Estimated reading time: 3 minutes

Operational Excellence: Update Your Business Contingency Plan

With the unprecedented events associated with COVID-19, companies are facing worst-case scenarios and looking at ways to manage work stoppage or limited production for essential manufacturing needs. This column provides a practical guideline to create or update your business contingency plan to help you manage your business during a crisis situation.

An effective business contingency plan consists of two categories: business continuity and disaster recovery. Business continuity provides you a structure to identify critical functions in the organization required to execute your business plan over time. On the other hand, a disaster recovery plan is a process to help your organization navigate adverse situations to help your business stay afloat.

Business Continuity
Business continuity consists of seven essential elements in a manufacturing organization.

1. Governance: Define the roles and responsibilities of executive leadership. Define a back-up plan in case you have departures of leaders in the organization.

2. Personnel: Define talent acquisition and development of employees. The objective is to retain top performers and continuously develop skills in the workforce.

3. Manufacturing Facilities: This section covers many areas within manufacturing operations. At a minimum, identify all key equipment and back-up plans in case of malfunction and requirements to continue to have utilities, equipment maintenance, compliance with regulations, and security to support operations.

4. Technology Roadmap: Define current and future process capabilities. Identify the direction that the organization plans to take to sustain or increase revenue based on competitive technological advantages. Consider including the protection of intellectual property.

• Risk: Identify risks that could affect your operations. Common risks include:

• Supplier ABC obsoletes a particular component 
• The company email or intranet is disrupted 
• An employee with unique skills or knowledge leaves the organization 
• Equipment failure of specialized technology 
• A key customer moves manufacturing orders to a competitor 

• Probability of Occurrence: Consider having five levels of occurrence (90% = very likely, 75% = likely, 50% = possible, 25% = unlikely, 10% = very unlikely). 
• Impact of Occurrence: Consider having five levels of impact (5 = severe impact, 4 = high impact, 3 = moderate impact, 2 = limited impact, 1 = insignificant) 
• Risk Mitigation Plan: Prepare a specific action plan to prevent or minimize the risk from occurring.  
• Recovery Plan: Prepare a recovery plan to remedy adverse outcomes when risk occurs.  
• Leadership: Clearly identify responsible individuals within the organization to lead risk mitigation and recovery plans to address a specific risk. 
• Reference Documentation: Reference existing procedures, standards, manuals, or other documents that provide supplemental information to help with risk  mitigation and/or recovery plans.   

1. Business Continuity Management:  Global Best Practices, 4th Edition by Andrew N. Hiles and Kristen Noakes-Fry 
2. The Power of Resilience: How the Best  Companies Manage the Unexpected by Yossi Sheffi
3. Crisis Management: How to Develop a  Powerful Program by Regina Phelps

This column originally appeared in the May 2020 issue of SMT007 Magazine.