Established in 1960, Yamaha Corporation of America (YCA), then Yamaha International Corporation, offers a full line of musical instruments, audio/visual, and computer- related products to the U.S. market. Also, YCA subsidiary Yamaha Exporting, Inc. is engaged in exporting many products and materials to overseas markets. A substantial percentage of products sold in the U.S. are domestically assembled at Yamaha Musical Products (band and orchestral instruments) in Michigan, Yamaha Music Manufacturing (pianos and professional audio equipment) in Georgia, and Yamaha Electronics Corporation (audio/visual products and services) in California. All are wholly-owned subsidiaries of YCA.
Yamaha Corporation of America is a wholly-owned subsidiary of Yamaha Corporation, Japan, and is the largest of all global subsidiary companies. Global sales are $5.1 billion and total employees are 23,900. But business continuity planning (BCP) wasn't always so clear to him. "When we started, I read a book on the topic, and then I read a second book on the topic. Soon I realized we needed to have some outside help on this." So, YCA contracted with a consulting firm to help them develop a strategy around BCP. The project has resulted in a cohesive company wide BCP program.
Putting People First
Life safety was YCA's starting point. They rolled out a CERT (corporate emergency response training) course to employees in 2001. The four-day program included instruction in first aid, CPR, triage, and how to use a fire extinguisher or deal with a suspicious package. The course was offered during the work day and at no cost to employees. The CERT course proved to be such a success that it is still being offered nearly four years later, and an astonishing 18 percent of YCA personnel have taken the course. The overwhelmingly positive response was "a very big surprise" to Jemelian. "The morale boost that has come from the CERT program is great. Employees really feel that Yamaha is investing in them as people. There is a personal benefit to them and we have stories about how employees have used their training in their every day lives."
Jemelian is quick to point out that there is a business benefit as well. "Until employees are safe and they are secure with their well being, we are not going to get our business up and running. We first have to help our employees and their families and loved ones." Although life safety is its first concern, CERT extends far beyond first aid and triage. As part of the CERT component, YCA has four 20- foot containers at its headquarters that hold a three-day supply of food and water for all employees, emergency supplies, and satellite radios for communicating with corporate offices in Japan. Also stored in the containers are "grab boxes" for each division. The grab boxes, which are updated quarterly, contain critical records and documents that divisions would need to access quickly in a crisis. "They are not meant to be data storage, and they do not replace an offsite storage facility," Jemelian says. "They are core, critical documents that people would want to get their hands on in the time of an event," like customer lists or blueprints of the building. Grab boxes also contain office supplies, including pencils, paper, and things to keep us rolling," Jemelian says.
Next, Jemelian and his team tackled YCA's computer systems and IT plans. "There are three key components to our IT plans," he says. "Our bunkered site, our hot site, and our documentation." The bunkered site is "a high-availability systems location" that is a second data center. Located 25 miles from headquarters, the alternate data center is housed in a "level four building that can handle an earthquake up to 9.0, has redundant power, duplicate network backbone, and stringent security measures." "We have our high-availability systems located there, such as Yamaha-dot-com, our e-mail system, and our customer support system. These are systems that cannot be down even for a minute. We also have backup of our core ERP [enterprise resource planning] system at this data center, which ensures that we do not lose more than 15 minutes of information at any given point." YCA's hot site agreement includes "systems recovery, with a goal of being up and running within five business days of the disaster." Another element of that hot site contract is a local alternate site with workstations, providing desks, PCs, and phones. Hot site tests are conducted twice a year. The third element of YCA's IT plans is documentation. "All of the key information concerning IT is documented. The document includes information on IT architecture, hardware, software, telecommunications, and how to recover each system." The IT continuity plans are reviewed and updated each quarter, each time new systems are added, as well as after each test at the hot site.
"Running the company at the time of a disaster" is the job of YCA's emergency operations center (EOC), which functions as the crisis management team, according to Jemelian. There are three EOC locations. The first is at the headquarters building in a large seminar room. The second is an alternate EOC location within walking distance of headquarters. And the third is about 30 miles away at an office "where we have an agreement for using conference facilities," Jemelian says.
