After almost three years of having to deal with the impact of COVID, many American businesses are still not taking proactive steps to mitigate against the threat of a pandemic to supply chains. Despite what the U.S. has gone through — and more recently, with Monkeypox landing on watch lists — research shows that only 39 percent of companies are investing in tools to monitor risks and disruptions.
How a company prepares for an emergency health situation is key to ensuring that its supply chains remain as operational as possible. An essential determining factor is whether a company has chosen a proactive or reactive stance when dealing with the various threats that may occur across its supply chain.
Proactive strategies are a general set of management principles to scan the horizon for indications that technical, naturally occurring, or man-made events could create an adverse business environment, and then effect strategies to either prevent or reduce their impact. Based on the perceived level of threat posed by these identified risks, managers will need to make relevant changes to the company’s operational processes. Current clients will need to be informed of potential disruptions, and employees will be briefed about changes to their work schedules and processes.
Reactive pandemic strategies imply that a company will wait for an event to occur before responding. This approach involves decision-makers hedging their bets that a potential event may not occur, or if it does, that its impact will be less severe than anticipated. By implication, the company’s reputation, profitability and viability may be at stake. Moreover, the customers end up bearing some of the risk in this approach, as failure can end up placing them at a significant disadvantage.
While a reactive approach may be considered a necessity, owing in a large part to the unpredictable nature of business, it is a mistake to think that a proactive strategy is overly complex to put in place. After all, it is often easier to check for smoke than put out a fire.
For instance, from the standpoint of a reactive management plan, as companies wait for a critical incident to occur, they may experience significant pressure across various departments and their supply chain. As we have observed in recent years, everyone involved in manufacturing and delivery will feel the impact once a serious disruption occurs and the reactive strategy kicks in.
I.T. departments will focus on keeping the company’s information infrastructure operational and secure, ensuring those employees who can work remotely have all the necessary assets and bandwidth to do their job. I.T. will also need to have onsite support for employees who cannot work from home or from a recovery site.
The business continuity team will have to ensure the company can deal with the current interruption of normal business operations, manage the company executive’s concerns surrounding the continuity of operations, and decide whether to invoke their business continuity plan.
HR departments will have to deal with quarantining and isolating employees, hiring, and training new employees to replace those unable to work, while also responding to employee-related concerns. The stresses placed on employees by a pandemic may introduce enduring mental health concerns, which will need to be addressed by HR and qualified providers.
Supply chains will begin to operate at a lower capacity as the impact of a reactive pandemic strategy flows down and across the industry. Employees involved in manufacturing and delivery will potentially face significantly increased operational stresses. The combined effect of these evolving challenges is the disruption to the on-time delivery and quality of services and solutions — which will be felt by all stages of the supply chain, including customers, suppliers, and partners.
Given that reactive approaches may result in sub-optimal outcomes, how can companies implement a more proactive strategy in the future?
Board involvement: The responsibility for pandemic readiness must sit primarily at the board level. C-suite executives need to be actively involved in the entire planning process because they are directly responsible for a company’s most important asset — its people. While mid-level managers perform a critical role in keeping supply chains moving, it is the presence and involvement of C-level decision-maker that not only communicates the importance of planning but help to create the momentum that is needed to drive this process to completion.
Being pandemic-ready must no longer be seen as something to tick off a to-do list. Should a company be impacted by another pandemic where there are no proactive mitigation strategies in place to deal with the crisis, directors will be held accountable. Shareholders, investors, and customers have the right to expect competent leadership to manage a crisis well and in their best interests. Pandemic preparedness needs to be considered as part of a company’s overall governance, compliance, and risk management process.
360-degree view: One of the things that recent experience has taught us is that having a comprehensive view of operation is essential to sound oversight. Business custodians must track relevant disease risks, and determine where an interruption in the supply chain could occur. They must then estimate the knock-on effect on the supply chain as well as the potential impact on individuals within the company. Monitoring developments in employee health may, therefore, be a core component of this capability, and requires access to actionable employee data. In practice, this can be challenging, and ought not to be performed ad hoc. Rather, it is worthwhile considering carefully what information is at a minimum necessary to effectively implement protective measures both securely and ethically.
Integrated approach: Supply chains cannot be protected by a siloed approach where various departments do their own thing. An integrated approach is vital. It involves several core departments such as H.R., finance, I.T., risk management, and manufacturing — among others — all working in concert to build resilience and agility. Their objective is to protect the supply chain and ensure the optimal functioning of the business under adverse conditions by determining risks, developing integrated plans, and activating unified responses to threatening events. This is achieved when an integrated pandemic approach is built into the company’s business continuity plan.
Third-party preparedness: Ensuring third-party preparedness is a core strategy that significantly contributes to protecting a company’s productivity and ensures it can meet the service level agreements that it has with its own clients. Companies must ensure that their partners and suppliers have their own pandemic response strategies. If partners and suppliers do not have these strategies in place, then a company may not be able to receive the services and components that it needs to deliver goods and services to its customer base. In a recent Manufacturing Supply Chain Study conducted by Deloitte and the Manufacturers Alliance, 83% of surveyed supply chain executives responded that they would be strengthening existing supplier relationships to avoid disruption.
Tactical plans: For proactive strategies to work, there need to be solid tactics. It is important to have a full tactical response plan in place, that can be activated within a specific amount of time after a pandemic surpasses the company’s risk tolerance.
This plan must include pre-approved response systems that can confirm which employees have been in contact with each other in a facility or across a supply chain. This information is typically derived from second-generation automated contact tracing. In addition, businesses should develop pandemic toolkits that are stocked with personal protective equipment that can be accessed at a moment’s notice.
Proactive pandemic management strategies are an investment in business viability and supply chain resilience. These strategies also enhance business operational capabilities and help employees feel confident that their executives have the best interests of everyone at heart.
Dr. Steve Cantwell is the lead safety researcher at SaferMe.
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