There was an article on the BBC News website recently about a small factory in Germany that had suffered a fire in which tragically two people died but which also which dramatically impacted their production output.

At the time of the fire it barely made the news but it is now emerging that one of the key products of this factory is a special resin used in the automotive industry. Apparently this tiny factory produces up to 50% of the world supply. The article referred to board meetings at a major car manufacturer in Detroit in which the discussion was how to deal with the impact and the knock-on effects to the car industry.

Wow! So one small factory in another country can potentially halt the production of some of the largest manufacturers across the world.

Business processes are like chains – it only takes one small link to be missing and the chain (the process) is broken.

There’s a couple of points to think about in this scenario.

Firstly, the need to identify and review key suppliers in terms of their own business continuity arrangements.

Secondly, the need to identify whether a supplier is a potential single point of failure for your organisation. Within this the considerations need to include whether alternative suppliers are available and also perhaps how much market share the supplier provides. This could lead on to questions about where your organisation fits in the priorities of the supplier if they have to operate on reduced capacity or if supplies are temporarily suspended i.e where do you stand in the pecking order?

Supplier or procurement strategies often conflict with business continuity or risk management principles because organisations seek the most economically advantageous deals with suppliers. This can result in preferred supplier arrangements etc which of course make sense from a financial point of view but can create an ‘all eggs in one basket’ situation from a risk perspective. A balance needs to be struck. You can guarantee that when you call on a new supplier because you need an emergency supply of a particular commodity you will be at their mercy in terms of price, delivery and conditions.

More and more organisations are moving towards ‘Just In Time’ deliveries which means that the margin for error is constantly diminishing. If you are responsible for Business Continuity in your organisation you need to be involved in the introduction of such supply arrangements at the beginning of the process, not at the point of failure.

May 17, 2012 at 11:00 am
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Category: Business Impact Analysis, Planning
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