Business continuity in manufacturing

ContinuitySA has identified some key success factors for business continuity management in manufacturing businesses.

“Business continuity management is increasingly being used by manufacturing companies to help them deal with a growing range of risks,” says Karen Humphris, BCM advisor at ContinuitySA.

“Manufacturers are finding that business continuity management offers a mature and tested framework for coming to terms with what their risks actually are, and then putting the necessary plans in place,” Humphris continues.

“Manufacturers have learned the hard way that the inability to supply product has significant financial and reputational consequences.”

Humphris explains that manufacturing has become much less vertically integrated, with global supply chains and manufacturing practices premised on low or zero component stocks. This has reduced costs and improved margins, but it raises the manufacturer’s risk profile quite considerably. For example, the Japanese tsunami in 2011 severely impacted the manufacturing timetables of global companies that relied on Japanese component suppliers. Similarly, automotive companies were impacted by floods in Thailand that interrupted the production schedules of component suppliers.

“The longer and more complex your supply chain, the greater your risk exposure,” Humphris observes.

When it comes to supply chain risk, Humphris says that it’s vital that manufacturers perform a detailed analysis to identify critical suppliers. Having more than one supplier is obviously one way of spreading risk, another is to understand the logistics environment in order to predetermine alternative supply routes. Business interruption insurance is also an option but, she points out, does not mitigate the reputational risk.

“Over the longer term, you have to get your suppliers to undertake their own business continuity management by stipulating it in their service-level agreements, and then inspecting their plans,” she says.

On a practical level, Humphris says that she advises clients to identify and pre-qualify alternative suppliers so that in an emergency, stock can be ordered without delays. She also advises clients to look at holding some buffer stocks of critical components.

Equipment is another key dependency for manufacturers. It’s an unavoidable fact that replacing specialised machinery has long lead times and is very expensive. Practical options include entering into fixed maintenance contracts for critical equipment and holding stock of critical spares. Humphris also advises clients to keep machinery that has been replaced in working order so it could be recommissioned rapidly at need.

“You could also enter into agreements with local competitors who make similar products to undertake production in the event of a disaster,” she adds. “Also, make sure you know about any overseas companies from whom you could import product—it’s an expensive option, but it might be necessary as a stop-gap solution.”

Taking a more general view, Humphris says that, if possible, manufacturers should have more than one production site.

www.continuitysa.com

•Date: 27th November 2013 • Africa / World •Type: Article • Topic: BC general

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