Rethink Your Business Continuity Strategy

The earthquakes in Japan that disrupted supply chains and challenged the just-in-time (JIT) management model have led many small firms to the brink of collapse. In thisHarvard Business Review article, Ndubuisi Ekekwe examines the impact that the recent earthquakes had on GM, Ford, and the electronics and banking industries. From halting product production to running out of critical business supplies, these companies have suffered heavy financial losses.

Implementing a total business continuity plan helps companies stay in business when disaster strikes.

“Over the years, firms have become more cost-conscious owing to the fierce and global nature of competition. Many adopted a lean strategy,” Ekekwe wrote. “They order the materials only when needed; they consider holding stocks of parts an unnecessary redundancy. But events in Japan in the last few weeks have exposed the hidden costs of JIT. A company stands a risk of losing market leadership and corporate reputation. Organizations largely sit atop a three-legged chair of people, processes, and tools. When supply chain is disrupted, all three are affected, especially in the case of Japan, which produces high-tech niche products for which there are limited sourcing alternatives.”

Ekekwe advises that when creating a continuity plan, take an extra look at IT infrastructure. “As businesses transition into the digital ecosystem, preparing for events like earthquakes, tsunamis, and nuclear disasters become very important,” Ekekwe wrote.

Two important steps to implementing adequate IT infrastructure include having offsite backup and fully investigating cloud partners. Depending on flexible offsite backup is vital. Make sure that backup is in a different area than your business. And when investigating cloud vendors, find out how prepared they are, as well as how they’ve performed after previous disasters.

Offsite Backup: For organizations that depend on data to function, developing a flexible offsite backup strategy is important. And it must be far away from your locality. Keeping the backup in your vicinity does not make much difference; it could be affected by the same disaster that disrupted you. A backup strategy is not complete without an offsite strategy.

In another Harvard Business Review article, “How to Prepare Your Supply Chain for the Unthinkable,” Harold L. Sirkin offers ways companies can mitigate these issues, including diversifying supply bases, locking up supplies, investing in flexibility, producing locally, and verbalizing costs.

For more information about how to effectively manage JIT risks and supply chain disruptions, read the full article:http://blogs.hbr.org/cs/2011/04/refine_your_continuity_strateg.html