A major retail chain’s stock of pastries was severely affected when operations at its primary vendor’s production center (a ready to eat foods company) was disrupted due to an incendiary accident. Despite having an efficient response strategy in place that was immediately deployed, the confection of pastries at the vendor’s location could be resumed only after three days. By which time, the retail store chain had already found an alternate supplier. The pastry confectioner went out of business.
Customer needs take precedence over everything else. An organization’s Business Continuity and Disaster Recovery (BCDR) strategy is relevant only when the plan’s timeframes are closely aligned with its clients’ demands.
The majority of crisis situations have a relatively negligible impact on operations and most emergency teams have predefined plans that can adequately respond to these hazards.
However, experts suggest that enterprises will have to confront at least one large scale disaster of catastrophic proportions every five years. The impact of such events can be devastating. Recovery from such widespread destruction is a long drawn process that spans over many years. In extreme cases, many commercial establishments suffer major losses in revenue, lose business from important clients, or even shut down permanently, never to resume operations again. Preparing against such disasters is vital for the company, especially in the case of industries such as manufacturing where facilities are installed with heavy machinery and equipment that have a minuscule margin for deviation. This is to say nothing of the risk that can be hazarded to life and safety of personnel in the event of failures or malfunction.
Business entities are constantly vulnerable to a variety of threats that are caused by the environment and human intervention such as:
- Cyber crimes and intrusions
- Lack of utilities such as water, gas, electricity and fuel
- Outbreak of diseases and epidemics
- Environmental hazards such as global warming, climate change and CO2 emissions
Many of these threats can imply dire and irreparable consequences for the organization if not dealt with decisively.
Emergency teams must have a plan that can be readily deployed the moment a disaster occurs. Notwithstanding the practical considerations while executing a crisis response, outlining a recovery strategy after a disruption erupts is not highly recommended, given the high levels of tension and panic that unfold during such events.
And then, there are other factors such as:
- Backing up assets and machinery
- Workarounds for business processes
- Identifying alternate vendors
- Safeguarding critical systems and data
While manufacturing companies have an organizational structure that, in general terms, resemble businesses in other industries, some specific problems such as supply chain disruptions and lack of assets, resources and skilled personnel become more critical in this sector, considering the nature of operations entailed.
Business Continuity Management in the Manufacturing Sector
Business resiliency begins with averting operational hazards that can hamper production. But when a crisis situation does erupt, the enterprise’s emergency team must have a working model for restoring operations without compromising on the qualitative or quantitative demands of clients. Formalizing these goals and objectives through written policies and SLAs can ensure both client and manufacturer are on the same page.
Logistical issues, IT infrastructural failures and defective goods that compromise safety are some of the common factors that impact the manufacturing industry. Crisis teams can deal with most of these hazards through standard mitigation measures that can be effectuated seamlessly with minimum perceptibility from the customer’s side. But the last ten years has seen the business landscape become increasingly volatile and erratic. Price fluctuations, financial institutions’ vulnerabilities to economic changes, catastrophes and sociopolitical unrest are becoming increasingly common.
The impact on productivity is the primary concern for any manufacturing establishment and the prime objective is to manufacture as many quality units of merchandize as possible with the least expenditure. And towards this end, many manufacturers introduced manufacturing methodologies such as LEAN and inventory strategies such as Just in Time. While these practices have increased efficiency and reduced operational budgets, the extent to which an emergency can impact business has also increased.
Some of the commonly encountered operational hazards in the manufacturing sector include:
- Losing access to a facility or the facility itself through damage
- Unavailability of commuting options
- Lack of connectivity
- Fatalities and illnesses
- Defective goods and safety concerns
For instance, a corporation with multiple sites might look at cutting down costs by moving its production from all the sites to a single location that has the infrastructural capabilities to handle such large volumes of output. But although the company is saving money and increasing profits, the commercial implications of a crisis situation at this single location would be much more. Earlier, the organization could fall back on any of its multiple production facilities if one center was affected. And even in the case of the single location, if there was a business continuity and disaster recovery framework in place, the demands on its performance would be that much higher, since the entire organization’s business is dependent on this one location. This in turn would imply more investments in terms of assets, technology, personnel, training and so on.
In the case of a Just in Time model, critical factors include:
- Connectivity, so that IT systems are operational
- Vendor resiliency, so that raw materials and components crucial for production are provided on time
- Transport facilities, so that these inputs for manufacturing can be made available
There are two primary options to preventing supply chain issues. The first is by prioritizing urgent needs and seeing through the purchase of materials to meet monthly, quarterly, half yearly or yearly production demands. These can be effectuated as standalone transactions. The second option is to negotiate contractually binding lock-ins with tier 1 and tier 2 vendors for a tenure that lasts at least five to ten years.
A vendor’s core business focus is also an important factor to consider while nurturing long term alliances with strategic partners. Airline manufacturers should carefully assess the product portfolio of third party partners to gauge future needs and the supply of backup materials. Collaboration with third party business associates is essential while deciding on a strategy to tackle risks such as inflation, economic crisis, market downturns and so on.
In the case of a Just in Time model, critical factors include:
- Connectivity, so that IT systems are operational
- Vendor resiliency, so that raw materials and components crucial for production are provided on time
- Transport facilities, so that these inputs for manufacturing can be made available
Even in the event of twin production lines being available, due excessive customer demands, the manufacturer is obliged to consider how the center will cope with delivery requirements if one of the two units fails.
Suggestions while preparing for disaster
No plan is one hundred percent comprehensive. Even the most detailed and well thought out business continuity and disaster recovery model would have overlooked a risk or two. Nevertheless, a manufacturing unit must keep these basic guidelines in mind while designing a resiliency framework.
- Identifying key merchandize that are the most commercially viable. The company’s revenue usually depends to a large extent on these products
- Identifying the natural or manmade hazards that can impact the production of these goods.
- Designing a business continuity and disaster recovery that can fortify the production facility’s infrastructural capabilities to seamlessly transition crisis situations and deliver these goods.
- Assess the extent to which the BCDR design satisfies the organization’s resiliency requirements through regular testing, simulated exercises and drills.
- Keep systems and procedures updated through periodic upgrades and enhancements.
Conclusion
Experts unanimously agree that business disruptions are inevitable, even in the most well guarded manufacturing facilities. And a robust BCDR plan has become the defining factor that differentiates a company from its competition. Having said that, it must be acknowledged, especially from a manufacturing perspective, that any emergency plan is not a one off project but rather a constant endeavor to improve upon existing systems.
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