For a long time, Business Continuity professionals have complained about the lack of attention to the supply chain, despite its importance.
Now, the global pandemic and the aftermath of leaving the European Union have pushed supply chains into the spotlight.
Complex network of interdependencies
Supply chain management is difficult because it relies on a network of interconnected parties. Thus, very diverse industries can be disrupted by one underlying cause.
The Carbon Dioxide shortage earlier this year clearly affected carbonated beverages, carbonated drinks and beer but there are a number of other, less obvious industries affected. For example, Carbon Dioxide is used to stun animals before slaughter, is used to package fresh foods, and is used in medical applications.
The shortfall is due to dependence on another market – fertilizers. Much of the industrial carbon dioxide in the UK is a by-product of fertilizer production.
Rising gas prices have led to a reduction in fertilizer production, leading to Carbon Dioxide-related disruptions for a number of industries.
Just as the pandemic has highlighted, we are all in this together. An energy crisis in China or a blockage of the Suez Canal has a major downstream impact on many industries.
Allotment
In addition to specific issues affecting products like semiconductors, there are now larger transportation and distribution challenges that affect many industries.
So, what can we do to protect ourselves and make our supply chains more resilient?
First, be flexible and think clearly to find solutions. If the problem is receiving the goods from the truck driver, can you use another method? The ‘wine train’ is a great example. Moving from road to train means we all have enough wine for Christmas.
Work with your competitors
In some cases, the best solution may be to work with your competitors. They can help you with ingredients you can’t find elsewhere, and you can do the same thing with them. It can feel weird and difficult, but you guys can help each other and all benefit. In extreme cases, competition rules can be relaxed in order to continue to bring your product to market.
For businesses involved in the supply of staple products such as bread, milk and coffee, etc., it is in the national interest to ensure that the supply is maintained. There will probably be less choice on store shelves, but it’s important to make sure there’s a selection available to all.
Who is your supplier’s supplier?
To really manage the continuity of your supply chain, it’s important that you really have visibility into the situation. You know about how many degrees in your sequence? You know your supplier, but what about yours? For example, has the downturn in fertilizer production impacted you?
You don’t need this level of insight into every supplier, just the ones that are important to your service delivery (if you know who they are). They don’t have to be the biggest, most obvious parts, sometimes there are small components or suppliers that, without them, would stop your production or service.
A perfect example is the foil seal on the top of the bottle. If their suppliers suddenly don’t have foil seals, the major dairy producers will be left standing still until an alternative is found, which can take a considerable amount of time. Find those critical providers and build in contingencies.
By default, you should plan to have multiple vendors for critical products or services so that you can switch to an alternative if one of your providers goes down.
In some cases, your multiple suppliers are all dependent on the same supplier – that’s a risk. Such is the case in many technology markets, where a few companies depend on a very small number of actual manufacturers. Discs and semiconductors are two examples of this. Similarly, more than half of the Carbon Dioxide for the UK is produced by just two fertilizer plants. This is a known risk in the Food and Beverage Industry and can be avoided with efforts to diversify supply chains, but it requires time and concerted planning effort.
Work with your suppliers
It’s a bit cliché but you really need to treat your key suppliers like partners. If your suppliers do not have Business Continuity skills, ask for your help. In the end, it will benefit you.
Don’t immediately pull out the contract every two minutes to beat them up on small issues. If they are struggling due to a Business Continuity issue, you should relax or renegotiate the SLA (at least for a temporary period of time) and work with them to get the best service possible. .
Finally, include your suppliers in the Go on Business exercises and give them the opportunity to rehearse with you. So few people do it, but it’s the best way to build relationships, improve their BC, and improve your resilience in general.
