by Brianna Crandall — April 8, 2015—A third (35%) of businesses in the manufacturing industry are extremely concerned about potential supply chain disruption, according to research released by U.K.-based business standards company BSI 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.
According to the report, 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, according to the report. 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.
Courtney Foster, supply chain solutions manager at BSI, commented, “Recent global incidents have thrown the risk of supply chain disruption 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.
“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 Supplier Compliance Manager (SCM) tool allows organizations to examine, assess, understand and correct the business continuity risks exposure throughout a number of channels and a number of actors in the supply chain, including manufacturers, carriers, transit routes, and distributors worldwide.
BSI’s top ten tips for business continuity planning
- 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.
- Remember the seven “Ps” needed to keep a business operational — These are providers, performance, processes, people, premises, profile (brand) and preparation.
- Understand and track past incidents with suppliers — Using risk assessments, obtain country-level intelligence in order to understand what factors may cause a supply chain disruption, e.g. working conditions, natural disasters, and political unrest.
- Assess and understand vulnerabilities and weak points — Use risk assessments to assess supplier capabilities to effectively adhere to the company’s business continuity plans and requirements.
- Agree and document plans — These should never just be hidden away in the mind of the managing director (MD). Assess “critical” suppliers to make sure their business continuity plans fit with company objectives and are defined within their contract.
- Make sure plans are communicated to key staff and suppliers — Equally, share them with other key stakeholders to boost their confidence in the company’s ability to maintain “business as usual.” This is particularly important for small businesses or those working with suppliers/buyers for the first time.
- Try plans out in mock scenarios — If possible include suppliers in 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.
- 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.
- Make sure continuity plans are nimble and can evolve quickly — If plans look the same as they did 10 years ago, then they probably will not 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.
- Make sure to not just “check boxes” — Plans that get a check on 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 plans allow the company to get back up and running in a way that aligns with the organization’s objectives.
