In today’s interconnected economy, businesses rely heavily on efficient supply chain management to maintain operations, meet customer demands, and ensure profitability.
However, supply chains are vulnerable to disruptions caused by natural disasters and property damage from other perils, geopolitical conflicts, cyberattacks, and unforeseen
events.
Recently, the changing tariffs have caused uncertainty and challenges for businesses, especially those in the manufacturing sector. The potential increased cost of raw materials and logistical complications have many companies focusing on their supply chain more than ever.
To mitigate these risks, companies should ensure they have a business continuity plan (BCP) for their supply chain strategies. The NFPA 1600 Standard on Continuity, Emergency, and Crisis Management provides a framework to strengthen supply chain resilience, allowing businesses to navigate disruptions, protect their financial stability, and ensure the flow of raw materials, components, and finished goods is uninterrupted.
What is the NFPA 1600?
The NFPA 1600 Standard, established by the National Fire Protection Association (NFPA), outlines best practices for disaster preparedness — emphasizing an all- hazards approach for emergency response and recovery planning. It encourages
companies to identify risks, develop contingency strategies, and establish recovery procedures to maintain operational stability.
Key Strategies for Resilience
So, what should companies consider when it comes to creating a supply chain BCP?
1. Supplier Diversification — Businesses that rely on a single supplier or geographic region face significant risks when disasters strike. We witnessed this firsthand during the pandemic when panic buying led to inventory shortages and demand for materials skyrocketed. Companies should ensure they work with multiple suppliers across different locations. This approach mitigates risks associated with regional disruptions, allowing alternative sources to keep operations running smoothly. Considering increased tariffs on specific trade partners, diversification has also become an immediate focus for businesses focused on controlling costs.
2. Risk Assessment and Continuity Planning — Businesses should also conduct risk assessments to identify vulnerabilities in sourcing, manufacturing, and distribution, such as securing backup suppliers or pre-arranging emergency transportation routes. While not all supply chain risks are insurable, we’ve seen an increased focus on companies considering insurance solutions for dependent/contingent business interruption for specific suppliers.
3. Inventory Management and Contingency Stock — Maintaining adequate inventory levels is crucial for responding to sudden supply chain disruptions. The NFPA 1600 encourages companies to establish contingency stock and additional warehousing to improve flexibility during emergencies. This can be counterintuitive and even challenge the core principles of businesses dedicated to lean manufacturing and minimizing inventory on site. Those businesses that have invested heavily in automation to make their inventory management more efficient have helped set themselves up for success, but admittedly, automation comes with its own challenges, namely significant capital investment. Economic uncertainty often leads many companies to hold and focus on the here and now versus investing in future efficiencies. A potential insurance solution for companies to consider is trade credit insurance, which can protect them from non-payment of buyers who have pivoted elsewhere for their product needs.
4. Emergency Communication and Collaboration —Coordinating with suppliers, logistics providers, and internal teams is essential for managing supply chain disruptions, and the importance of clear communication protocols can’t be
understated. This allows businesses to swiftly respond to emergencies, reroute shipments, and adjust sourcing strategies in real time.
It’s More Than a Safety Measure Supply chain management is a cornerstone of business continuity planning, ensuring companies can navigate disruptions without suffering major financial losses.
Preparedness isn’t just a safety measure — it’s an investment in securing the future. Is your supply chain ready for the unexpected? If you’re not sure, don’t hesitate to contact
our Holmes Murphy team. We’d be happy to chat with you.