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Forging the Link and Building the Chain! – The Ten CommandmentsBy R. Andrew Fernandes – P. Mgr, MBCI, CBCP The ‘O’ word is in! In the race to increase Operational efficiency, Organizations have steadily, over the years, gone from business process Outsourcing, to knowledge process Outsourcing, And whilst BPO and KPO have been success stories over the last few years, it has taken a decade of trial and error to perfect the service industry and to get the call center syndrome right; there are still hiccups that are being ironed out, even today. Notwithstanding this, the economic downturn in North America has forced global corporations to turn to look at other means to cut costs and look deeper into their souls - where is the single biggest overhead in anything that is done in North America? You got it – Labor costs! Did I mention the O word was the hottest thing today? –Over the last 5 years another dimension of Outsourcing started– Original Design Manufacturing, .i.e.: copying your ORIGINAL design and mass producing it at a fraction of the cost. What I want to do today is in true star trek style walk you through the maze of this new outsourcing model and take you “Where no man dare go”. And show you how to achieve basic business continuity, whilst continuing operational efficiency?? As iron sharpens iron, let me provide you with some the Ten Commandments that can sharpen your business continuity survival. #1 – Supplier’s Pareto Rule Remember, Pareto’s rule – identify the 20% that will cause you the 80% grief!! KNOW WHICH SUPPLIERS ARE YOUR ACHILLES HEEL You will have this list of suppliers and key vendors that you use for your operational survival. And whilst your first reaction is to look at the $ spent that is the biggest driver in identifying the highest risk, think again. $ spent is NOT the only criteria in identifying your top suppliers who can bring you down.
# 2 – Poll Your Critical Suppliers Once you have narrowed down your top 20 % or your high-risk suppliers/vendors, prepare a questionnaire that you can send out to poll your suppliers. This questionnaire needs to cover the basics systems assessment, BCRP assessment and business redirection all in five questions! Suggested questions are:
# 3 Do Your Homework – Define and set Standards Requirements Remember the saying ‘Rome was not build in a day’. Standards in North America evolved over time, and in that same context, don’t assume that what is in place in the US today, are the same standards that are being compared to, in another part of the world. For example – US fire and safety codes have a lot more rigor around sprinkler system installations in highly combustible environments as compared to non-existent requirements for sprinkler systems in the same highly combustible environments in China. Be prepared to have professionals define what fire and safety systems you must have as minimum standards. Tip: If you have insurance for your building or site, it would have had to meet certain building, fire and safety codes. Those are the minimum standards you would want your vendor or supplier to adhere to. # 4 – Visit Your TOP Suppliers In Each Tier There is a reason, why you wanted to keep the questions in Tip # 2 close ended. This is for two reasons:
If you have the services of an engineering firm (tip: your insurance company can be your ally in procuring these services for free or for a nominal fee) engage them to review with you, your vendor/supplier’s construction and Fire and safety systems onsite. Pay special attention to the following:
#5 – Business Continuity Strategies So they have a strategy :-) yes they have multiple sites and they tell you they can redirect. But, here is the catch... You are not a dedicated client. Think of yourself as part of a telephone ‘minute family plan’. If the minutes in the family plan are exhausted, there are no more minutes, no matter what you do. Every Supplier runs their operations at not 100% operational capacity but in most cases at 110%!! Even though these economic times have resulted in some downtime for even these suppliers, what you have to keep in mind is the following:
So whilst they may turn blue in the face trying to convince you otherwise, remember – contractually, they have already signed that MOU (Memorandum of Understanding) or it may be hard-written into the contract with your competitor So if you are in a pinch, I assure you, your competitor is not going to graciously offer you their services and their manufacturing capabilities to allow you to ramp up to 100% capability. Think again!!
# 6 – Business Continuity Plan And they give you a pretty document. But if they cannot execute TIP # 5, then they really don’t have a plan do they? And in the plan, what you need to be looking for is proof of redirection and sustainability to support YOUR capacity/your work that has been outsourced to them. Almost with consistency you will get a nice fluffy document that has a lot of tabs, in a heavy binder that has probably killed a few trees (environmentalists please note!!) BUT nowhere in that document even if you look with a magnifying glass will you find any documentation that demonstrates or shows evidence of production redirection capability. So why is this important – Refer to Tip # 5, production capability cannot be shared at an existing site since it is a shared model? So the only alternative is for the vendor/supplier to be able to produce somewhere else. If that is not evidenced in the document, then really, there is no plan... # 7 – Test with Them And if by a miracle, they do have a plan that has evidenced proof of redirection, then ask to be partners with them in the next testing cycle. You, as a partner, will need to be involved as your level of outsourcing increases and your risk increases. What are you testing for – Testing can be done in phases.
(This test will also help validate their true level of external dependencies and whether this is captured in their plan or not.) # 8 – Timeline One common mistake that is not caught is that even if you have a clause that says the vendor must have a BCRP plan; does it stipulate what is an acceptable recovery time within which the vendor must start being able to deliver products and/or services to you? Most vendors/suppliers are single manufacturing units (see tip #1). This is how they maintain their operational efficiency. In the event of a business interruption, say in a scenario of a fire on their production floor where there is no sprinkler system, the whole place will be gutted and gone! In this case... the ramp time for you will not be hours but months, as the factory will have to be rebuilt before they can even start to fulfill orders. In this case... what is YOUR BCRP? # 9 – Contractual Bondage Get those pencils sharpened and those contracts amended. Have an addendum added to have your vendor/supplier responsible for their OWN BCRP plan. Why?? BECAUSE –If you are at this stage, you are not the only one looking for operational efficiency. Your vendor will be outsourcing their tasks. Your risks will now be N+1+1. # 10 – BUILD THE CHAIN You have now FORGED the link. Repeat steps 1-9 annually. It s time to BUILD THE CHAIN... Best of luck!! About the Author |
