Operational Resiliency
in Today's Economy
How to stretch
and bend to be "ready for anything"
By
Jerry Ose, Principal, Tompkins Associates
Businesses
are committed to growth. Yet, while growth brings opportunities,
it also creates greater risks. Growth forces change throughout
the organization-from production to sales to supply chain
partners.
A strategy
for operational resiliency will help manage these risks by
helping you understand potential vulnerabilities in your organization
and enabling you to be better prepared for unforeseen events.
A comprehensive and well-implemented operational resiliency
plan is one of the most effective ways to help your company
survive, expand and prosper.
Operational Resiliency
Defined
Operational
resiliency differs from conventional contingency planning
because it looks at more than just how to come back from adverse
events. It focuses on helping companies understand where they
are vulnerable so they can avoid adversity as well as be ready
to "bounce back" when the inevitable happens. Think
of it this way: contingency is about how quickly you can repair
breaks. Resiliency is about knowing how to stretch and bend
so your company resists breaking, plus planning how to respond
if it does.
An example
is what happened to eBay in 1999. As customers logged onto
the site to trade their goods, eBay went dead-leaving customers
on hold for 22 hours. The failures ultimately cost eBay more
than $5 million in revenue. To top it off, the market value
of eBay stock dropped 20 percent as investors had doubts.
A good resiliency plan would have helped eBay identify potential
risks in its infrastructure, helping it avert or at least
lessen the impact of this 22-hour customer service nightmare.
Here's
a hypothetical situation with a company that makes lawn furniture.
The company may be doing everything right in its factory.
It has solid deals with its suppliers, and it's using a procurement
strategy instead of just buying. But, suppose the company
lets itself get so comfortable that it doesn't exercise its
supply chain muscles. Imagine how the company would react
when its supplier of aluminum chair frames goes out of business
suddenly or has a strike. Suddenly, it's caught not knowing
who can help because it doesn't have a resiliency plan in
place. Keeping aware of your supply chain alternatives is
one way to stay resilient, even while you're improving business
and are on top of your game.
Resiliency Impacts
Everything
Because
of its popularity during the Internet boom, many people still
equate resiliency with IT security and how to keep out hackers.
A lot of talk about security after the tragedies of 9/11 has
focused on the same areas, but operational resiliency is a
much bigger issue. Hundreds of events can negatively impact
companies if the proper precautions aren't taken into consideration.
That's true whether you're debating selling your products
overseas, running less-expensive material through your machinery,
or instituting just-in-time inventory.
Resiliency
is specific to the company that undertakes it. Like any best
practice, it doesn't always mean the same thing in every company.
A comprehensive operational resiliency outreach goes beyond
IT security or regulatory compliance to identify potential
risks, determine viable strategies and implement a plan that
reflects your organization's goals. Ideally, resiliency should
cover these four areas:
- Information
technology and communications infrastructure: Infrastructure,
security, software and hardware
- Operations
processes: Management, engineering, production, maintenance
and financial controls
- Physical
security: Theft, utility supply, personnel safety, natural
disasters and facility integrity
- Supply
chain: Customers, suppliers, distribution, traffic and transportation,
inventory and warehousing
Resiliency
planning should include a detailed and thorough assessment
to examine those four areas. Look for targeted and clearly
defined questions addressing the key areas of your business.
The results of this assessment should help you prioritize
and identify risks that you might not normally recognize in
your day-to-day operations. An effective solution should be
based on:
- Properly
communicated plans, both internally and throughout the supply
chain
- Evolving
regulatory and industry guidelines
- Redefinition
of security, supply chain, operational and technology requirements
- Consideration
of costs and benefits
The Benefits of
Resiliency
Operational
resiliency minimizes financial loss by putting in place plans
and procedures to react appropriately to unplanned downtime.
It minimizes expensive recovery efforts. It can enhance your
reputation because you are able to show your customers and
other supply chain partners that you have taken steps to prepare
for any event. It enhances your competitive advantage because
you have time to focus on advancing your company's mission,
not on operational concerns. And it gives you peace of mind.
You and your employees will be assured that you have taken
the time and committed the resources to be prepared for the
future.
In a
world where everyone is trying to get lean and fast, there's
less and less chance to make up lost momentum and lost business
if your operations stumble. Incorporating resiliency into
your company culture is challenging, but it could save you
millions of dollars in time, labor and wasted resources in
the future-and could mean your company's survival.
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