Manufacturing strategy is widely recognized as an integral part of a firm’s overall corporate strategy to gain and retain competitive advantages.
Advances in computer- and communications-based technologies have contributed to an explosive growth in automated approaches to the implementation of manufacturing strategies within organizations.
The tools of advanced technologies, properly and effectively utilized, have harnessed a wide range of benefits for firms, including reduced costs, increased productivity, greater flexibility, higher quality, etc., enabling firms to improve their competitive position in a number of ways.
These benefits and the resultant competitive advantages can be directly traced to increased reliance upon information and communications in real-time, which have effectively removed time and distance as barrier to competition.
However, these computer- and communications-based manufacturing solutions have also created, or have the potential to create, significant risks due to disasters. Consider the following scenarios:
- Company A, a major manufacturer of snack foods, has all of its four large warehouses completely automated with bar-code technology for inventory control and robotics-based warehouse handling. One of its large warehouses in the east coast suffers a major disaster due to a once-in-a-100-years snow and ice storm, which has knocked out all power to the warehouse and has prevented loading, unloading, and driving of its trucks due to icy roads!
- Company B, a major light equipment manufacturer with full CIM implementation and just-in-time and flexible manufacturing systems, is in the path of a major hurricane of the Hurricane Andrew variety!
- Company C, a major mail-order company, has its fully automated warehouse in Connecticut but all its mail-order operations in the World Trade Center building in New York City!
- Company D, a small manufacturing firm with CAD, CAM, MRP II, and FMS systems fully integrated into a CIM/ CIE concept, suffers extensive damage from a tornado that has ripped its roof apart and flooded the facilities due to torrential rain!
While these are imaginary scenarios, disasters of these variety are indeed real. While most businesses protect themselves with business interruption insurance, can these companies actually survive such disasters?
Can they recover from the loss of data and property effectively and in reasonable time to meet their customer orders and demands? Can they continue to be competitive in the market place, or are they likely to lose customer confidence slowly and painfully in the future?
While daily backup and offsite storage are essential procedures for firms dependent on automation of their manufacturing operations, can these firms recover and resume operations effectively and efficiently within a specified time period?
Recovering Technologies Only means Recovering Facilitators
There can be no doubt that data processing and communications technologies are merely facilitators of efficiency and effectiveness in transacting business; after all, businesses thrived even before the days of the computers and the telephones.
What is important to recognize, however, is that these advances in technologies have certainly resulted in changing the fundamental ways in which business is conducted in modern times. Advances in computers and communications technologies have led to changes in business processes and business functions to such an extent that these changes have also resulted in significant transformations in organizational, structural, strategic and competitive environments faced by organizations today.
Despite such marvels of computers and communications technologies in conducting the ‘normal course of business,’ recovery and resumption of these technologies during a disaster merely means one has recovered the facilitator, but what about the facilitated? That is, the business processes and the business functions which are facilitated by these technologies?
In disaster recovery and contingency planning, it is imperative that we keep the business process/business function recovery and resumption in focus at all times. For instance, company A with its automated warehouses, Company B with fully automated manufacturing, the mail-order Company C with its operations interrupted by bombing, Company D devastated by a tornado, and other small firms as well as medium and large companies may pride themselves on their ability to recover data from their offsite storage facilities. However, what good is the data if there are no concomitant plans to recover manufacturing and business functions, such as making the deliveries from the warehouses, taking mail-orders, and serving customers from an alternate site. In most, if not all, cases, data happens to be static while business processes / business functions are dynamic, implying that data recovery gets an organization back to the point when the disaster struck, whereas recovering business functions alone can take the organization forward. In disaster recovery and contingency planning, then, one must not only consider technologies (the facilitators) as key areas of concern for recovery and resumption, but also the business processes and business functions (the facilitated). Disaster recovery and business resumption plans can gain significantly from this view of technologies as facilitators of business processes/business functions.
The Need for Disaster Recovery and Business Continuity Planning: The Case of the Manufacturing Automation
Increasingly, manufacturing automation is not just seen as a strategy for gaining competitive advantages but also for the very survival of businesses. As a matter of fact, the concepts of computer integrated manufacturing (CIM) and computer integrated enterprise (CIE) have led to unprecedented revolution in the manufacturing sector of developed economies on a global scale, perhaps even comparable to the earlier industrial revolution. The CIM and the CIE concepts have fostered a growing and still-emerging focus on both upstream and downstream aspects of manufacturing. Upstream applications include design engineering, CAD/CAM, robotics, and flexible manufacturing systems. Downstream manufacturing considerations utilizing CIM concepts include MRP II, KANBAN, Just-in-Time or JIT, and shop floor scheduling and control. Increasingly, the CIM concept is not only being viewed as a means to solve problems which inhibit excellence in manufacturing but also as a foundation upon which to build a computer integrated enterprise (CIE) which can provide both intra-organizational and inter-organizational integration of information and production systems.
