When you first get up in the morning, before the first cup of coffee you hear on the radio or see on television that some disaster has occurred. You express your condolences out loud and are thankful the disaster was not in your neighborhood. On the way to work you see an accident or a fire and again you are thankful.
I have spoken with people who have survived disasters, accidents, and fires. Not one of them ever expected it would happen to them that day. There is often no warning on the most impactful of circumstances.
How can you make your enterprise truly resilient? There are only three things you need to do. First, accept the risk and own it. Second, partner with others, or third, outsource effort to another organization. There actually is a forth option: do nothing. That doesn’t fit this topic, and I will let you determine if it is a proper corporate response.
Corporate offices: If you are a company of size, you probably have multiple locations where employees work on a regular basis. You might own the facilities or have a partnership with other companies or lease the space (outsourcing). As your business conditions lead to a workforce reduction, don’t be hasty to move out of the space that you are not currently using. There are costs of giving up the space: remodeling, lease termination costs, etc. Compare those costs to the costs of rapidly acquiring and completely outfitting space when you have lost your capacity in another facility. A partnership may allow you to expand and contract your space needs as issues arise. In full outsourcing, you are leasing the space, and there may be long-term benefits to ride through the current business downturn and have a positive impact over time.
Corporate functions: Again, if you have multiple locations, consider having representatives from each of the corporate functions at each location. You can have people cover job requirements at an alternative site even during normal work times. You can partner with other organization that has similar requirements. Although you will always need to keep core employees inside the corporation, you can look at using outside services for non-core functions: a payroll service (with Internet-based capabilities), bank lock boxes so funds can be handled, etc. Unless medical insurance is your core business you probably have already contracted a third party to manage this for you.
Information technology: You have heard that there are significant changes in technology and the associated footprint over the past couple of years. You have walked by partially occupied data centers and wondered if you could take back some of the space. You should consider keeping the space in tact; you are going to need the power and cooling to support your new technology. You also have space that you can use to immediately outfit if you lose another facility. You could also work with another enterprise to sublease space to them. An alternative is to outsource the technology department, including the servers, to a third party that specializes in data centers and technology management.
Sales force: How many of your sales force really need to be in the office all the time? Could they be better served by sharing offices in corporate locations with the rest of their time on the road? Do the home offices have or conduct a portion of their work at wireless Internet locations? Can you partner with a third party for local office space that they can use on an as-needed basis? Would your enterprise be better served by using manufactures, representatives that market your goods but are not on your payroll?
Logistics and supply chain: As an enterprise you are probably looking at maintaining the lowest dollar value of on-hand inventory, so you have moved to a just-in-time and single-source inventory philosophy. The enterprise should consider how much inventory they want to maintain onsite at the enterprise location or how much they want the vendor to maintain in on-hand inventory. The enterprise could also store everything offsite in a leased area and only ship in materials that are needed for the current work shift.
Manufacturing: All manufacturing could be conducted at a single facility owned by the company, or the risk could be spread across facilities. Again, as the workload volume changes, consider not giving up the extra space and look forward to the longer corporate strategy. There are outside firms that are interested in taking on additional workload as the need arises for a price that may be surprisingly similar to the cost of doing business in the enterprise shop. These businesses absorb the ebb and flow of the work volume. The third alternative is to outsource manufacturing to an external party. This puts your business at risk if the third party cannot perform, but in some cases it may be worth the risk.
Quality assurance: All of the quality assurance functions can be conducted in house. If it is determined that there is an issue with products shipped in from a vendor, is there time to react without impacting the production schedules? There is a possibility for a partnership with the supplier, leading to increased quality in their manufacturing location. You may be approached by your customer to increase your levels of quality and inspection at your manufacturing sites. You can also hire an outside firm to handle your quality requirements.
Finished goods inventory: The enterprise can maintain the entire finished goods inventory at the end of the production line. If you lose the production line, what happens to the finished goods? They are most likely not available either. You can contract a third-party logistics house to transport and maintain your inventory. This moves the risk, but there is always a possibility that the product mix will not meet the customers’ needs. A third option is to partner with your customer to jointly hold an amount of inventory, based on a rolling number of days from the purchase order requirement, at a third-party facility. The customer can draw down the materials as they need them, even when their internal requirements change, and can be invoiced when the product finally ships.
I realize that you have more departments than I have outlined. But if you extend this philosophy process across all of your departments and lines, the outcome is the same. Not every department will be a candidate for the same solution. Your senior managers, the same people who are interested in a bonus for a job well done, should be working together to see how the enterprise can best leverage these three options.
Build the three concepts: accept, partner, or outsource into the enterprise. Add the philosophy into every business dealing and contract in which you enter. Take one step at a time, and you can achieve true enterprise resiliency.
Howard Pierpont is retired from Intel Corporation where he was a business continuity manager for engineering. He is the chairman of the board for the Disaster Preparedness and Emergency Response Association (DERA: www.disasters.org). He also is on call with FEMA to provide long-term community recovery support to communities impacted by disasters. He can be reached at firstname.lastname@example.org.