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Business continuity in the lean times

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

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Business continuity in the lean times

  1. 1. Business Continuity in Lean Times STEVEN AIELLO
  2. 2. ~Salvador Dali
  3. 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. 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. 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. 6. Why Are We Here?
  7. 7. Why Are We Here?
  8. 8. Why Are We Here?
  9. 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. 10. Why Are We Here?  How does a risk- based mindset affect the type of business you conduct?  Enron  Arthur Anderson
  11. 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. 12. Why Are We Here  Or you could just want to…  Protect your company  Protect you profits  Protect your customers  Protect your job
  13. 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. 14. What Is DR / BC  What is DR?  What is BC?  How are they different?  What are they designed to protect?
  15. 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. 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. 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. 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. 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. 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. 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. 22. Macro Efficiency Global IT GlobalCSR Global HR Global Etc. This is great! Everything is the same!
  23. 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. 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. 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. 26. Not Common
  27. 27. More Common
  28. 28. More Common
  29. 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. 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. 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. 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. 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. 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. 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. 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. 37. People != Math Your teams can only be effective as the talent of the managers and the management systems in place
  38. 38. Think Small!  The OSI Model Break Big problems into smaller ones!
  39. 39. Think Big 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Location 1 Location 2 Slack Production
  40. 40. Think Big 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Slack Production
  41. 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. 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. 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. 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. 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. 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. 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. 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. 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

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