Lee Glendon, head of research and advocacy at the Business Continuity Institute (BCI) blogs on how manufacturers can benefit from an improved BCM strategy.
A recent survey from the Chartered Institute of Purchasing & Supply (Cips), revealed that the UK’s manufacturing sector returned to growth in January 2012, with its highest level of activity in eight months.
Since manufacturing is the third largest sector in the UK economy, employing some 2.6 million people, resilience is crucial. However despite January’s reported growth, there are still factors exposing manufacturers to new threats, which need to be addressed if this growth can be sustained.
Firstly, manufacturing in general has opted to ditch “redundancy” – idle capacity and buffer stocks – in favour of lean and “just-in-time” supply chains. Secondly, manufacturers have moved offshore to low cost countries, making them vulnerable to transport disruption and business ethics violations. Thirdly, new approaches in manufacturing ‘have led to the introduction of new single points of failure, whether through supplier consolidation strategies or moving towards “centres of excellence”.
In 2011, the BCI revealed that the manufacturing sector experienced significant levels of disruption to operations, with 92% of respondents reporting at least one supply chain disruption that year. The consequences of this might include increased working costs, customer complaints, loss of revenue, product release delays and loss of productivity.
These figures indicate that there is still significant work to be done to improve resilience in this sector. Embracing a modern business continuity management (BCM) strategy that focuses on key end-to-end business factors across an organisation is a step in the right direction. After all, BCM is an integral part of an organisation’s resilience, providing the capability to manage an incident, or worst case, a crisis.
It’s important to consider why many manufacturers are failing in their business continuity (BC) strategies. The primary reason is that BCM is often considered too IT-centric, whilst in manufacturing, IT is just a support function to production, rather than the key component.
Therefore whilst IT is a key resource to be considered, BCM should now look at a business not only in terms of the operational factors behind that disruption, but in its relationships with customers and suppliers, its availability of finance, and the impact on its brands and corporate reputation caused by failure to deliver on time.
A further reason for this failure is that manufacturing has benefited from decades of quality initiatives, with preconceptions that a Total Quality Management (TQM) approach – one which focuses on long-term success through customer satisfaction – incorporates resilience and continuity. Given how established these initiatives are, the value-add of a new BCM process may not be immediately obvious.
To re-establish the significance of BCM in manufacturing, widespread notions around its theory and practice must change. First and foremost, modern BCM must focus on “key products and services” and an organisation’s ability to continue to supply them in the face of substantial disruption. The key point is that BCM is not about “how do I rebuild my plant”, rather – “how do I continue to service my customers until I rebuild my plant”.
Senior management must consider the strategic consequences of incidents, rather than simply practicing fire drills. UK manufacturers need to work hard to improve their resilience and altering their thinking around how to be resilient will move towards creating a more productive industry overall.