Supply chains today are extremely complex — and as they are now global, they are extremely long as well, says Derek Taylor, business development manager, ContinuitySA.
This scope and complexity creates a web of interdependencies that is hard to track. Indeed, many companies live in ignorance of the risk posed by one part of their supply chains... until disaster strikes.
Supply chains are multilevel and comprise the flow of goods and materials, information and money within and between organisations. The outward manifestation of supply chains is the physical transport and distribution networks that move goods from one point to another, but as important are the communication networks across which information passes. Today's supply chains, with their emphasis on efficiencies and just-in-time delivery, are hugely dependent on these less visible networks.
Watch for the risks
Today's supply chains face three broad types of risk.
The first of these is the loss of power. Many outlets at the one end of the supply chain simply don't have backup generators; during a power outage, they cannot transact with customers given today's payment methodologies. In addition, ordering systems are increasingly linked to electronic tills, so loss of power affects replenishment. And, of course, stores selling perishables would be severely affected by extended loss of power to refrigeration units.
The second major category of risk is loss of fuel. One immediate result is loss of transport, which means the movement of goods and people is halted — and consider that the average supermarket might be replenished up to 12 or more times a week. Perishable goods in transit would be at risk, and, of course, so would backup power-generation plans, which typically rely on diesel generators.
The final category is loss of people, primarily through industrial action and pandemics. Obviously, without people, operations are compromised or even impossible.
Each of these losses can affect any company within the supply chain, with knock-on effects of greater or lesser severity.
But is it in the budget?
Even from this brief description, it's clear that even the simplest supply chain has multiple vulnerabilities, the number of which grows exponentially in relation to the supply chain's complexity and scope.
The case of a local producer of specialty mushrooms to the European market demonstrates some of these interdependences. After listing on the stock exchange and a year's stellar growth, the company folded. One reason was poor harvesting practices, but the other two concerned loss of power and loss of transport. Loss of power meant the temperature controls necessary for mushroom growth broke down, and port congestion meant the perishable product spoiled.
Even more to the point is Land Rover, which, in the early 2000s, found itself unable to produce its best-selling Discovery model because the company that supplied the chassis went broke. The chassis manufacturer's failure was the result of an ill-advised foreign venture that had nothing to do with its business with Land Rover. Land Rover learnt the hard way that the failure of a single point of dependency is catastrophic: luckily, there was a happy ending and the company was able to recover.
Learn the lessons
My point is that the interdependencies within a supply chain can be so complex that a business can find itself at risk from something totally unexpected somewhere in a complex web of business partners. Conversely, a business might itself be so important in a supply chain that its failure would put the whole chain at risk.
Your own company's continuity thus depends on the continuity of the entire supply chain. It's thus very important to know your suppliers well, especially those that are important. In fact, I believe that companies should not procure from suppliers without ensuring that an effective and current business continuity plan is in place: “No business continuity plan, no business,” should be the phrase on your procurement staff's lips!
In other words, your business continuity plan must include credible business continuity plans for all suppliers as well — their success is your success, but their failure is also your failure.
ContinuitySA is Africa's leading provider of business continuity management and related services. The company boasts some of the continent's most highly skilled and qualified business continuity and disaster management experts who help companies, organisations and government departments of all sizes prepare for and deal with all eventualities. These include potential threats, events, incidences and unforeseen or sudden disruptions due to human error or natural events.
ContinuitySA also provides a variety of hosting solutions, ranging from co-located to fully managed virtualised environments, with its primary focus being to ensure its clients are able to address the resilience and recoverability of their IT services. These hosting services are complemented by managed backup and recovery services, virtual server replication and high availability solutions to satisfy any level of continuity requirement.
ContinuitySA operates the largest recovery facilities in southern Africa. It has a number of recovery centres in southern Africa with more than 20 000 square metres of recovery facilities in Midrand, Gauteng. Smaller sites have been located in Cape Town, Gaborone, Botswana and Mozambique, and a joint venture has been established in Mauritius.
ContinuitySA. Our business is keeping you in business. Additional information about ContinuitySA can be found at www.continuitysa.com.