whether your company manufactures printed circuit

boards or plastic molding machines or sells

handbags or lawn furniture, it is not unreasonable

to expect that there is a crisis looming some time in its future.

The reality is that no business or industry is immune from

crisis. While our tendency is to think about major disasters that

create havoc and impact whole communities—such as earthquakes,

hurricanes, fl oods, or severe winter storms—for most

businesses, the disaster is more likely to be on a smaller scale.

For most businesses, disaster can come from an event that may

not generate headlines, such as a water main break in the immediate

area, a fi re confi ned to a small section of their business,

or the failure of their IT systems.

And though we tend to think in terms of environmental

disruptions, such as natural catastrophes or pandemics, we

must also consider social disruptions (strikes, sabotage), technical

disruptions (a breakdown of equipment, loss of a key skilled

staff member), political disruptions (terrorist attacks, civil unrest,

nationalization), legal disruptions (legal shutdowns, injunctions),

and economic disruptions (supplier failure, exchange

rate fl uctuations, takeovers).

Just as it is not possible to totally prevent most disasters

and disruptions, it is not realistic to assume that they will

happen to other organizations but not to yours. Being prepared

when the things that “can never happen here” do happen is just

plain good business. Failure to plan for such events can lead

to supply chain disruptions that can devastate company performance,

damage profi tability and stock prices, and result in irreparable

harm to the organization. The consequences can also

result in cascading damage to every business and organization

relying on the timely receipt of your goods or services that enable

them to continue meeting their customers’ needs in order

to generate revenue and protect their bottom line. Who wants

to stand in front of a board of directors, senior executives, or a

major customer in the wake of unsuccessful attempts to restore

critical operations following a disaster? Who wants to respond

to their queries about why the threat went undetected, why an

identifi ed risk was not eliminated or mitigated, or why strategies

were not in place to enable the organization to get back on its

feet quickly?

The Effects of a Disaster

In today’s global economy, the effects of a disaster can be

more than just local; its impact can reach across country borders

and oceans. In 1995, a magnitude 7.2 earthquake struck

Kobe, Japan, resulting in 5,100 deaths and devastating physical

destruction. Following the earthquake, all area steel mills were

shut down and many other businesses became nonoperational

as a result of water and gas outages. Secondary business and

supply chain interruptions were extensive. Kobe was Japan’s

biggest international trade hub and a major production and logistics

center, with approximately 30 percent of Japan’s shipping

passing through it. Even businesses with no direct physical impact

suffered because of damage to the utilities, port, railroads,

and roads. Production was impossible, and shipments in or out

were diffi cult to unachievable. When Sumitomo’s Metal Industries

Ltd.—the sole source of brake shoes for Toyota—closed

its plant in nearby Osaka, most of Toyota’s plants in other parts

of Japan closed as well. For companies like Toyota that used a

just- in- time (JIT) inventory management system and relied on

frequent shipments of parts and materials, there was little available

inventory on hand, leading to an interruption of production.

According to published estimates, Toyota lost $200 million

in revenue. Moreover, the disaster cascaded and caused supply

chain interruptions for businesses in other parts of the world,

including U.S. companies IBM and Apple, which relied on displays

produced in Kobe.

Even a seemingly relatively small emergency can result in

a large business disruption. In 2000, a Phillips microchip manufacturing

plant in New Mexico was struck by lightning, creating

a small fi re. Though quickly extinguished, the fi re caused contamination

in the sterile manufacturing facility, contaminated

millions of chips, and halted the chip- making process. The

company’s two primary customers were the two largest mobile

phone companies in Europe, which used chips manufactured at

the plant in cellular telephones. One of the companies, Nokia,

became immediately aware of the disruption in chip deliveries

and acted quickly, working closely with the chip manufacturer.

Nokia arranged to purchase chips from another of its primary

supplier’s plants as well as other alternative sources, quickly tying

up the spare capacity. Some phone models were even reengineered

to allow the use of chips from yet other suppliers.

With pre- disaster plans in place, Nokia was able to continue to

assemble and distribute its products and gain a greater market