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March, 2011

Recent research* spanning 35 countries released by the Business Continuity Institute (BCI) shows that over 70% of organisations recorded at least one supply chain disruption during 2010, with 20% admitting they had suffered reputational damage as a result.

When a supplier fails

Businesses that have shifted production to lower cost countries are most at risk with more than eight out of ten experiencing disruption, usually due to failure of transport networks and supplier insolvency. Even when suppliers were identified as being critical to their business, almost half the firms surveyed confessed they had not checked their suppliers’ business continuity plans.

As a SunGard Availability Services customer, you recognise the importance of building resilience into your own operation – but have you addressed the impact of a key supplier failure? SunGard offers a range of market-leading software tools and expert consulting services that can help you reduce your exposure to the failings of others.

Continuity Management Solutions (CMS) – Supply Chain package

This software bundle will help you to assess the impact on your business and customers in the event of supply chain disruption. It features a Vendor Assessment module that enables you to evaluate your vendor’s BC plans and ensure their objectives match your own. Even more importantly, it helps you plan workarounds should the chain be broken.

The other products in the package are BIA Professional, a highly effective survey tool to help you understand the effect on your business when disasters strike, ensuring your continuity plans meets actual business needs. We also offer the award-winning LDRPS (living Disaster recovery Planning System), which unlike DIY Microsoft Office based plans, helps you manage the complexity and numerous changes that occur within multiple plans; across several locations within your organisation. And if you already have a mature plan in place that’s becoming unmanageable, don’t worry we can help you migrate to CMS, so you won’t loose all  the hard work that you put into your original plan. 

Supply Chain Consulting services

Our pragmatic and experienced consultants are skilled at quickly getting to the heart of your business, identifying critical dependencies and helping you understand your level of risk based on the critical activities identified in your business impact Analysis. Working closely with you, they will help develop a supply chain strategy covering key areas including:

  • Supplier procurement – helping you draw up a vendor specification setting the minimum level of BCM provision you expect from your suppliers based on industry best practice. This will cover core components from general programme management through to overall risk and incident management. We help you collate the information you need to make informed decisions on BC strategy, ensuring a full audit trail to meet internal and external compliance requirements.
  • Process mapping – matching suppliers with business-critical processes to identify any vulnerabilities.
  • Supply chain incident management – drawing up action plans covering your response, escalation, management and monitoring.
  • Lifecycle supply chain review – Our web-based tracking and reporting portal gives you the ability to monitor, note changes and, ultimately, improve your suppliers’ resilience.

Click here to find out more about SunGard's CMS Supply Chain Package

Click here to find out more about SunGard's Consulting Services

*Business Continuity Institute: Supply Chain Resilience – October 2010

From ‘one man and his dog outfits’ to SMes and multinationals, the diversity of people bearing the mantle of ‘supply chain manager’ or ‘risk manager’ means there are many different views on the biggest problem areas.

For better or for worse, it’s human nature that we all see risk through the goggles of our own self-interest and performance measures. but few would argue that the dramatic evolution of the supply chain from yesterday’s simple linear model to today’s complex, dynamic networks with hundreds of interdependencies lies behind the three most common pain points in supply chains:

  1. The perpetual drive for increased efficiency – competitive pressures force organisations to become ever leaner in an effort to cut costs meaning there is very little margin for error.
  2. Lack of visibility – Our supply networks are increasingly complex and permanently reconfiguring themselves, consequently few organisations have any real picture of their end-to-end supply chain. these can circle the globe, cross several legal jurisdictions and resemble a cobweb involving numerous organisations all operating to meet their own priorities.
  3. Friction caused by competing demands –  We are always juggling financial imperatives with the need to build in some contingency. For example, ‘just in time’ delivery of spares may be the preferred strategy of a financially focused inventory manager reluctant to tie up valuable capital in stock, but when just-in-time is just-too-late, it is a potential disaster for an individual with operational responsibilities who sees the need to build in a buffer to ensure services keep running, whether that’s through additional time in the schedules, redundant capacity, supplies or personnel.
What can risk and business continuity managers do to address these issues? in my experience, the most important step is to communicate widely. there is very little that can go wrong for an organisation that people on the shop floor or at the front line of service delivery won’t already know about. They are aware of potential problems and weaknesses because they are immersed in it at grass roots level on a daily basis. they will have experienced the everyday glitches and may already have spotted the tell-tale signs of near-misses. beyond that, watch what is happening in the world around you. 
 

