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 amount of chicken to the right place at the right time, writes Rickie Sehgal, chairman of business continuity software platform firm Crises Control, a company used by many air and sea logistics and cargo companies, including Maersk, Saudia Cargo and WFS.
KFC’s was a classic supply chain interruption on a massive scale: it had just switched its primary logistics supplier from specialist food supplier Bidvest, to global delivery giant DHL.
It seems that a new UK depot set up by DHL especially for the new KFC contract, was simply not up and running in time to handle the new work. As a result, up to 600 KFC stores across the UK had to temporarily shut up shop, as the direct cost of the lost business spiralled to £1million a day.
This KFC commercial catastrophe highlights the crucial role that logistics now plays in most businesses, a role about which readers of aircargoeye.com will be only too aware.
Of course, it is not just the likes of KFC that suffer from supply chain disruption. The Business Continuity Institute Supply Chain Resilience Report 2016 shows that 70 per cent of businesses experience at least one supply chain disruption each year. Some 41 per cent of these disruptions occur with the primary tier-one-level supplier; 37 per cent of companies affected by such supply chain interruptions suffer from loss of revenue and, worst of all, as KFC learned, 38 per cent also sustain painful damage to their brand reputation.
In an ever more interconnected world, where we rely not only on third-party suppliers of materials and utilities, but also on 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 is to make sure that you have full visibility of your entire supply chain. This includes not only your own direct suppliers, but also the key suppliers that they themselves dependent upon.
Logistics supply chain resilience
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.
Even with full visibility of the supply chain, it is critically important to also 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.
This means demanding to see your supplier’s own ‘risk-register tool’ – which not only investigates all possible vulnerabilities within the company, but also assesses them and includes contingency plans. If the supplier does not have a risk assessment tool, then take this as a warning sign about doing any business with them.
The next step is to extend your own business continuity planning standards to your supply chain. For example, when you select a supplier, make sure that their business continuity planning is up to at least the same rigorous standard as your own, with recovery-time key performance indicators that support yours.
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 communication channels need to be completely independent of your normal supply chain, to avoid being compromised 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.
It is becoming obvious that supply chain resilience is growing as an operational issue – and therefore as a significant business risk – but there are proven continuity planning and management tools out there that can help to reduce this risk – and make sure that you don’t fall fowl of the same problems as KFC.
This article first appeared in Air Cargo Eye.