Sunday 22nd Oct 2017 - Logistics & Supply Chain

Do go on

What a difference a year makes. Last year, the big threat to business in the UK, the US and parts of Europe was power cuts. The year before, floods. Hanging over everything this year is the ill-defined but ever-present threat of terrorist attack.

Yet do business people really lie awake at nights worrying about these things or are they just part of the background noise of business life – and perhaps not a very important part at that? It seems likely that the threat of a business-stopping disaster is not that high up most managers’ agendas.

A survey by the Business Continuity Institute reveals that only one in five companies practice the organisation-wide recovery procedures they’d use in the event of a disaster. Of those that do, four out of five rehearsals reveal shortcomings in the business recovery plan. Another survey found that if a disaster did destroy company data, 44 per cent of companies would be without business information and IT systems for up to 24 hours.

Hope for the best?
So is it a case of crossing fingers, touching wood and hoping for the best? It rather looks as though it might be in too many companies. And this is especially dangerous for logistics given that supply chains are, effectively, the heart and arteries which bring lifeblood to all parts of the body corporate.

There is nothing new about the subject of business continuity. And perhaps that’s the problem with it: it’s been around for so long that managers are inclined to take it for granted. Alongside the ‘hope for the best’ approach, there is often an attitude of leaving it to somebody else. After all, isn’t business continuity just a cost rather than a profit centre? Spending money on it is a grudge purchase’.

If that thinking is prevalent among logistics professionals, it’s about time it was changed for it increasingly looks as though business continuity could become a source of competitive advantage for those companies that use it cleverly. And this applies particularly in the logistics and distribution function which, because of its pervasive nature, is more prone to disruptions and discontinuities than some other parts of the business.

One of the problems is that too many managers think of business continuity in terms of the big catastrophe, the show-stopping event that brings the company to its knees. But what’s needed is some more subtle thinking.

True, show-stoppers do occasionally happen – as the companies that occupied the twin towers on 9/11 can tragically testify. But they are rare occurrences. What is much more common is the kind of inconvenient event which disrupts a business but which doesn’t put it out for the count. The flood in the warehouse. The snow-bound fleet of distribution vans. The power-cut computer system controlling stock picking.

But the problem with such events is that they are, paradoxically, much more likely to have an adverse effect on customer satisfaction than the show-stopper.

There is a reason for this, rooted deep in human psychology. It is that the small-scale event doesn’t get noticed by the customer as much as the consequences that flow from it. It won’t make headline news so it won’t influence the way the customer perceives the deterioration in service he or she experiences. And, of course, the reverse tends to be true. The real catastrophe – perhaps with loss of life – evokes sympathy and puts into stark context that late or undelivered order.

All this is by way of getting round to the central point about business continuity. It’s not just about the big disaster. It’s about being ready and able to cope when a whole host of smaller things go wrong.

Take that on board, and it has important implications for the way business continuity ought to be managed. In the past, it’s tended to be something that’s shuffled off to a speciality manager. What ought to happen is that everybody who would be involved if something did go wrong should have a stake in business continuity planning.

The upside of this bottom-up approach to business continuity is that the planning is likely to be based on much more reliable risk analysis than happens when its top-down. When dealing with risks, there’s no substitute for knowing what the guys on the ground think. Or what they’d do about if the worst happened.

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