Perspective >> Beyond Continuity Planning – A Value Chain Approach

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Version History

REVISION CHART

Version Author(s) Description of Version Date Completed

1.0 GMT/MW/DA First Draft 21 December 2011

2.0 GMT/MW/DA Second Draft 26 December 2011

3.0 GMT/MW/DA Third Draft 29 December 2011

4.0 GMT/MW/DA Final Version 4 January 2012

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Document Owner The primary contact for questions regarding this document is: Author: Gregory M. Thomas, Mike Williams, Duangporn Akkaravivat Project Name: Phone: Email:

Document Approval Document Name: Perspective >> Beyond Continuity Planning – A Value Chain

Approach Publication Date: 4 January 2012 Prepared by: Duangporn Akkaravivat

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Table of Contents Introduction ............................................................................................................................... 5

Value Chain Continuity .............................................................................................................. 6

Stakeholder Involvement ....................................................................................................... 7

Distribution Models ............................................................................................................... 7

Employee Support Programs ................................................................................................. 8

Coordination of Activities ...................................................................................................... 8

Conclusion ................................................................................................................................. 8

About Foundation Consulting.................................................................................................. 10

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5

Introduction

The 2011 monsoon season marked the worst flooding in more than 50 years, leading to the

disruption of millions of lives and the closure of thousands of businesses. The Thai Government was

predictably ineffective in coordinating a response to the short-term emergency and has yet to fully

implement long-term preventive actions. This has left the business community largely on its own;

given how recent experiences bias expectations the question of how to effectively prepare for the

long-term is of particular importance.

While much has been written on crisis management, this view is reactive. Organizations who have

implemented effective Value Chain Continuity Plans were in the best position to support customers

and gain an advantage over their competition.

What can business leaders do? Based on our research, leading organizations are taking a 360˚ view

and have successfully implemented Value Chain Continuity.

Fitting the Pieces Together

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Value Chain Continuity

Recent events have affected customers and suppliers with the resulting disruptions leading to a

complete failure to deliver the right goods or services at the right time for the right price. The

impact on cash cycles could prove catastrophic especially as the frequency of what was previously

categorized as a 1 in 30 occurrence increases in Thailand’s Central Region.

The lesson learned is that leading organizations integrate with Suppliers and Customers through

Value Chain Continuity Plans to ensure that value added goods and services are available when

needed. By taking this approach leading organizations can lessen the impact of potential black

swans by assessing:

Predictability of events (if/then),

Limits to the events impact,

Countermeasures to prevent cascading failure,

Errors in reasoning that lead to a sense of false security,

Integrating this information into a 360˚ view of the value their organizations offer to customers.

In addition to ensuring that all aspects of the plan are SMART, the plan should also address:

Delegation of responsibilities with clear chain of command.

Information sharing, storage & recovery that utilizes the all available technologies.

Site protection and/or relocation.

Extended enterprise capital & insurance requirements.

Leading organizations not only demand the active support of suppliers but are also more closely

integrated with customers. In this way, leading organizations are positioned to win market share at

a time when their competition is ill-prepared to withstand the crisis.

Aspects of Value Chain Continuity include:

Stakeholder Involvement.

Distribution Models (including relocation & logistics support.)

Employee Support Programs.

Coordination of Activities.

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Stakeholder Involvement

Leading organizations actively include extended enterprise stakeholders not only in the

development of the plan but also in its implementation. For these organizations Stakeholder

Involvement is crucial to overcoming crises as it creates a two-way platform to capitalize on

opportunities before the competition.

Distribution Models

The floods stretched fulfillment systems to the brink of collapse and in some cases shut down parts

of the local (consumer products) and global economies (hard disk drive, auto parts). The stresses

affected organizations in different ways, from the forced relocation of Centralized Distribution

Centers to the suspension of operations to simply rerouting to secondary or tertiary sites.

One outcome of the recent crisis is that leading organizations are rethinking their distribution

models and in some cases will be decentralizing to a certain extent by realigning to where their

customer base actual is. While Bangkok and the surrounding provinces represent the largest market

in Thailand, second level cities are actually growing faster than Bangkok. Ultimately,

decentralization will reduce risk as the major road and rail routes to the north and northeast from

Bangkok are in a flood plain.

Source – Thailand Macro Economic Briefing (Suthiwart-Narueput, S)

2,897

3,748

2002 Bangkok Vicinities Other Provinces 2009

Increase in the number of employed persons in municipal areas with > 15k montly income between 2002 and 2009

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While revised distribution models will depend on customer requirements it would appear that

several trends are emerging, including:

Hub and spoke model.

Higher reliance on VMI to ensure availability & diversify risk.

Integration with key customers to pool resources.

Increased reliance on 3rd party distribution partners.

Supply base diversification with alternative sites approved in advance.

Employee Support Programs

Most business leaders agree that people are the most important asset of their organization. One

best practice observed during the crisis was the continued payment of employees even when the

work site was closed. While this commitment to employees during a crisis is laudable, it should not

stop there. Leading organizations look for inventive ways to utilize their idled employees for the

benefit of the community. However Corporate Social Responsibility only goes so far and cannot take

the place of good business practices. By recognizing the value in having comprehensive Employee

Support Programs in place, leading organizations look beyond direct financial assistance to include

insurance options, access to funding, as well as setting up a network to educate employees on how

to deal with potential risks and providing logistical support in times of need.

Coordination of Activities

Not unlike most governments, the Thai Government proved incapable of effectively coordinating

activities in a timely manner; unfortunately, the private sector fared only slightly better. From a

value chain perspective, leading organizations take a 360˚ view to ensure value for customers in the

toughest of operating environments. By coordinating activities with key suppliers and key customers

organizations can pool resources, reduce waste, and achieve effective scale to overcome challenges.

Conclusion

Leading organizations are actively integrating Value Chain Continuity Planning into their day-to-day

activities while seeking to fortify their value proposition for customers. This short-list of best

practices can easily be expanded depending on the specifics of the organization in question. The

next step for leaders is to begin thinking beyond continuity planning in a linear fashion and seek

opportunities to integrate suppliers & customers into an expanded Value Chain Continuity Plan.

Through this approach leaders can recognize and overcome potential crises and ensure that their

organization is well positioned as a market leader.

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About Foundation Consulting We love challenges! We love what we do! Our team has helped more than 140 companies in the Asia-Pacific Region boost organizational performance and alignment, resulting in sales growth of up to 300% and increasing profits by millions of dollars. We know the difference between strategy and implementation. We cut through bureaucracy, improve productivity, and strengthen the value chain. We deliver results. Who We Work With We work with growth companies and our knowledge covers the world's major industries and today's most crucial business issues. Our broad range of expertise and straight forward approach ensures that we deliver unique adaptive solutions to your toughest challenges. What We Do We help clients to Grow Sales, Grow Profits, and Grow People! How We Do It Our approach, W.I.S.E., is simple yet scientific and leads to identifying the needs of all stakeholders and crafting a specific yet sustainable plan that delivers results through an adaptive, straightforward approach that cuts through the bureaucracy, improves productivity, and strengthens the value chain.

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