The crisis management team is a group of approximately 20 people. There is the EOC director; that's Jemelian's job. There is also a command support function "that is responsible for communications with our parent company, media statements, and legal." The planning/intelligence function "handles issues around people, including emergency staffing, employee communications, and personnel redeployment." Providing emergency funds, overseeing expense tracking and coordinating insurance matters are the job of the finance and administration team. The operations team coordinates recovery of damaged buildings, arranges emergency vendor contracting, oversees logistics matters, and addresses damaged records. Finally, the systems operations team coordinates systems restoration, telecom restoration, and replaces or repairs damaged equipment. The EOC is "a different organization than our normal organization chart," he says. Business unit recovery teams at corporate and at remote locations look to the crisis management team for direction.
The EOC's emergency communications provisions include three toll-free phone numbers: one for employees, one for the EOC team, and one for communicating with the various YCA business unit BCP leads.
Where It Happens
"When you think about a time of disaster, you need your people, you need technology, and you need facilities to work in," Jemelian says. The hot site contract provides an alternate site, while facilities plans cover restoring and repairing YCA properties. These plans include, for example, "preselected restoration companies that we would use if we had water damage."
The logistics plan "addresses our warehouses where we store our inventory. We've met with all of our third-party warehouses to explain what we are doing and to learn what they have as far as emergency preparedness," Jemelian explains. A next step for YCA would be to require all third-party warehouses to have plans, he adds.
Division and Subsidiary Plans
"The fifth aspect to BCP is the division plans," Jemelian says. All YCA divisions and subsidiaries have prepared business continuity plans. This includes the six main business units: piano, band and orchestra, pro audio and combo, commercial audio systems, consumer products, and Yamaha Electronics. In addition, YCA has various divisions or departments handling artist relations, research and development, music education, software, finance, operations, credit, information technology, human resources, and administration. YCA also has two factories in the U.S. that have developed business continuity plans. "Each division or company has created their own plans, and that is important," he says. "A lot of companies think of BCP only with respect to technology issues but there are many other critical functions that take place." BCP plans include:
- Contact information for employees
- Information about critical functions and step-by-step procedures
- Documentation of grab box contents
- Employee redeployment plans showing which employees could be reassigned to another area within Yamaha at the time of a disaster
- Contact information for vendors, customers, and other stakeholders
- Vital records.
The essential feature of these plans is that they "are written in such a way that they identify priorities." Critical functions are detailed out from day one through day 21, with step-by-step procedures for every function.
Return on Investment?
Building the business continuity program has also resulted in better business processes, Jemelian says. "I am most excited about how our BCP program provides synergies with our Process Excellence Project (PEP). The PEP project deals with process excellence and innovation, "looking for ways we can do things more efficiently and enhance our customer service. I am finding that there is a blurring of these two projects. Improvements made on BCP actually become very valuable for the PEP team." For example, prior to the BCP push, customer contact information was stored in a variety of databases around the country. "It was in employees' Daytimers. Some divisions used Act or Goldmine. So we centralized those databases into one database using CRM [customer relationship management] software." For business continuity, that provided "a lot more security from a vital records perspective, but as a company it also makes us a lot more efficient."
"Another area that we have addressed is imaging, starting with the credit division and the customer files. Those were an area of exposure to us. Duplicate copies of these customer credit documents and security documents did not exist. "From a continuity perspective, the decision was made to image these documents. The vital record exposure was addressed, and process improvements also were realized. "Now people just go online to view those documents. They no longer have to run around the building trying to find the file," Jemelian says, adding that, "Document imaging has expanded to include the finance division. We expect imaging to expand to other divisions over the next 18 months."
While Jemelian says YCA's program may sound both extensive and expensive, he believes it is worth every penny. "Up front we had to answer some key questions," including, "How vulnerable are we at Yamaha?" YCA's southern California location puts them at risk for earthquakes. The company is also adjacent to a freeway. To justify the costs of the project, we needed to address the long-term impact to our business in the event of an interruption to our business. "We needed to answer the question of how loyal was each customer? We answered that for every customer we have, and that was a key point to our ability to justify the ROI for this project," Jemelian says. "We do have insurance that would cover lost profits from an interruption to our business, but what it doesn't cover is the loss of future business with those customers." What YCA found was that some customers "would still be there even in the event of a prolonged shutdown of four, eight, or 12 weeks. It wouldn't be great for them. However, they would be there for us when we got back up and running."
Other customers, such as the mass market, would need to fill the shelf space if Yamaha product was not delivered as planned. "It is very difficult to get that shelf space back," says Jemelian. Jemelian is a true believer in the business value of BCP. "Many companies view BCP as a loss leader rather than a strategic initiative," he says. But Jemelian says he thinks the events of September 11 helped to change that. "I do think many companies see this as strategic now," he says.