Understanding the strengths and weaknesses of your supply chain can help you keep your business afloat when supplies are disrupted.
In previous blogs we have looked at how to improve the financial resilience of your business. But operational resilience is just as important – most businesses could tolerate a degree of disruption, but you don’t want to allow it to reach a point where it impacts your customer relationships.
When assessing how vulnerable your business may be to disruption, a good starting point is to identify your critical suppliers and determine the impact of the failure of one or more of these suppliers. For some businesses this might involve going right back to the source of the raw materials.
This analysis may reveal weaknesses you were previously unaware of, such as over-dependence on a single supplier or a lack of diversity (for example, where a key supplier and the alternative are located in the same region and could both be disrupted at the same time).
The financial stability of your suppliers should also be considered. It is not easy to ask a supplier with whom you might have been working successfully for years for assurance that they are not about to belly-up but this is an important conversation for every business to have as part of its continuity planning.
If you don’t want to ask a supplier directly, you could do a social media search to see if there are any stories circulating that suggest the business is in trouble. If you are concerned about security of supply you might – depending on the nature of the product – be able to maintain a larger inventory, although the benefit would have to be weighed against the additional cost of keeping more stock.
Being proactive when it comes to identifying opportunities for diversification is another element of business continuity planning.
For business continuity issues relating to COVID-19, the government has published a checklist of preparatory actions that can minimise the impact of staff absences, including checking if your business insurance will kick in.
One of the best options for maintaining business continuity in the event of an IT failure is to use a service that you can access remotely if you have to use a different device and/or change location. Cloud-based solutions such as Big Red Cloud really come into their own when small businesses run into problems with their IT systems.
Of course, you need to apply the same risk assessments and controls to cloud-based services as you would for any other outsourced service. It is important to understand what kind of recovery plan your cloud service provider has in place should things go wrong.
It might be tempting to look at the steady fall in corporate insolvencies since the global financial crisis and assume everyone in your supply chain will be fine. But with Deloitte warning that insolvency rates are likely to increase as a result of lockdown, why leave it to chance?