Sunday 27th Sep 2020 - Logistics & Supply Chain

Be prepared for the worst

Pandemics such as avian flu do not represent a traditional business continuity risk. They don’t hit a single physical location at a certain time. The recent SARS epidemic challenged the way organisations think when experience showed the buildings and systems were in place but the people were unavailable to operate them. The challenge with lean supply and just-in-time operations is to understand the implications of such an event and ensure supply chains are resilient. Building up stocks is unlikely to be the answer.

Aon’s recent pandemic survey shows while more than eight in ten business leaders see a possible influenza pandemic as a threat to their business, four in ten have not put any measures in place to protect themselves.

Most organisations have a crisis management plan but how many are clear on its purpose and its effectiveness? Plans often address the most obvious physical threats without considering the importance of people. In an outsourced world it is not sufficient to manage your internal supply systems. Many companies work in conjunction with suppliers and customers to ensure strategies for managing risk are consistent along the value chain.

A pandemic is likely to create twin challenges. First, how to re-engineer supply chains to overcome restrictions in the movement of goods and people at short notice and second, how to manage the flow of information to stakeholders such as suppliers, staff and customers to maintain their goodwill and support.

Simple and flexible tools must be available to plan capability to relocate operations between facilities. The process needs to establish recovery time objectives (RTO) for each product or service based on the time available to recover operations to an alternative location. Trade-offs will need to be made between customer service and recovery costs. Protocols must be developed to support the evaluation of the current achievable recovery times. Where these exceed the RTO options must be generated for reducing this to an acceptable level. Judgements will also need to be made regarding the likely impact on customer demand during a pandemic period.

The management of information flow through the supply chain will also be a challenge. Staff and customers will be seeking information and reassurance at a time when messages transmitted by the media may be piecemeal, skewed in nature and potentially melodramatic. Restrictions on movement of people may be imposed and messages provided by public authorities may be conflicting. As a result, part of maintaining an effective organisational response will be managing staff and customer anxieties and concerns.

The potential reputational consequences of not having appropriate and effective plans in place will be devastating. The challenges are significant. Six in 10 companies with business continuity plans have never tested them. Plans must be robust and tested if they are to have the desired results following an unexpected event.

Alex Hindson is associate director, enterprise risk management at IRMG. Angel Pompa is a consultant at State of Flux

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