Just-in-time delivery, while helping manufacturing companies to cut operating costs, has created new problems for engineers. The threat of financial penalties does not help maintain production when crisis hits a supplier’s production line.
Kierkert of Germany suffered a 10-day problem with software resulting in the loss of £10m £15m of production at the two Ford plants. It would appear Kierkert had no plans to overcome such problems.
Last year another German supplier to Toyota had to use a helicopter to ferry in parts to the line in Derbyshire when two lorries went missing in the UK.
Nissan recognises that supplies can only be maintained by considering all the risks that could impact upon production and distribution and by having contingency strategies. It believes Business Continuity Management (BCM) can help overcome or minimise many problems before they occur.
By working with its key suppliers it will identify the areas of potential failure and develop plans to work around the problems while maintaining supplies.
BCM was first established in the US finance sector and has quickly been taken up across the world. It is now spreading to other industries.
Food manufacturers have adopted the process, spurred on by the experience of Source Perrier in 1990, when it discovered benzene in its bottled water. Its failure to handle the problem and the public concerns resulted in big losses and a serious loss of investor confidence.
In the past few weeks, UK soft drinks manufacturers had to recall their products due to a similar contamination. The firms have BCM plans in place. Assurances were given to the public that it was not a health but a quality issue, the product was recalled and replacements delivered. The media was kept informed and the story died down.
Engineering companies have much to learn from these examples. By adopting BCM throughout their supply chains they will avoid the problems experienced by Ford and Toyota. They will maintain customers’ and investors’ confidence, minimise the effects of supply failures, as happened after the Kobe earthquake, and will cut the cost of ‘fire brigade’ actions.
Every five years one in five companies will suffer from a major interruption. Of those which have not adopted BCM, 80% fail within 13 months. Engineering companies are not immune.
The year 2000 brings a greater risk of failure. By planning to continue business through every eventuality, they may survive.
John Sharp is chief executive officer of the Business Continuity Institute.