Contingency Planning for your Supply Chain: Business Continuity in a Pandemic
Posted May 31, 2009 by Bierce & Kenerson, P.C. · 
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The risk of a pandemic has become a realistic possibility, following the SARS outbreak in China a few years ago and the “swine flu” outbreak in Mexico in 2009. Business contingency planning should include not only the possibility of a pandemic but also the impact of a pandemic upon the supply chain including business operations performed by independent contractors (such as outsourcers and suppliers) and affiliates (captives and joint ventures). In a pandemic, 40% of the population (both workforce and customer universe) could be idled. Now is the time to develop contingency plans and obtain updated contingency plans from those in your extended supply chain.
General Planning for Pandemics. What are typical strategies to mitigate the damage of a pandemic? For the typical employer, the list might be fairly simple: redundancy, social distancing and cleanliness.
- Design the work so that a skeletal staff can do the work. With 40% absenteeism, this means process mapping, manuals for operational sequences, cross-training of employees to do multiple functions (and repetition to retain that training) and developing redundancy strategies to avoid single points of failure. Consider staffing scheduling to enable different teams to handle the same functions.
- Enable and encourage working at home. Employers should consider the value of investing in hardware, software and connectivity to the worker’s home, as well as policies for ensuring that at-home workers have a safe work environment and maintain corporate records in a private and secure location.
- Plan for travel restrictions. Either you or your government might discourage or control travel, since the closed ventilation systems in airplanes spread contagion. If workers must travel, they should be quarantined after traveling for a test period (say, two days) after returning home.
- Deploy social networking and videoconferencing tools to sustain group interactions.
- Develop a web-enabled business that requires little face-to-face interaction. This will get around the implementation of social distancing strategie, which would impair production efficiency, increase costs of production, reduce employee morale and delay deliveries of promised goods and services. A web-enabled business will enable “business as usual” using tools familiar to the consumer, the business customer and the supplier. (Of course, a web-enabled business needs robust security to fend off other threats).
- Prevent the spread of germs in the workplace by encouraging hand washing and posting warnings about the risks of not washing hands.
More detailed plans can be found through the World Health Organization (click here) and the U.S. government (click here).
Diversification Strategies. Business sourcing consultants promote the use of multiple suppliers to create a microcosm of competition between vetted vendors. Multi-sourcing has the added advantages of redundancy and diversification of supply chains. This diversification can be achieved using multiple service centers in different time zones, using different electric grids, food supplies, transportation systems, telecommunications networks and technology infrastructures. Virtualization of servers and extension of the enterprise into a multi-nodal “cloud” also supports diversification.
Management and Governance Skills. Of course, multi-sourcing requires new disciplines in management of service providers across time and distance. Such disciplines are necessary to enable the global enterprise to sustain its operations and maintain customers during threats such as pandemics, economic slowdowns, hurricanes and other storms, governmental intervention in markets, wars and strikes.
Force Majeure: Is Non-Performance Always Excused? From a lawyer’s perspective, all these events are generally “causes beyond one’s control,” and thus provide excuses for non-performance. However, effective continuity planning can help anticipate and mitigate those risks. Contractually, the service provider might not have any excuse for non-performance if implementation of the business continuity plan would have mitigated or overcome the threatened disruption.
Planning for the Pandemic: Impact on Your Suppliers and Service Providers. Enterprise customers that hire others to deliver ITO or BPO services should require that the service providers develop and maintain updated business continuity plans that include the full range of contingency risks. This includes general operational plans, contingencies for major disruption, prioritizing operations by criticality and identifying key gaps in the extended supply chain of your suppliers’ suppliers.