A recent study highlights the potential problems that can occur if a company's business continuity plans do not ensure continuity in its supply chain.

The Eli Broad Graduate School of Management at Michigan State University conducted "Effective Practices in Business Continuity Planning for Purchasing and Supply Management."

The study highlighted four key elements of a good supply chain continuity plan:

• Awareness that the supply chain is susceptible to potentially crippling disruption;
• Prevention through risk identification, risk assessment, risk treatment and risk monitoring;
• Remediation plans for recovery from a disruption;
• Knowledge management that calls for a shareable, post-event audit of supply chain disruptions throughout the organization and its supply chain.

Other findings showed that some supply chains have become increasingly fragile and prone to interruptions. In addition, when something does go wrong, the impact can be considerable. As a result, the study found that the managers in the "best practice" companies have developed an awareness of the potential risks to their supply chains and have implemented systems to anticipate and proactively manage these risks.

Assistant professor George Zsidisin, associate professor Gary Ragatz, and professor Steven Melnyk wrote the study, which was commissioned by AT&T.

While the distribution end of the supply chain is crucial, Prof. Zsidisin added that "overall, there's simply been a greater reliance on all the links in the supply chains—not just the distributors."

There was no one particular potential weak link in a supply chain, he added.

"Disruptions can result from anywhere in the supply chain," he said. "Firms have become more reliant on their suppliers to get lean, but very often don't own the transportation assets or their warehousing. They outsource that to other firms, distributors or 3 PLs, and have a greater reliance on that."

In addition, the study did not find any one industry that seemed especially susceptible to a breakdown in service.

"Industries where there is a significant focus on just-in-time and leanness, or they have little to no inventory, may be more fragile, especially if they have few contingencies available," said Prof. Zsidisin. "Firms become more vulnerable if they have fewer supply options."

A copy of "Effective Practices" can be found at: www.bus.msu.edu/msc/research.html.