Four months after the earthquake, tsunami and nuclear emergency struck Japan, the flow of components and products out of the country is nearing pre-disaster levels. But at the peak of the disaster, plant closures and product shortages were experienced around the globe by many companies that had operations or critical vendors in Japan.
While events of this magnitude are rare, there is no doubt that supply chain resilience is now front-of-mind for many business continuity professionals. At The Goodyear Tire & Rubber Company, there is a movement to extend the best practices used internally to its first- and second-tier vendors.
“Many companies have vendor relationships that include sole- and single-source suppliers,” explains Mike Janko, Manager of Global Business Continuity at Goodyear.
“These companies may not know if their critical suppliers have robust business continuity plans in place,” adds Janko.
As a result, Goodyear is working on a five-step process to gather information about its critical vendors and pass on information that will make its supply chain more resilient. Janko walks us through each of the steps.
1. Benchmark other global companies that have extremely complex supply chains.
I spoke with a couple of close contacts who are business continuity directors in companies with complex supply chains and global footprints. Regardless of whether these organizations are heavy manufacturing, retail or some other sector, we face common issues with sourcing of materials from other regions, similar logistical and transportation challenges, and the potential for second- and third-tier suppliers to have a negative effect on business planning and operations.
All of the feedback I received was unanimous in recommending similar basic business continuity terminology and strategies be used both internally and externally. It becomes quite difficult to track multiple processes or programs, so whatever can be done for uniformity and simplification will help.
2. Develop a strategy that is sustainable and understood throughout your organization.
It is important to have consistency in the way you approach all business continuity-related activities, including those relating to procurement, transportation, logistics and supply chain. This includes a formal policy, organizational charter, defined roles and structure.
As we were developing a strategy to look at our external partners, we tried to keep it simple; we made it similar to what we’re doing internally. My company has already bought into it, so why would I do something different?
We have used the DRI International 10 Professional Practices and NFPA 1600 as our guides ever since our global process was developed. We also developed a program called Business Continuity Excellence to promote continuous improvement and benchmark ourselves against each of the 10 Professional Practices using an annual scorecard.
Additionally, we use a steering committee consisting of about a dozen key leaders in the company, including our VPs of supply chain and procurement. I meet quarterly with our steering committee and monthly with our tactical team, and we share best practices, talk about recent incidents and give others the opportunity to link into what we’re doing. So if there are any gaps in what we do with supply chain, purchasing, manufacturing, etc., we address it and move ahead.
3. Determine who is most critical to you, where the greatest risks to your supply chain lie and how they are tied to your critical vendors.
Of all the incidents we encountered globally last year, approximately 15 percent of them were related to product supply disruptions. So we developed a process to rank critical suppliers based on our perception of the risks they face due to location, exposures and other business relationship-related factors.
We put together an internal survey asking: Who poses the greatest risk, what incidents were they subjected to and where are they located? Then, we got together with our commodity and category managers and said “This is what we’d like to use to determine which commodity and raw material suppliers pose the greatest risk. What are your thoughts on it?”
After some fine tuning, we distributed the survey internally and gave our team members a couple of weeks to complete the form. We came up with a list of about two dozen raw materials suppliers we needed to work with to ensure they have business continuity practices in place.
4. Review and share your business continuity strategies with your critical vendors and attempt to hold them to the same standards.
We made it a collaborative process — you can share what works well for you without proprietary exchange of information.
We are in the process of inviting our critical vendors to workshops to review the basics of business continuity planning. They are sent a checklist in advance, which we go through during the workshop.
After completing our joint workshop, we ask them to complete and submit the checklist, and we begin working with them on any gaps or challenges we can jointly address. Then, we review the progress we made in order to help make decisions on future supply chain and sourcing strategies: Avoidance, transfer, acceptance, etc.
5. Continue to monitor and improve the vendor resiliency process.
We plan on repeating this process on an as needed basis to strengthen not only our own, but also our vendor’s continuity of operations. Once our first-tier of critical vendors has been reviewed, we can proceed to the next level and get second-tier suppliers and partners engaged. Also, we ultimately want to do a site visit or audit and confirm they have the plans and processes in place.
It’s important that the business continuity planning documents we jointly develop with our vendors are sustainable. Eventually, we hope to work them into legal agreements and contracts to incentivize our critical partners to have a robust business continuity process.
Even before Goodyear formally started this process to improve vendor resilience, some suppliers became aware of the business continuity processes being used by the company and initiated similar programs for their own organizations. However, this organic transfer of best practices is an exception to the rule. A much more proactive approach was required to identify and engage all of the most critical vendors.
The five steps described by Janko emphasize the collaborative nature of this process.
Information sharing between Janko, his peers and Goodyear’s suppliers is possible due to a focus on the non-proprietary nature of their business continuity processes. A common understanding of identifying risks and incidents, and implementing business continuity strategies when critical processes are affected, applies to all organizations. In many ways, it is simply an extension of the internal business continuity practices already in place, which for Goodyear includes “showing business value” and “helping to meet the needs of its customers.”