The supply chain, Achilles heel of an organisation?“There is very little that will go wrong  in an organisation that people on  the shop floor won’t know about”

Some organisations look to received best practice in enterprise risk management, and the belief that risk can be transferred through insurance, contracting or outsourcing. Financial liability can often be transferred, but as every operations manager knows only too well, the operational consequences of supply chain failure cannot. in fact, as we know, even in finance the notion that everybody could transfer risk almost caused the collapse of the international banking system in 2008.
 
We’ve come a long way. It is encouraging to see increased awareness of the importance of supply chain vulnerability at the highest levels. Just ten years ago, it was an issue few organisations talked about. Now it is viewed in a completely different light. Being seen to be actively engaged in improving supply chain resilience is considered to be one of the hallmarks of  a responsible organisation. In BS 25999, we have an internationally recognised framework for best practice in business continuity management. The challenge is to support and actively encourage businesses to look beyond the boundaries of their own organisation to their supply chains. With well over 90% of businesses in the UK being Small and Medium enterprises (which is also the norm in many countries),  I am currently working with a cabinet Office and Business Continuity Institute-led group to develop  an accessible appendix to the Standard specifically  geared to take into account the needs of smaller firms.  So, while there’s no room for complacency, we have  made great strides since the beginning of the decade.Huge lessons have been learned about managing  supply chain risk but it is an extremely complex issue.  We come up with awkward questions as often as easy answers – there is no silver bullet. What businesses can  do is accept new realities rather than base planning assumptions on an outdated view of the business and approaches to risk management that have failed  spectacularly in recent years. “We come up with  awkward questions as often  as easy answers – there  is no silver bullet”
 
Looking forward, we face some interesting challenges. After a twenty-year run of relative economic stability few would doubt that we are now entering a period of extreme economic uncertainty. An inflationary environment, would turn some tenets of existing supply chain management best practice on their head. For instance, in an inflationary environment companies that have been encouraged to keep supply chains lean, holding minimum stocks of goods and raw materials, may find it makes more financial sense to reverse that policy. We’ve become accustomed to seeing year-on-year price reductions as the norm. If companies force target price reductions through without making adjustments for inflation, they will only succeed in putting their suppliers out of business.
 
Longer term, the UK’s chief scientist Professor John Beddington has warned that by 2030 population pressures and other factors will combine to create a perfect storm of global food, water and energy shortages. A recent report by analysts at the bundeswehr (German Federal Defence Force) predicts that near-term oil shortages will unleash public unrest and profound disruptions for Germany and other industrialised societies.Supply chains will be affected. With easily accessible oil supplies running out, forcing the price of crude to skyrocket, supply chains that span the globe on the back of cheap oil may simply not be viable. in this, like so many other things, we are going to have to learn to do things differently.
 
In conclusion, as systemic disruptions such as the foot and mouth crisis, fuel protests, financial collapse and erupting icelandic volcano have demonstrated in recent years, no matter how robust we believe our own organisations to be, we are all affected by seemingly unconnected external events that occur on a regional, national and international scale. Whereas, traditionally, supply chain disruption was mostly considered a problem for manufacturing environments, in today’s interconnected world, businesses across all industry sectors are vulnerable to any event that impedes the movement of money, information, people, goods and services.
 
