A business continuity plan protects your business by providing the strategies and techniques for continued operations during any disruptive event, such as a hurricane or power outage. One important aspect of this plan is the company's suppliers, whose actions affect your continuity by their ability to continue operations.
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Without raw materials, equipment and essential supplies, a company cannot continue production. Any supply chain break can disrupt business. This is not limited to manufacturing operations in need of raw materials. For instance, a company in a small town may send away for its printer supplies because they are not available locally. A disruptive event in the company's area of operation or in the supplier's could impede or cut off delivery.
Companies without existing backup suppliers may find themselves subject to increased costs due to price gouging that may occur during a natural hazard's aftermath. Whether or not acquired before the disruption, alternate suppliers may increase costs if their location necessitates additional transportation costs or their product prices differ from the existing supplier.
Sole Source and Exclusive Contracts
Sole source agreements and exclusive contracts can reduce the need for requests for proposals and simplify the independent contractor process but, if inappropriately written, these contracts can lock your company into a single provider who may not be able to deliver during a disruption. Have an attorney review existing agreements to ensure they provide adequate exceptions for disruptive events affecting either party. Also, have the attorney draft a standard agreement for your company's use with all such contractors that includes text explicitly exempting enforcement of exclusivity of the agreement during disruptive events. This helps protect the firm from potential lawsuits while leaving you the latitude to form agreements with backup vendors.
Identifying and establishing relationships with multiple vendors of the same materials or products to support critical functions protects the company's production capabilities. Doing so before the need arises, as part of your business continuity program, can help you by locking in prices and reducing the time needed to transition to the alternate vendor since your firm will already be in their system and they will already be in yours.
Suppliers' Business Continuity Plans
While working on your own business continuity plan, don't forget the importance your suppliers' plans, of lack of, can have on your business. Ask current and potential suppliers if they have a business continuity plan and, if so, what their alternate plans for production and delivery of product are. If they don't have one, suggest its development and start looking at other suppliers.
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