“No man is an island”,
wrote the 16/17th century English poet John Donne and the same can
be said for organisations and nations today. In the world that John Donne
inhabited change of significance yet to be appreciated was on its way as
nations strove to discover new oceans, lands and trade routes in an attempt to
capitalise on their commercial value, including discovering routes to the
lucrative spice markets. This struggle pitted established giants, such as Spain
and Portugal, against each other but interestingly allowed others, such as the
relatively insignificant English, the chance to exploit the weaknesses and
misfortunes of the larger nations. Nations that failed to do so or experienced
loss in their trading networks became insignificant or were swallowed up.
Ever since then the
dependence of nations, societies and people on trading networks has deepened. In
the modern era no business survives in isolation and success is often more
about how you do things, through those trading networks, than it may be about
what you provide. However in other ways, just like 16/17Th century
nations, modern businesses are vulnerable to disruptions to those trading
relationships. It may no longer come in the form of buccaneers or gentlemen
pirates but, as we have seen recently, age long risks to business and commerce such
as volcanoes and tsunamis remain with us. Add to those the modern threats from
cyber attacks, power outages or fuel shortages and it may be said we in the 21st
century have as a result more to concern ourselves with. Recently the Business
Continuity Institute published its 5th report into supply chain
vulnerability. Read these findings from
that report and consider how they apply to you:
- 75% do not know what their supply chain looks like yet the same amount experienced a disruption in the previous year.
- 42% of disruptions in the supply chain occur in your supplier’s supplier yet they impact you.
- 15% had a disruption that cost over €1M.
- Of those suffering a disruption 41% had customer complaints and 55% lost productivity.
- Roughly a quarter of those experience disruption felt it negatively impacted upon reputation and caused shareholder concerns.
- Major risks reported included severe weather, earthquake/tsunami, fire, currency volatility, terrorism, illness, animal disease, financial pressures, IPR violation, data breach, cyber attack and telephone outage.
Before you run off to build
strategies for supply chain resilience you firstly need to appreciate the
nature of the problem. If you don’t know what your key services and products
are and if you have no idea on the supply chain that enables their delivery
then you can’t focus your efforts on where you may be most vulnerable. So use a
Business Impact Analysis to inform the selection of the critical supply chain
paths as a starting point. Don’t forget to engage with your suppliers as part
of the solution. That may be through agreed SLAs or simply by educating them as
to your needs/expectations. In those cases where this can’t happen or does not
remove the risks then look at alternative plans for gaining access to the goods
and services you require. This may require additional or alternative sources to
be identified and it may come at a costs. When assessing this make sure you
consider the cost of suffering a disruption.