Over recent weeks the mainstream media has been full of stories about global fast-food retailer, KFC, running out of chicken, or more specifically not being able to supply the right amounts of chicken to the right places.
This was a classic supply chain interruption on a massive scale. KFC had just switched its logistics supplier from specialist food supplier Bidvest, to global delivery giant DHL. It seems that a new Rugby depot, created by DHL for the KFC contract, was just not up and running in time to handle the new work.
Up to 600 KFC stores across the UK had to close temporarily because of the disruption. The cost of the lost business was estimated at more than £1million a day. The KFC story highlighted the vital role that logistics plays in most businesses, a role that readers of Freight Industry Times will only be too aware of.
Of course it is not just KFC that is suffering from supply chain disruption. The Business Continuity Institute Supply Chain Resilience Report 2016 shows that 70% of businesses experience at least one supply chain disruption every year. 41% of these disruptions occur at the Tier 1 level, 37% of companies affected by a disruption event suffer from loss of revenue and, worst of all, as KFC found, 38% sustain damage to their brand reputation.
In our ever more interconnected world, where we rely not only on third-party suppliers of materials and utilities, but also cloud-hosted data storage and many other outsourced services, our supply chains are becoming ever longer and more remotely spread. This trend brings with it many business benefits, but it also leads to increasing risks of dependency on these stretched supply chains.
There are a number of steps that can be taken to mitigate this threat. The first step is to make sure that you have full visibility of your entire supply chain. This will include not only your own direct suppliers, but also the key suppliers that they are themselves dependent upon. If your data is held in cloud storage, then you will be dependent on the local power company of your cloud storage suppliers, unless you or they have secondary back-up somewhere else.
Once you have full visibility of your supply chain, conduct your own assessment of the impact that a business disruption event at your supplier could have on your operations along with the likelihood that such an event could occur. Ask to see your suppliers own risk register to help you with this. If they don’t have one, then take this as a warning sign about doing business with them.
The next step is to extend your own business continuity planning standards to your supply chain. When you select a supplier, make sure that their business continuity planning is up to at least the same standard as your own, with recovery time KPIs that support yours, before you are prepared to purchase from them.
Finally, you should include your entire supply chain within your own incident communications network, so that you can talk to each other when you most need to. These communications channels need to be completely independent of your normal supply chain, to avoid being brought down at the same time. This means choosing a cloud-hosted communications supplier that is not reliant on the same data centres as your own day-to-day network.
Supply chain resilience is growing as an operational issue and as a business risk, but there are business continuity planning and management tools out there, that can help you to reduce this risk and make sure that you don’t fall fowl of the same problems as KFC.
Posted on: May 4th 2018