The 24-hour, always-on world in which we now conduct business brings with it many well-documented challenges, particularly for IT. Indeed, it is no exaggeration to say that businesses now depend on the success and integrity of their IT systems in order to survive.
The rapid growth of ecommerce, and increased automation through all business processes, particularly in the supply chain, places an enormous burden on the effective operation of IT systems.
With the borders of the real-time revolution drawn, information and processes integrated into the supply chain require constant availability, since they now constitute the very nature of the business itself.
Nowhere is this more evident than in the retail sector where any chink in a hyper-delicate supply chain can mean severe consequences for a retailer.
What exactly is the impact of IT downtime on the retail supply chain? The loss in revenues of downtime can be quite easily measured, though unquantifiable damage to the reputation of a company due to the unavailability of products penetrates the organisation far more deeply and with greater permanence.
A sorry supply chain
A well-documented example of the potential damage that a flawed supply chain can cause came about in 2004 when a major UK retailer experienced problems with its warehousing and delivery operations.
A raft of new automated warehouses - built as part of a multi-billion pound investment programme in the retailer's supply chain, IT systems and infrastructure - failed to function properly. This led to huge disruption to the supply chain and, subsequently, the business itself.
The supply chain became clogged and goods were delivered to stores at the wrong time. Staff were deployed in the wrong places at the wrong times, meaning that stock languished in the storeroom or delivery yard rather than on the shelves. Managers were ordering stock 48 hours in advance, fearful that the automated warehouses would not deliver what they wanted on time.
The effects of this mess went all the way to the board. Senior figures were forced to resign as their previous promises to shareholders to transform the business went up in flames.
In that year, the company wrote off £260m against ineffective supply chain equipment and ineffective IT systems. However, even worse than the financial loss, was the damage that the episode caused to the company's reputation and brand, which it is still recovering from to this day.
The need for availability
The abundance of enterprises that use technology to run their organisations continuously has led to an unprecedented degree of customer promiscuity. It used to be that if I wanted a new TV and the local shop didn't have the model I wanted I would have to drive to the next shop to get it. Now a competitor offering the same item is only two clicks away.
We've become a society that stands, impatient, in front of a microwave tapping our feet and watching the seconds tick by. How many times have you stood in front of the ATM, astounded that it has taken all of ten seconds to give you your money?
Recent research from SunGard Availability Services highlights this growing consumer impatience. A survey of behavioural habits amongst British shoppers revealed that, faced with unavailability of the product that they wanted, one in three shoppers would simply buy an alternative product, whilst only seven per cent of shoppers would wait for the product to be re-stocked.
The rest would simply go elsewhere to find their desired product. These figures clearly show the importance of availability to both retailers and manufacturers.
Consumers expect organisations' systems to perform at the highest levels 24/7/365. Information availability is crucial in business, as unavailable or delayed information is wrong information - imagine an investment fund being five minutes out of the loop on share price information when a take-over is announced.
Due to the rise of this culture of promiscuity, companies expect their suppliers' systems to interlink with theirs and perform at the same levels of reliability and availability because they are an integral part of their supply chain. If systems and information are not always available, then customers will go elsewhere because the supply chain is only as strong as the weakest link.
Whilst most coverage of business continuity in the media focuses on the threat of terrorism and natural disasters, it is the mundane threats of power outages, fires and floods which cause the vast majority of disruptions to business.
In my company, for example, we are receiving around three requests every fortnight to invoke business continuity plans to safeguard the reputation of organisations.
Supply chains now represent such a complex web of interdependencies that the most minor glitch can have a drastic knock-on effect on virtually every part of the business. Figures from Datamonitor show that the financial costs of downtime are severe. One hour of downtime typically costs a retail catalogue sales company £72,666.
What should retailers and manufacturers be doing to protect the integrity of their IT systems and supply chain processes? Is it possible to safeguard against downtime in the supply chain?
Continuity in the supply chain
There has been evidence over the past 18 months that businesses, particularly the large retailers, are starting to wake up to the importance of continuous uptime within their supply chains. More and more of the UK's larger retailers are instilling service level agreements which guarantee from potential suppliers and distributors that they have the means to fulfil their promises.
The large supermarkets are now implementing procedures which allow them to examine the ability of their suppliers to continue to operate in crisis situations. This in turn puts pressure on smaller producers and manufacturers to put continuity plans in place. In fact, it takes the decision out of their hands; supermarkets will simply not work with them if they fail to show adequate contingency plans.
Supermarkets can no longer afford any slip-ups in their supply chains, such is the reliance that the everyday shopper places upon them. Recent research carried out by YouGov and SunGard Availability Services found that British people now believe UK supermarkets to be as reliable as the emergency services, and more reliable than high street banks in terms of availability of products and services. Clearly the importance of availability is starting to hit home with the UK's largest retailers.
However, it isn't just large organisations that need continuity throughout their supply chains. The CBI is now realising the security risks which threaten the continuous operation of small and medium sized businesses in the UK.
Recent research carried out by the CBI shows that, despite the fact that 60 per cent of medium-sized firms currently use the internet in their supply chains, less than half of these have no security to cope with online attacks and no back up plans.
This is a deeply worrying statistic that highlights the need for all businesses, no matter what their size, to identify and prioritise the risks that they face, and to put plans in place to ensure they do not suffer from business disruption.
As Alun Michael, the trade and industry minister stated on launching the CBI's new IT security guide for small and medium sized businesses, 'In the future we will probably need to start thinking of the supply chain as something more like a business eco-system, where it is all the more vital for companies to protect their information assets.'
In order to ensure availability at all times throughout the supply chain, retailers and manufacturers need to take a holistic approach to their planning. They need to assess risk across the entire organisation and throughout their supply chain, both up and down.
It is essential that they consider how best to protect and ensure continuity within their IT systems, but they also need to take a broader perspective, examining businesses processes and the people and technologies that support them.
Establishing a continuity culture
The need for information availability within the supply chain is evident, but how can businesses maximise continuity when supply chains are so complex? Certainly, any organisation is only as strong as the weakest link in its supply chain.
Therefore it is up to businesses to put business continuity on the agenda at every level of the organisation, right up to the board. It is vital that continuity is a consideration when signing new contracts with partners and suppliers to safeguard the business.
However, just as important as buy-in at director level, is the commitment across the entire organisation to treat continuity seriously, both from a compliance point of view, and from a risk perspective. If individuals are encouraged to consider continuity, it can only be good for the business.
As companies develop, good or bad continuity practice can become embedded in their operations. A company that starts on the kitchen table may, if successful, end up working across multiple premises with many employees at each. If an availability culture is inaugurated from the outset, it will be carried with the business on that journey.
Far better to establish such a culture when the business is still small than to try and correct it when it has grown and inefficiencies have become embedded.
Similarly, if when choosing a supplier, an organisation takes care to consider any prospective partner's attitude to availability, it can go a long way towards ensuring continuity and eliminating any dangerous, weak links in its supply chain.
