As predicted at the time of the earthquake, the disruption to Japanese industry is now starting to have a knock-on effect on UK manufacturing. The most high-profile example so far has been Honda’s announcement yesterday that they are halving production at their Swindon plant because of a shortage of components.
Supply chain problems are a very common form of disruption to businesses: in a study published in 2005, Hendricks and Singhal found over 800 examples of major US corporations suffering this type of disruption over an 11-year period. Moreover, the impact is very significant; in the 2005 study firms that had experienced a disruption under-performed the market by over 40% over 3 years.
This all serves to highlight the importance of considering the supply chain when conducting Business Continuity planning. Key considerations for critical supplies include:
- Single-source or use multiple suppliers;
- How resilient are your supplier(s); and
- Where can alternative supplies be obtained from in an emergency?