In a study commissioned by AT&T, Broad School professors George Zsidisin, Steven Melnyk and Gary Ragatz have found that companies are courting disaster if their business continuity plans fail to ensure supply chain continuity.

According to Zsidisin, two issues are at the heart of a company's supply chain vulnerability:

1. Familiarity with their supply chain partners may end at first tier suppliers; and
2. Influence over the actions of suppliers may be limited, especially at the second and third tier levels.

"These problems are compounded by the application of 'lean' practices," says Zsidisin, "which reduce supply chain buffers in the form of inventory, lead time and capacity. Consequently, many managers are unaware of what their suppliers are doing to ensure business continuity. With so many companies depending on a reduced set of suppliers for key components, the potential for problems is real and increasing."

Zsidisin and his colleagues note that if a key supplier is unable to perform, the impact on the firm - as measured financially, strategically, and in terms of market share - can be sizable, even catastrophic. Based on their detailed case studies, however, they found that "best practice" companies have developed an awareness of the potential risks and, more important, have introduced systems and procedures aimed at proactively managing the risk. The result is not only better performance, but the emergence of a potentially significant competitive advantage for these firms.

Both the full study and a white paper are available on-line at http://www.bus.msu.edu/msc/research.html