Debate raises issues of disaster impact

24 June 2011

24 June 2011 | Angeline Albert

Purchasers were told to strike a balance between reducing costs and increasing supply chain risk at last night’s CPO Agenda Question Time debate on disaster recovery.

A panel of four guest speakers, chaired by CPO Agenda editor Steve Bagshaw, told an audience of procurement professionals gathered at the Royal Institute of British Architects (RIBA) that the focus on achieving efficiencies must not be done at the expense of addressing supply chain risks. They agreed that organisations must have business continuity plans in place to better manage the impact of disasters.

Panellist Nick Wildgoose, global product manager, supply chain at insurer Zurich Financial Services, said some problems had arisen as a result of the move towards single sourcing, globalisation and a focus on lowest cost and ‘just in time’. “Yes, we’re reducing costs in the short-term, but aren’t we increasing risk over the long-term and isn’t there a balance to be struck?”  

He urged purchasers to tell their CEOs that purchasing is not just about cost savings. Fellow panellist Catherine Petersen, principal consultant at SunGard Availability Services, which sponsored the event, agreed that CEOs should be encouraged to invest in business continuity plans. She said: “Lean [processes] doesn’t necessarily mean more resilient.”  

Tom Rae, group director of procurement at NSG Group, which includes glass manufacturer Pilkington, admitted the company’s suppliers had been affected by last March’s tsunami in Japan. He said buyers must focus on critical tier one suppliers and understand who they are because they can’t do them all. “We’ve isolated 48 key global risks – supply risks,” he said.

He admitted it was difficult for suppliers to share potential vulnerabilities, but his company had overcome this by stressing the importance of their awareness and saying that not sharing such information would mean the supplier would be put on their risk profile.       

Wildgoose told the audience to check whether their supplier’s manufacturing facilities are in earthquake or flood zones by asking insurers.

Rebecca Green, Accenture consultant in supply chain practice, spoke of how companies’ fear of sharing information with competitors may result in similar contingency plans that could exacerbate their efforts to manage risk. In response, Petersen agreed that companies must collaborate to ensure they don’t make the problem worse. 

Audience member Guy Cullum, contingency planning officer at the Royal Borough of Kensington and Chelsea, said more collaboration was key. He told the panel that councils across London were currently working together to effectively standardise business continuity plans.

A video of the event will be available from Tuesday on SM's YouTube channel

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