Special thanks to Source One Management Services for this guest post
Building and maintaining a competitive advantage in today’s complex supply chain environment can be a never-ending endeavor. As customer needs and economic conditions evolve, what once put your company at the forefront of the industry may become your downfall. Producing a product or providing a service that is superior in quality, the most cost competitive, and comes with best-in-class customer support is certainly the goal, however in reality, choosing two of the three and aligning with customers who are seeking that mix is the standard in many markets today.
While external factors outside of your immediate control can drive cost and quality depending on the availability of raw materials, taking ownership of internal operations can provide an advantageous perception of your company’s overall competitiveness through the promotion of supply chain resiliency. This can be done by designing, implementing, and most importantly being transparent in sharing a Business Continuity Management (BCM) plan with all current and potential customers.
Undergoing such an initiative may seem laborious, however the process can drive advantages at every stage, the first of which, is proving there is a need. This is best executed by performing a comprehensive audit of all critical incidents of both large and small scale. The costs incurred to alleviate these incidents are hard examples of the impact a lack of a BCM plan is having on your bottom line. While further value will certainly be driven upon execution, the immediate financial incentive to resolve these issues should be enough to keep senior management engaged. The specific details of a recovery and continuity plan will vary depending on the product or service being provided, however there are general stipulations that will make a plan not only critical to the continued success of the company, but also attractive to a current or potential customer.
A first best practice is to ensure that you are taking an enterprise approach to your continuity plan. This will centralize all stakeholders needed to respond to a particular crisis, and gives each customer piece of mind regardless of geography. It also eliminates duplicate efforts as all instruction comes from a single source of information throughout the response period. Finally, this approach allows for the revision of the plan based on lessons-learned from past responses leading to constant improvement.
A second best practice is to ensure that your plan covers and reports on all fathomable losses. This includes a loss of facility due to a fire or natural disaster, an interruption in your own supply chain due to external or internal forces, a loss of personnel, a change of government policy, or any other industry specific risk. Expected recovery times and where applicable, historic recovery times, should be clearly communicated for each associated risk.
Next, address how interruptions will affect a customer specifically, especially for large scale customers. This should include setting aside a clear communication plan between yourself and a designated point of contact at each necessary location to discuss any interruptions. This is also valuable to a potential customer as it will likely feed into their own continuity plan creating a seamless chain of communication and reaction. It may also be advantageous to communicate the prioritization schedule for customers in the event of a disruption. Customers with larger volume and thus larger leverage will be further incentivized to remain with a company, even despite a lack of competitive advantage in other areas, knowing that they are higher up on the priority chain should inventory be unavailable to fulfill all current orders. Record and communicate the frequency of which your plan is reviewed, tested, and updated. This will keep customers engaged in the agility of your operations and serve as a reminder of your commitment to providing uninterrupted products and services.
It is also useful to communicate and share all updates with your own supply chain and engage in open two way communication on the best way to minimize interruptions and mitigate disaster. It is just as disadvantageous for your supplier if you experience an interruption that will stop production as it may cause a decrease in purchasing or even the loss of your business. Sharing your continuity plan up the supply chain will give you leverage to negotiate better pricing or terms as it gives the supplier piece of mind that you will continue to purchase, especially with custom materials. This furthers your competitive advantage by keeping quality consistent while minimizing cost.
The value of transparency can be overlooked in customer – vendor relationships as business processes are often held as proprietary and confidential. Certainly there is reason to create a business continuity plan that is held internally and not shared with current or potential customers, however this drastically diminishes the plan’s value. If a company is fortunate enough to never experience a major disruption, its reaction abilities are unknown to the general market. As supply chain resiliency becomes a greater focus, customers want proof that a company is reactive and responsible, and that will drive competitive value.
Recommended Reading
- Contingency Plans
- Is Your Force Majeure Clause Too Weak?
Who’s Braver: Procurement Professionals or the Average Driver?
Procurement and the “as a Service” Movement – Webinar This Coming Wednesday
Realized Savings: When It’s Your Fault They Are Too Low
Recommended Reading
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