Presentation on Business Continuity drawing from the principals of lean supply chain management

1. Business
Continuity in
Lean Times
STEVEN AIELLO

2. ~Salvador Dali

3. Who Am I?
 Steven Aiello
 CISSP, CISA
 VCP 5, CCNA, etc…
 Bachelors in TM from EMU
 Masters in TM : IA from EMU (Winter 2013)

4. What’s My Background?
 Focus One
 HIPAA
 PHI (Protected Health Information)
 ADP
 SAS 70
 SOX
 Technical interface with KPMG & D&T
 Online Tech
 Head engineer & manager
 Head of design & management of our BC / DR plan
 Advisory member for customers for BC / DR planning
(primarily banking sector)

5. Why Am I in This Space?
 I like long term thinking
(personal disposition)
 Advocate responsible business not just short
term gains
 Businesses have a responsibility to their stake
holders to think about their long term viability

6. Why Are We Here?

7. Why Are We Here?

8. Why Are We Here?

9. Why Are We Here?
 77% net profit loss (Toyota: Auto)
 38% net profit loss (Honda: Auto)
 60% net profit loss (Western Digital)
 80% production decline
 180% increase in consumer cost

10. Why Are We Here?
 How does a risk- based mindset affect the
type of business you conduct?
 Enron
 Arthur Anderson

11. Why Are We Here?
 Sarbanes-Oxley: Publicly Traded Companies
and Accounting
 HIPAA: Health Care Data
 Basel II & III: Banking Regulations
 Gramm-Leach-Bliley: Banking, Securities, and
Insurance
 PCI: Credit Card Transactions
 SAS 70: Generally replaced by SOC (Service
Organization Controls)

12. Why Are We Here
 Or you could just want to…
 Protect your company
 Protect you profits
 Protect your customers
 Protect your job

13. Macro Efficiency
 strategy + business (autumn 2012)
Managing in a Multipolar World
Why companies need to rethinking their
operating models
by:
Paolo Pigorini
Ashok Divakaran
and Ariel Fleichman

14. What Is DR / BC
 What is DR?
 What is BC?
 How are they different?
 What are they designed to protect?

15. Disaster Recovery Feeds
Business Continuity
 You can’t have Business Continuity without
Disaster Recovery
 Disaster Recovery without Business
Continuity isn’t very effective

16. BC Language: Words for
Changing Mental Models
 IT Based
 RTO: Recovery Time Objective
How fast do we have to be online?
 RPO: Recovery Point Objective
How much data can we afford to loose?
 Operations Based
 Backlog or Backlog Trap
 What is critical?
 What is time sensitive?

17. BC Language: Words for
Changing Mental Models
 Operations: Let’s Focus On Choices We
Can Make
 Backlog or Backlog Trap
We’re going to talk more about this
 What is time sensitive?
 What is critical?

18. BC Language: Words for
Changing Mental Models
 Backlog
1. A reserve supply or source.
2. An accumulation, especially of unfinished work
or unfilled orders.
http://www.thefreedictionary.com/backlog

19. BC Language: Words for
Changing Mental Models
 Backlog Example
Operating efficiency = 80%
Slack per day = 1.4 hours
Downtime = 4 days
8 Hr. pd x 4 days = 32hrs / 1.6 Hr. pd = 20 days
Downtime / (Max Production Capacity – Expected Production Capacity)

20. Economics 101:
Why do we lose site of the basics?
 Macro Efficiency vs. Micro Sufficiency
 Economy of Scale / Diseconomy of Scale
 Utility Cost or Marginal Utility

21. Economy of Scale, Diseconomy
of Scale
 What are we managing?
 People & Relationships
 Over Dispersed Geographic Locations
 Production Capacity & its Complexities
Manufacturing
Shipping
Etc…
 Operational Guidelines or Processes

22. Macro Efficiency
Global
IT GlobalCSR
Global
HR
Global
Etc.
This is great!
Everything is the same!

23. Macro Efficiency
Global
IT GlobalCSR
Global
HR
Global
Etc.
This is great until…
Dissatisfied customers or workers
Disruptions in your supply base
Differences in Customs

24. Difference in a Disaster?
 77% net profit loss (Toyota)
 38% net profit loss (Honda)
The Motor Vehicle Supply Chain: Effects of the Japanese Earthquake and Tsunami
By: Congressional Research Service
(May 23 2011)

25. The Cost of Downtime
 1.5 million an hour to 6 million an hour
 36 million to 144 million per day in lost
profit
 What is the cost of down time to your
business brand?
 If you can’t supply your customer and they
buy a competitors product will you get
them back?