To achieve true resilience, business continuity managers need to recognise that they are only as strong as the weakest link in their supply chain. Where possible they should coordinate their contingency plans with their critical suppliers. Mapping the many interdependencies that undoubtedly exist along their supply chain may not be practicable, but planning workarounds for the loss of critical services or supplies is a good starting point. in this age of globalisation the words  of the poet John Donne have never had more resonance: “No man is an island”.
 
As an award-winning senior lecturer for Cranfield University, Dr Helen Peck teaches a range of resilience, security, defence and supply chain-related programmes at the MoD run Defence Academy at Shrivenham and elsewhere. Her work contributes directly to the development of UK national emergency planning,  as well as management practice. She has published numerous academic papers, authored several books  and is a regular speaker at academic, business and  defence conferences around the world.

Find out more about SunGard's CMS Supply Chain Package

Who is the weakest link in your supply chain?

As a SunGard Availability Services customer, you appreciate the importance of business continuity management and will be diligent about getting your  own house in order. But how resilient are your suppliers? Supply chains today are increasingly complex, less transparent and subsequently more  risky. If one of your key suppliers failed, what effect would it have on your  business? As the entertainment chain Zavvi found to its cost, its fate was inextricably – and fatally – linked to that of its wholesale distributor, the Woolworths-owned Entertainment UK.

According to a recent Marsh supply chain survey,  62% of companies see supplier failure as a risk, but less than half have measures in place to deal with any supplier outages. Given their mutual interdependence, many companies recognise the need to treat suppliers as an extension of their own organisation when it comes to business continuity management (BCM) planning. Yet few actually do so. Of those questioned in the 2009 BCI Supply chain Survey, just one in nine felt their BCM needs had been fully met. Two thirds had been partially successful in getting their needs adopted through their supply chain, while almost a quarter had either not tried or not been successful at all.
 
It is easy to see why many organisations find the task is simply too daunting to contemplate. Firstly, the number of dependencies in the supply chain has increased exponentially and the mapping process to identify single points of failure is far from straightforward, with numerous levels and nodes that network to other suppliers. Taking one example, a freight forwarding company found that just one of its contracts involved over 150 subcontractors ranging from trucking companies to overseas agents and shipping lines. Each of these parties will carry their own risks and would need to be understood and mapped!
 
Then, as we all know, a plan needs to be regularly tested if it is to be effective. The ideal approach is to broaden co-operation between your various supply chain links by including them in your incident management exercises, introducing them one at a time.
 
Finally, it is an unfortunate fact that a high number of outsourcing relationships fail within their first two years. Any change in supplier or a move to bring a contract back in-house represents a major business risk. An effective exit strategy is essential to manage the transition.
 
SunGard offers a range of products and services designed to support organisations as they extend their BCM focus along the supply chain to tackle vulnerabilities that pose a threat to their own business. These include: 
  • Continuity Management Solutions (CMS) – a highly effective, purpose-built software tool designed specifically for bc professionals that  saves time spent on admin and plan development. The Vendor Assessment module maps the complex dependencies that exist throughout the supply  chain and will help plan workarounds should the chain be broken.  
  • Consultancy Supply Chain Services – encompassing procurement support, supplier selection, process mapping of existing suppliers, incident management, scenario walkthroughs and rehearsal.
  • Exit Planning to manage the switch to a new supplier or integrate the service back into the organisation, minimising the business risk.

Click here to view SunGard's CMS online video for more information

SunGard Availability Services Data Centres

On recently being introduced as a data centre specialist, a US investor piped up, “Ah, the garbage bins of the IT world!”

My, perhaps unsurprisingly, preferred analogy is with the PBX or office switchboard – it may not be sexy or high-profile, but it is central to any business and it needs to be incredibly reliable.

However, perhaps my analogy is also becoming less accurate. Unlike the humble PBX, overtaken by VoIP and the convergence of it and telecoms, the data centre is gaining in prominence and importance. While it could yet struggle to be described as ‘sexy’, it is the critical element to many sexy parts of the it world. As the CEO of data centre provider, telecity, describes it to investors, “The only non-virtual part of the virtual economy”. Or, as the CFOs of the likes of Google and Microsoft see it, easily the biggest capex line in the company.

