Newswise — A Michigan State University (MSU) study commissioned by AT&T has found that companies are courting disaster if their business continuity plans fail to ensure supply chain continuity.
The findings suggest that supply chains have become increasingly fragile. When something does go wrong, the event and the resulting supply chain disruption can have a significant if not catastrophic impact on the buying firm. Consequently, managers working within "best practice" companies have developed an awareness of these potential risks and, more importantly, they have introduced systems and procedures aimed at proactively managing the risk. The result is not only better performance, but the emergence of a potentially important competitive advantage.
Conducted by the Department of Marketing and Supply Chain Management at MSU's Eli Broad Graduate School of Management (rated #2 in the country, according to U.S News & World Report), Assistant Professor George A. Zsidisin, Associate Professor Gary L. Ragatz and Professor Steven A. Melnyk utilized detailed case studies to develop their findings. They reviewed three manufacturing companies with strong business continuity plans, including a U.S. plant of a large international aerospace supplier, a large European telecommunications corporation and an electronics manufacturing firm.
The Michigan State University study was one of five grants totaling $250,000 that the AT&T Foundation made to U.S.-based universities to identify a more formalized approach to business continuity planning that would help organizations identify and quantify risks and then implement procedures, strategies and tactics aimed at ensuring business continuity. AT&T, a recognized leader in business continuity planning, will share the results with its clients as it provides professional services designed to assist companies in developing a business continuity plan.
According to Zsidisin, two issues are at the heart of a company's supply chain management problems " reduced visibility (often the visibility into the supply chain ends at the first tier supplier) and reduced control (the ability to influence and shape the actions of suppliers, especially at the second and third tier levels). These problems are compounded by the application of "lean" practices, which reduce supply chain buffers in the form of inventory, lead time and capacity. Consequently, many managers are unaware of what their suppliers are doing to ensure business continuity. With so many companies depending on a reduced set of suppliers for key components, the potential for problems is real and increasing. If a key supplier is unable to perform, the impact on the firm " as measured financially, strategically, and in terms of market share " can be sizable, even catastrophic.
The study identifies four major factors of a good supply chain business continuity plan: Awareness that the supply chain is susceptible to potentially crippling disruption; prevention through risk identification, risk assessment, risk treatment and risk monitoring; remediation plans for recovery from a disruption; and knowledge management calls for a shareable, post-event audit of supply chain disruptions throughout the organization and supply chain.
"With more companies depending upon their supply chains, they are exposed to the risks inherent in them," Zsidisin said. "Companies can manage and live with those risks, however, by making sure that they and their partner-suppliers develop and deploy strong business continuity plans."
"As a leader in developing customized business continuity solutions for the world's largest companies, we know that a static business continuity plan will not protect a company from disruptions," said Michael Heath, AT&T sales vice president. "A robust plan that ensures continuation of services during disruptions requires a supply chain component and regular testing."
The entire study and white paper are available on-line at http://www.bus.msu.edu/msc/research.html
In addition to MSU with its focus on manufacturing, each of the other four universities focused on vertical industries. They include:Financial services: George Mason University, Fairfax, VirginiaPharmaceutical: Stevens Institute of Technology, Hoboken, New JerseyRetail: University of California, Los Angeles, California Travel and leisure: Georgia Institute of Technology, Atlanta, Georgia
About AT&TFor more than 125 years, AT&T (NYSE "T") has been known for unparalleled quality and reliability in communications. Backed by the research and development capabilities of AT&T Labs, the company is a global leader in local, long distance, Internet and transaction-based voice and data services.
About The Eli Broad College of Business/The Eli Broad Graduate School of Management The Eli Broad College of Business/The Eli Broad Graduate School of Management at Michigan State University is consistently among the top-ranked business schools in the country, with more than 5,000 students currently enrolled in undergraduate, MBA, masters, doctoral and executive development programs.
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