HSE440 Crisis Management

In a paper, recommend emergency decision making strategies and best practices for business continuity in regard to a crisis situation. It will likely be easier to write this paper if you use real-world examples of crises that have occurred.

In this paper you will answer the following questions:

• What are some of the strategies used?
• Why are these strategies appropriate for a crisis situation?
• What does an organization need to have in place for these strategies and best practices to work in the event of a crisis?
• In addition, your paper will include the following:
• A real-world example of a crisis situation that was handled properly.
• The decision-making strategies and best practices for business continuity in that situation.

Business disruptions caused by Supply chain management

Supply chain disruptions’ can significantly have a negative impact on a business’ reputation as well as financial performance. Take for example, Mc Donalds experienced a major crisis following a port slow down coupled with a supplier closure that led to people raising concerns on food safety  world wide and also created supply shortages.  Consequently, the sales of one of the worlds largest food chain stores were hit (Drake, 2012). The fast food giant was forced to change the management including appointment of a new CEO. Poor management in supply chain certainly played a role in all this.  This paper will analyze the impact of sourcing disruptions on the the fast food company’s bottomline, and the strategies used to limit this risk. Even though it is impossible to eliminate this risk completely,there are many strategies that the procurement taem can implement to reduce impact on supply disruptions and strengthen their sourcing strategies. The question this paper attempt to answer is what McDonalds could have done differently to avoid product shortages, and how they can get back to normal sales and supply levels.It all comes down to risk management and visibility.

Understanding how the company’s supply chain is organized and identifying and preventing risks in the ongoing operation of the chain is key to keeping the company’s running smoothly. Since supply chains outline how your business moves, they need to be protected from unforeseen incidents that could disrupt or damage them (Johnson, Leenders, & Flynn, 2011).Mc Donalds was hit by a scandal in 2014 that involved selling of bad meat in China. Consequently, this led to sales decline of the fast food giant in this region. It is here that the management of business continuity in the supply chain becomes an important business tool.

 Business Continuity (BC) and Disaster Recovery (DR) techniques are well governed and well defined  by international best practices and standards. Applying BC / DR principles to supply chains has become a critical business activity (Kildow, 2011). Business continuity management in the supply chain  includes many actions that are key: supply chain impact analysis; Development of prevention; Risk assessment of the supply chain and recovery strategy; Development of BC / DR plan for the supply chain.

  In addition, to applying Business Continuity / Disaster Recovery principles to the supply chain,The China Mc Donalds case study has revealed to what extent should the BC / DR be considered in the supply chain.Since supply chains are very complex, with many relationships that are different among stakeholders, it is essential to map their supply chain as accurately as possible.

Analysis of the impact of supply chain risks on the business

tItle : Effect of supplier scandal on profit

Source: http://www.foundingfuel.com/article/yum-china

All was going well for Mc Donalds in China, however, a run of positive results was cut short by asupply scandal in 2014. It was down hill after that because the company lost a significant market share. hEnce the results posted for the 2014/15 financial year recorded a major decline.

According to the company’s chief executive conducting  a supply chain impact analysis is the first step. Hence they identified  interdependencies within and outside the Mc Donalds and documented the financial and operational impact resulting from an interruption in those dependencies. An important goal of impact analysis is to identify the links in the chain that have a significant impact on the success of the chain. The high impact links you identify - both internal and external - will be candidates for BC / DR activities.

Secondly the management conducted a risk assessment of the supply chain. This activity examines and identifies situations that may threaten the operations of the supply chain. Risks can be external and internal and can involve people, processes, physical objects, natural phenomena and technology, for example. Examples of supply chain risk include a major factory located next to a river. In the case of Mc Donald, the risk was external because it involved a supplier.

strategies

The contingency plan is usually intended to prevent interruptions in the flow of products and / or supply chain information. For 73 percent of companies, this type of situation is not unknown since at least once they have suffered first-person consequences, as shown in a recent study published by Inbound Logistics (Sterling, 2012).

Sometimes it is due to a natural disaster, sometimes as a result of a political crisis, there have also been cases where terrorism has ended up causing disruptions in different supply chains and, although all of them are unusual situations fortunately, they can happen. Companies that want to minimize the damage in these cases should be prepared to deal with the inevitable.in this case, Mc Donald supply chain distruption was caused by a supplier.  