The final point also highlights an interesting trend. Cloud computing, rather than being a substitute for data centres, actually increases the requirement. While the notion of cloud computing infrastructure being anywhere is attractive, for security, legal, auditing and business reasons, most corporates wish their data  to remain in the same region. Thus meaning there won’t be a rush on cheap out of country data centre space to host the latest cloud.

Of course, what really ensures the attention of the data centre at the forefront of executives’ minds is their importance, both to the business needs and the bottom line. Even in the economic challenges of 2009, many data centre providers saw annual growth of 20-30%. European telecoms traffic going through internet exchanges is continuing to increase at 50-60% per year. Further drivers going into 2011 include video (and particularly the potential for HD and 3D tv), smart grids, high speed broadband and mobile, and regulations particularly in the financial sector. The desire for vendors to take part in this demand can be well illustrated by the recent bidding war for data centre storage firm, 3PAR.

But, while the importance of data centres may have increased, the role of data centre managers and importance of data centres in business and IT thinking has yet to keep pace.

Rather strangely, there is no obvious voice or organisation for data centre managers. They often belong to broader organisations, such as facilities management or computing society, or more specialist groups, based on areas such as cabling or cooling. IT strategy decisions are often made with scant regard to the data centre, and decisions can also be shared between a number of departments such as property, facilities management and IT.

There is also the element of control and centralisation – as so often in it, the political and cultural reasons are bigger inhibitors than any technological one.

As someone at a bank recently put it, “I had to change my title from global enterprise architect, because I was getting so much negativity”. Basically, business units resented any sense of control, centralisation and interference. Such issues, as well as historical attitudes, explain why only around a third of servers are actually in proper data centres, and nearly 90% of data centre requirements are kept in-house.

Outsourcing is often simply not on the agenda. On asking a data centre manager at a multi-national recently about whether they had considered outsourcing their data centre, they replied, “Of course not, that it is too business critical”. Reasons include control, security and cost.

In a recent discussion with an IT director about data centres, his view was that, “We can do it a lot cheaper in-house”. But are they really understanding all aspects of the financial calculation – impact of depreciation, operating costs (of which power could easily be  30-40%), risks (whether technology or environmental obsolescence, or simply the fact of how a data centre will evolve in the 15 years they would hope the facility  to remain in use)? it is also use of finance – last year, we saw some outsourcing simply due to the need to move costs from capex to opex. Data centres can cost  around £5-7.8m per 10,000 sq ft to build and fit-out, and is this really the best use of company resource? equally, is it best to allow a specialist in the area, with all the associated skills, experience and economies of scale to manage and run data centre services? 

Many data centre managers have rebutted attempts at outsourcing. Even companies, who regularly outsource activities from it to catering, often still keep their own data centres. The thinking, experience and expertise from other sourcing decisions – from cost comparisons of in-house vs outsourced to SlA and t&c issues – have rarely been used in conjunction with data centres.

Clearly, outsourcing does not work for all companies, and a hybrid route between in-house and external data centres can often make most sense. This is particularly true as, by meshing such facilities, far greater reliability and redundancy can be achieved. Indeed, a number of the larger banks have recently gone through exercises to rate applications as to the sort of data centre they need – such as specification, location and connectivity. The conclusion of such analysis has often been that they need to be less dependent on highly expensive facilities near capital cities.

On a final note, choosing a third party provider really requires a separate article. One it manager recently told me the reasons he had never considered a third party was that, “We looked five years ago, and facilities out there were very low quality”. At that time, many of  the largest third party facilities were built in the early 1990s as bankers remained cautious for five years after the dot com crash (which led to the demise of 17 of  27 pan-european players). Since that time, there has been much, high quality new build. However, the credibility and expertise of the data centre outsourcing provider remains key.

Source BroadGroup

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