Study: Business Continuity Planning Critical For Supply Chain

Increasingly "fragile" supply chains require that business continuity planning become integral components of companies' strategic sourcing processes, a Michigan State University study concludes. The increased fragility is a result of the introduction of "lean" manufacturing techniques, which reduce the amount of buffer inventory firms carry as they work to identify and eliminate waste. The downside, the study notes, is that those leaner supply chains become more vulnerable to shocks and disruptions among supply-chain partners. The study looked at three catastrophic events in developing its conclusions: a 1999 earthquake in Taiwan, which impacted computer chip supplies; the Sept. 11 terrorist attacks in New York; and the August 2003 blackout that caused power outages in the U.S. midwest and part of Canada. The events caused large-scale, supply-side disruptions, notes the study, which was conducted by the Department of Marketing and Supply Chain Management at MSU's Eli Broad Graduate School of Management in East Lansing. "These events had such a large impact because they hit supply chains that were neither robust nor resilient," notes "Effective Practices for Business Continuity Planning in Purchasing and Supply Management," a white paper by the study's authors. The study concludes that firms can take proactive stances to reduce risk in the supply chains. The authors developed a four-pronged framework for effective supply-chain business continuity planning that includes as its components: awareness, prevention, remediation and knowledge management. In other words, firms should create awareness of the risks; prevent or reduce the likelihood of supply-chain disruptions; develop a course of action to address disruptions; and, finally, learn from experience. The entire study and white paper are available online at www.bus.msu.edu/msc/research.html.

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