One of the strategies used by the fast food giant was to Gain visibility: from the mapping of the supply chain to the technological investment that guarantees an end-to-end vision (Sterling, 2012). In order to better anticipate possible problems, the management had to understand the entire supply chain and its operation. Today, supply chains are global (one more reason to develop the contingency plan), and this greatly increases the likelihood that any of these events will impact on the balance of processes and operations. This visibility becomes clear when you have the ability to answer questions about: Origin of raw materials. Means of transport used. Routes used and alternative routes.Mc Donalds sort all things out and that is why they are back in business.

Another strategy that Big Mac used was to Monitor the escalation of conflicts in areas of  instability and, especially, in critical moments, such as the weeks leading up to a supply disruption. They offered extra training to the supply and procurement team to handle well situations that may lead to supply chain disruptions. According to(The Definitive Handbook of Business Continuity Management, 2011) before the slightest doubt, begin to perfect the contingency plan, and be ready for its application at any time.

What the company did was to Prioritize: in a such a critical situation the management is able know how to differentiate what is vital from the important and the most relevant of what is not so much. The contingency plan that they developed must allow to supply the essential, in order to at least supply the most needed products.

Mc Donalds also made a detail of all the locations where the different components of the supply chain are located. Grouped them by areas with common attributes regarding the predisposition for certain meteorological accidents or natural catastrophes. They listed all that, locally, could go wrong in each zone. Made a list of actions to take, depending on the emergency situation and assigned to each one the necessary resources and the responsible persons (The Definitive Handbook of Business Continuity Management, 2011).This has gone a long way to avert future disruptions.

The company included the providers in the contingency plan: all providers must, in turn, have contingency plans. It is important to ensure that this is key because it enabled the company to:Work collaboratively to help each other to give creative answers to these types of problems.Lean on technological advances to find more efficient solutions.Use contingency planning to build trust and strengthen the relationship between the two.

Planning  transportation is another strategy that the company used : An interruption of the considered dimensions will require, with total security, alternative routes and transportation. So that, when it is needed, they know how to make the right decisions, we must be able to differentiate the urgency of what is important and be clear how to prioritize costs and customer service

Business continuity planning for the supply chain

Chief Executive Don Thompson outlined the following strategies in its recovery plan following a 30% dip in sales in China. According to the CEO Supply chain resistance to unexpected interruptions is essential to meet customer expectations for quality and availability. The Business Continuity Planning (BCP) program establishes strategies to prepare for unexpected social, financial or environmental events that could disrupt our supply chain and to react to them.

To maintain supply chain visibility, the Mc Donalds  assigned the parts of its products to  level 1 and 2 suppliers. This allowed the supply chain business continuity team to analyze and visualize  the Mc Donalds’s  physical space of production at a global level. Evaluate own risks: catastrophes of unimaginable magnitudes can happen in the world and do not affect the supply chain. However, smaller accidents and minor consequences can paralyze all activity supply chain and leave the management without maneuverability. It is a question of luck, but also of statistics and geography. There are areas with a greater propensity for tornados and hurricanes, there are others where earthquakes are a common phenomenon every year and, therefore, depending on the characteristics of a place, the contingency plan needs to be adapted to the most probable needs.

In addition,  the Mc Donalds compiled BCP self-assessments from suppliers to understand the tactical preparation of those suppliers in the face of potential disruptions.  Sccording to Don Thompson It is also necessary to  conduct business continuity exercises with some of the vendors to test  preparedness for an unexpected disruptive event. This is what Mc Donald did. Also he noted that  Collaboration across the supply base was key to  successful supply chain risk management program and certainly the processes have strengthened the partnership   suppliers and  Mc Donalds Corp to address the risks of business continuity. The company has since regained its grip on the market with sales improving as the figure below shows.

Fig 2: Mc Donalds rise in profits

Source: http://www.marketwatch.com/story/mcdonalds-profit-down-30-on-us-china-woes

References

Drake, M. (2012). Global supply chain management. [New York, N.Y.]: Business Expert Press.

Johnson, P., Leenders, M., & Flynn, A. (2011). Purchasing and supply management. New York: McGraw Hill.

Kildow, B. (2011). A supply chain management guide to business continuity. New York: American Management Association.

MURPHY, P. (2017). CONTEMPORARY LOGISTICS (1st ed.). [S.l.]: PEARSON.

Sterling, S. (2012). Business continuity for dummies. Chichester, West Sussex: Wiley.

The Definitive Handbook of Business Continuity Management. (2011).

Wallace, M., & Webber, L. (2011). The disaster recovery handbook. New York: American Management Association.

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