No business continuity plan? Then your work's not done

It is early winter here in the Northeastern United States, and on the day I'm writing this, meteorologists have issued warnings for high winds and coastal flooding. As the forecast suggests, we are coming into the time of year when crossing the Atlantic poses the highest risk for mariners. This is also the tail end of hurricane season. While North America was spared the devastation seen in some recent years, hurricanes and cyclones in other parts of the world, most notably Haiti, have wreaked havoc. Nor is the going any easier on land: Here in North America, heavy snows can block critical mountain passes, slowing truck and train traffic between the West Coast and regions to the East.

Today's weather has me thinking about the myriad ways that not just nature but also accident, foolishness, criminal and terrorist attacks, or simply bad luck can disrupt supply chains. There are so many possible causes of supply chain disruptions, in fact, that most companies have experienced disturbances of one kind or another in the past year. According to a recent survey of companies in 35 countries conducted by the London-based Business Continuity Institute, 72 percent of respondents had suffered at least one supply chain disruption in 2010. Bad weather was the main culprit, cited by 53 percent (up from 29 percent in 2009). That was followed by unplanned information technology and telecommunications disruptions and failures on the part of providers of outsourced goods and services. Companies that have shifted production to low-cost countries were particularly vulnerable: 83 percent of those firms experienced disruptions, mainly due to transportation problems or suppliers' insolvency.

Nor were supply chain disruptions a one-time event for most companies. The average number of disruptions per company was five, and some organizations reported 52 or more—more than one a week. One-fifth of respondents admitted that supply chain disruptions had damaged their brand or reputation.

With that in mind, here are statistics I found particularly startling in this age of fast cycle times, low inventories, and widespread outsourcing: a mere 7 percent of respondents have ensured that their suppliers have adopted business continuity plans. Twenty-four percent have not even made an effort in that regard. In other words, more than 70 percent of the survey respondents have experienced disruptions, many admit to experiencing lost productivity and suffering business harm ... and this issue is still not top of mind?

Every supply chain manager should know that disruption of some sort at some time is inevitable and that disruption can seriously hurt their business. To my mind, this much should be obvious to all: no supply chain management strategy can ever be considered complete unless it includes a business continuity plan for every critical segment of a company's network.

You can read an executive summary of the institute's report here.