Edited by Harry W. Richardson, Peter Gordon and James E. Moore II
Chapter 3: Business Continuity: A Systematic Approach
Yossi Sheffi Company operations can be disrupted in multiple and unexpected ways. Some disruptions are routine and can easily be overcome with available safety stock, expediting shipments, or well-rehearsed processes. Others, however, can be fatal to an enterprise, leading to tainting of the brand, loss of customers and even unplanned exit from the business, as the examples below demonstrate: ● ● ● Following an unsuccessful implementation of SAP’s enterprise requirement planning system, coupled with the installation of a flawed automated warehouse management system, Foxmeyer, a $5 billion distributor of drugs, had to file for bankruptcy. Its main operating division was sold to McKesson, its largest rival, for only $80 million. As a result of a fire in an Albuquerque Philips plant in 2001, one of the plant’s main customers, the Swedish electronic giant Ericsson, was driven out of the cellphone handset business, due to its slow response. This was in contrast to Nokia, also a major customer of the same Philips plant, which reacted quickly and was able to increase its market share. In 2002, Arthur Andersen & Co was basically liquidated after two of its partners were convicted of shredding documents related to the company’s audit of Enron. In 2005, the US Supreme Court overturned the conviction unanimously but it was too late for Andersen. Numerous other examples abound.1 DICHOTOMY OF DISRUPTIONS Disruptions can be classified into four categories: natural disasters, accidents, negligence and intentional attacks. These categories differ in the relative roles that human beings and random factors play in their cause....
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