By Betty A. Kildow, FBCI, CBCP
Partnership: A tailored business relationship based on mutual trust, openness, shared risk, and shared rewards that yield a competitive advantage, resulting in business performance greater for both or all parties than would be achieved by the individual entities.
On June 5, 2012, more than a year after the earthquake and tsunami that ripped through the Japanese coast, a 66-foot long floating pier that was originally located at the port of Misawa, Japan drifted across the Pacific Ocean and ended up on a beach on the west coast of the United States. This and other items that were cast adrift by the tsunami and have come to shore thousands of miles from their point of origin are continuing reminders of the severe and long-term impacts of a disaster with global implications.
It is also yet another reminder of the need to better prepare our businesses and organizations to respond to future major disasters and operational disruptions. One of the important ways in which to do so is to adjust our way of thinking and our approach to working with our customers, business partners, and other stakeholders. This is particularly true for supply chain business continuity planning where collaboration between customers and suppliers can strengthen our supply chains to make a critical difference in a company’s ability to continue or quickly restore operations following a disaster.
A customer-supplier trend being adopted by a growing number of organizations is to establish and build positive relationships with a goal of forming trusting strategic partnerships. When suppliers and customers partner in addressing risk management and business continuity planning challenges, the end result is mutually beneficial business continuity capabilities, a win-win for all involved. While changing a business relationship that may have been less than ideal or even adversarial to a more cooperative and collaborative one can take some work, patience, and commitment, in the long run the dividends will be well worth the effort. When developing supply chain business continuity strategies that will successfully decrease operational risks, utilize a cooperative approach among all supply chain links. The resulting partnerships make it easier for business partners to do business on a day-to-day basis and help ensure productive and profitable relationships by decreasing operational risk.
Whether your role is that of a supplier or a customer, work with your key supply chain partners. All parties, domestic or international, can start by viewing one another as strategic partners working toward a shared goal. Develop and then build on good relationships among suppliers, transport companies, forwarders, warehouse companies, contractors, etc., just as you do with your customers.
While there is a tendency to focus on business continuity requirements from the customer perspective, suppliers are vital stakeholders who want to meet the needs of their customers, yet have their own risks and continuity requirements. There is tremendous value in a proactive approach that includes meetings and planning sessions that involve both suppliers and customers to discuss business continuity goals and familiarize one another with their respective business continuity strategies, programs and challenges.
Partnering in the continuity planning process lays the foundation for developing and carrying out more effective continuity strategies. This non-adversarial intra-organization approach can make a positive and significant difference in how successful your organization – and partner organizations - can be in continuing or more rapidly restoring operations following a disaster. Share information and ideas. Consider not only your organization’s needs but those of partner organizations. It is quite possible that through joint problem solving and planning, mitigation and recovery strategies will be identified that serve both well and be cost effective.
While it is reasonable to assume that working together has benefits for all parties, to succeed, this approach requires that both or all involved companies be willing to share information about the risks they face and how prepared they are to manage those risks. For tier one suppliers this should include identifying and addressing threats that are inherited from their suppliers.
Let your business partners know your expectations and what they can expect from you. A basic step toward accomplishing this is to include continuity readiness as a factor - for suppliers when listing business continuity capabilities in proposals and in company information made available to prospective customers; for customers when weighing and comparing capabilities beyond price and quality when selecting suppliers for new contracts. To be effective continuity partnerships require that customers and suppliers collaborate. Customers can establish business continuity performance measures, include the criteria with other key performance indicators, and reward suppliers who consistently meet or exceed the established performance goals. Suppliers need to become familiar with their customers’ continuity goals and requirements; this requires information that can only be made available by the customer in an open exchange of information.
Business continuity is an increasingly accepted core business practice and a significant factor in supplier selection. If an organization has not previously been approached by customers or insurers, investors, regulators, or other stakeholders, asking about their business continuity plan, it’s only a matter of time until that day comes.
Keep the lines of communication open. When suppliers fall short of continuity performance goals, the customer can promptly discuss performance issues to provide valued critical suppliers with an opportunity to quickly correct any areas needing improvement. Establish a process that will lead to a cooperative approach to resolving any problems that arise.
While it is important for a customer to convey the message that there are expectations for supplier business continuity competency, a customer providing planning information, guidance, and assistance is an equally important part of customer-supplier collaboration. In the event a supplier or other business partner does not yet have a business continuity program, initiate an ongoing dialogue. There is much to be gained when a customer views a requirement for business continuity planning from the perspective of a supplier or other business partner. While each supplier needs to take responsibility for and have full ownership of its business continuity program, a customer requirement for a program is often the primary driver for implementing a business continuity initiative. Put yourself in the place of a supplier who, while preparing to respond to a request for proposal or in negotiating a contract renewal with a customer, first learns of newly added business continuity requirements. In some cases, suppliers and contractors are much smaller than the organizations they supply and have limited resources to initiate a continuity program. For suppliers whose business continuity objective is a plan that will meet customer needs, ask customers about their needs and requirements and take that information into account as you develop the business continuity program or update or enhance an existing program.
Losses experienced in the wake of a disaster will be shared. Consider taking the following steps to jointly build a solid mutually beneficial business continuity approach that lessen the risk of disaster-related losses for business partners:
I believe that it is important that each organization, whether it delivers a product or a service, to remember that it is both a customer and a supplier. When a disaster occurs, prepared supply chain partners, those who have done advance planning; defined mutual expectations, roles and responsibilities; established workable continuity strategies; and developed procedures to communicate and share information following a significant disruption or disaster are in a better position to leverage each others’ operational capabilities to the benefit of all concerned. While building the trust needed to build these partnerships will take time and effort, strong customer-supplier partnerships are certain to pay dividends when – not if – the next disaster occurs.
- View developing business continuity strategies as a joint challenge with mutual benefits
- Share business continuity standards and policies
- Jointly conduct business continuity workshops to provide guidance in developing coordinated and integrated business continuity strategies and plans
- Share planning templates and tools
- Work together to develop contingency plans for what will happen when a disaster or significant operational disruption occurs, yours or theirs
- Conduct joint business continuity training sessions, exercises, and tests
- Keep the lines of communication open on an ongoing basis, not just after a problem occurs
●This article was translated into Japanese and published on magazine "Risk-taisaku.com" vol.34.
Betty A. Kildow, FBCI, CBCP, has provided business continuity consulting services to a wide variety of businesses and organizations for more than twenty years. She is the author of “A Supply Chain Management Guide to Business Continuity” (2011), available in English and in Japanese: 「事業継続」のための サプライチェーン・マネジメント 実践マニュアル.
Betty can be reached at BettyKildow@comcast.com or by phone at +001-765-483-9365.