One of the key ingredients in the CIE concept which is most relevant to disaster recovery and business continuity planning is that intra-organizational and inter-organizational integration include both information and functionalities. This means that CIE seeks to integrate not only “islands of information automation” but also “islands of functionality automation.” This implies that if and when a disaster strikes a manufacturing organization that is part of a CIE, an unprepared firm is likely to suffer loss of information as well as the ability to function. While automation of information flow can be restored with traditional backup and recovery procedures, albeit to a limited extent, restoration of manufacturing functionalities, especially in a CIE environment, needs significant attention from the personnel, property, and information perspectives.
Even with the available disaster recovery and business continuity planning methodologies and disaster recovery vendor services, disaster recovery and business continuity planning for manufacturing functionalities suffers from a lack of much needed prescriptions for mitigating risks from natural and man-made disasters. After all, recovering computer and communications systems in a remote “hotsite” alone is not enough to keep the product pipeline flowing. This shortcoming in corporate-level disaster recovery and business continuity planning can be especially detrimental in a CIE environment where inter-organizational integration leads to interdependence of firms along the value-added chain (see Figure 1 p. 59) within and across industries. In short, firms no longer have disasters in isolation; other firms, both upstream and downstream along the value-added chain, are likely to suffer from a disaster, as presented earlier in the hypothetical situations.
This means that any firm along the value-added chain may be required to have disaster recovery and contingency plans not only under the scenario that the firm itself suffers a disaster, but also under the likelihood that its suppliers and/or customers along the value-added chain has a disaster, thereby resulting in business interruptions along the value-added chain.
Disaster Recovery and Business Continuity Planning in the CIE Environment: A Value-Added Chain Approach
Consider firms that are integrated in a closed-loop manner into a CIE along the value-added chain in an industry, as shown in Figure 1.
In this simplified value-added chain representation of a CIE, if one or more firms located in one node suffers from a disaster, firms in other nodes, both upstream and downstream, are likely to suffer the consequences of the same disaster. For instance, if a firm in the warehousing/distribution node is shut down due to a major, prolonged snowstorm, its impact is likely to be felt by the customer/market node downstream as well as the production, production scheduling, and other nodes upstream.
While some of the impacts are tangible and easily identifiable and quantifiable, most impacts are intangible and difficult to quantify.
Examples of intangible impacts due to disasters include loss of customer confidence and satisfaction and concomitant loss of customers and market share. In an integrated CIE environment the risks of such intangible losses are even greater. Such losses would include loss of supplier confidence, resulting in the loss of suppliers-based competitive advantages; loss of competitive ability to thwart substitute products and services; and eventual erosion of barriers to entry into the industry due to exposure to unmitigated tangible and intangible losses from disaster.
Disaster Recovery and Resumption for Manufacturing
It is clear from our discussions thus far that disaster recovery and business resumption for manufacturing firms take on added dimensions. First, the recovery of data and communications alone is insufficient because these are simply facilitators of the business processes and business functions.
Second, when firms are nodes in a value-added network of a computer integrated enterprise (CIE), disaster recovery must consider at least two dimensions: a firm’s own primary recovery plan when a firm has a disaster of its own, and a secondary disaster recovery plan when another firm in the value-added CIE network has a disaster along with ripple effects along the CIE network.
Finally, any firm, be it manufacturing or service-oriented, must recognize that the recovery of data and communications is only static, that is the recovery and resumption of technologies merely takes the firm back to the state when the disaster struck; further recovery and resumption involves business processes and business functions which are facilitated by the technologies.
It is imperative that firms, which have already automated or planning to automate most, if not all, of their manufacturing operations, consider the impact of disasters on their operations.
Ample challenges exist for contingency planners and vendors alike to develop and implement specific disaster recovery and business resumption options as firms worldwide advance toward the goals of agile manufacturing and global competitive advantages through continued manufacturing strategy automation.
In this article we have presented a discussion of a notable, recent phenomenon in our manufacturing organizations, namely the automation of most of the functions and processes in a manufacturing organization.
While such automation facilitates agile manufacturing and global competitiveness through the disappearance of time and distance barriers to competition, increased dependence on advanced computer and communication technologies also creates significant problems and challenges in the context of disaster recovery and business continuation planning for these types of organizations. The challenges multiply further when these firms are part of a value-added network in a computer-integrated enterprise environment.
We also suggested frameworks within which these problems and challenges may be analyzed; these frameworks included a value-added CIE network, along with a table discussing the impact of natural and man-made disasters on business functions and processes in manufacturing organizations in the CIE network.
We then proposed alternative disaster recovery and business recovery strategies for the various technologies (the facilitators) and the business processes / business functions (the facilitated). We believe that our proposals in this article constitute a starting point for a careful examination of disaster recovery and business resumption planning considerations in automated manufacturing environments.
Raja K. Iyer, Ph.D., CDRP is associate professor of information systems and management sciences in the College of Business Administration at the University of Texas at Arlington.
This article adapted from V8#3.