The supply chain crisis – A Business Continuity perspective
For a long time, Business Continuity professionals have bemoaned the lack of attention paid to the supply chain, despite its critical importance.
Now, the global pandemic and the fallout of leaving the European Union has thrust the supply chain into the spotlight.
The complex web of interdependency
Managing the supply chain is so difficult because it relies on a web of interconnected parties. Very diverse industries can be therefore disrupted by a single root cause.
The Carbon Dioxide shortage earlier this year had obvious effects on carbonated, fizzy drinks and beer but there were several other, less obvious industries affected. For instance, Carbon Dioxide is used to stun animals before slaughter, used for packaging fresh foods, and used in medical applications.
The shortage was caused by a dependency on another market – fertiliser. The majority of industrial Carbon Dioxide in the UK is a waste product of fertiliser production.
Gas price increases lead to a drop in fertiliser production which led to Carbon Dioxide related disruption to several industries.
Just as the pandemic has highlighted, we’re all in this together. An energy crisis in China or a blockage of the Suez Canal has a big downstream impact on multiple industries.
Aside from the specific issues affecting products like semiconductors, there is currently the broader challenge of transport and distribution impacting multiple industries.
So, what can we do to protect ourselves and make our supply chain more resilient?
Firstly, be flexible and think laterally for solutions. If the problem is getting deliveries from lorry drivers, could you use another method? ‘Wine trains’ are a great example. Switching from the roads to trains means we all have enough wine for Christmas.
Working with your competitors
In some cases, the best solution may be to work with your competitors. They may be able to help you with components you can’t source elsewhere and you can do the same for them. It might feel strange and difficult, but you may be able to help each other out and all benefit. In extreme cases, competition rules may be relaxed in order to keep delivering your product to the market.
For businesses involved in delivering staple products like bread, milk and coffee etc., it’s in the national interest to make sure supply is maintained. Perhaps there will be less choice on the shelves, but it’s important to make sure there is an option available for all.
Who are your suppliers’ suppliers?
To really manage your supply chain continuity, it’s vital to actually get visibility over the situation. How many degrees in your chain do you know about? You know your supplier, but what about your suppliers’ suppliers? Would a downturn in fertiliser production have a downstream impact on you for instance?
You don’t need that level of insight into every supplier, just the ones that are critical in delivering your service (if you know who they are). They’re not necessarily the biggest, most obvious ones, sometimes there are small components or suppliers, that without, production or your service would stop.
A perfect example is the foil seal on the top of a bottle of milk. If the foil seal was suddenly unavailable from their supplier, large milk producers would come to a standstill until an alternative could be found, which could take a significant period of time. Find those critical suppliers and build in contingencies.
By default, you should plan to have multiple suppliers for critical products or services so you can switch to an alternative if one of your suppliers has an issue.
In some cases, your multiple, diverse suppliers all be dependent the same supplier – which is a risk. It’s the case in multiple technology markets where several companies are dependent on a very small number of actual manufacturers. Disks and semiconductors are two examples of this. Similarly, over half of the Carbon Dioxide for the UK was produced by just two fertiliser factories. This was a known risk in the Food and Drink Industry and could have been avoided if efforts had been taken to diversify the supply chain but it does require time and a concerted planning effort.
Work with your suppliers
It’s a bit of a cliche but you really need to treat your critical suppliers like partners. If your suppliers don’t have in house Business Continuity skills, offer your help. Ultimately, it will benefit you.
Don’t immediately drag the contract out every two minutes to beat them up over minor issues. If they are having difficulties due to a Business Continuity incident, it may be in your best interest to relax or renegotiate SLAs (at least for a temporary period) and work with them to get the best service possible.
Lastly, include your suppliers in your Business Continuity exercises and give them the chance to rehearse with you. So few people do it, but it is the best way to build rapport, improve their BC capability and improve your resilience overall.