26. Not Common

27. More Common

28. More Common

29. New Mental Models
 Regional Cluster Models
“Decision rights should be pushed down into the
organization and the center should involve itself only
in critical enterprise-level decisions such as portfolio
strategy, capital allocation, and global brand
management”.

30. New Mental Models
 Regional Cluster Models: Require?
 Transparency at all levels of the organization
 Decision making should be made based on performance not
politics
 Key performance indicators which are linked to the
companies management process
 Does this sounds like “Balanced Score Card?”

31. Micro Sufficiency
Core
Functions
Operations
Unit 1
Operations
Unit 2
Operations
Unit 3
Operations
Unit 4
Operations
Unit 6
Operational Unit #
Sales
Legal
Communication
Manufacturing
(maybe)
Etc…

32. Micro Sufficiency
Core
Functions
Operations
Unit 1
Operations
Unit 2
Operations
Unit 3
Operations
Unit 4
Operations
Unit 5
Operations
Unit 6
Core Functions
HR
Finance
IT (maybe)
Etc…

33. Insert Personally Bias Slide Here
Your IT person may be
the very best individual
to help you!
Just because we’re so smart! (not really)

34. Business Networks ≈ Data Networks
 Fast
(speed of items transmitted)
 High throughput
(amount of volume transmitted)
 Resilient
(bus, star, mesh)
 Optimize for quality
(remember dial-up / DSL) (Franklin, 2011)

35. Would you Rather?
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))*
((2+4)+(3*6)+((9-3)/(2+1))+(5+7)-(5+5))

36. Would you Rather?
+(2+4) = 6
+(3*6) = 18
+(9-3/2+1) = 2
+(5+7) = 12
- (5+5) = 10
=(38-10) = 28
28*6 = 168

37. People != Math
Your teams can
only be effective
as the talent of the
managers and the
management
systems in place

38. Think Small!
 The OSI Model
Break Big problems
into smaller ones!

39. Think Big
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Location 1 Location 2
Slack
Production

40. Think Big
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Slack
Production

41. The JIT Strategy
 Cut Costs
 Save Space
 Free Up Cash
 Reduce Waste from Obsolescence
http://www.mindtools.com/pages/article/newSTR_78.htm

42. The JIT Strategy +
Reasonableness
 Cut Costs
(without loosing market share)
 Save Space
(without crippling yourself in the event of an emergency)
 Free Up Cash
(Invest in betterment programs)
 Reduce Waste from Obsolescence
(understand your business cycles better)
http://www.mindtools.com/pages/article/newSTR_78.htm

43. Benefits of BC
 Functional Improvements
During analysis stage many times you can
spot operational inefficiencies, safer ways of
conducting business, develop process
improvements

44. Benefits of BC
 Sales and Marketing
In the event of changes in the market those
who are prepared can adjust to changes in
those markets more rapidly

45. Benefits of BC
 Flexibility in Operating Procedures
While preparing for a business emergency
people naturally identify ways for
accomplishing business objectives
 Organizational Behavior & Theory

46. Benefits of BC
 Improving the Utilization of Key Resources
BC requires a thorough analysis of the
organizations resources. This is the perfect
time to review resource allocation

47. Benefits of BC
 Improving employee moral & wellness
Healthy work environments generally produce
a more productive and creative outcome
which allows a business to be more adaptable

48. Economics 101:
Why do we lose site of the basics?
 Macro Efficiency vs. Micro Sufficiency
 Economy of Scale / Diseconomy of Scale
 Utility Cost or Marginal Utility

49. So What is DR / BC
 BC is a way of thinking about conducting
business
 BC is a mental model to start building a
framework around
 BC includes disaster recovery