One approach to viewing losses in an industrial setting is to break them down into two categories: losses that a company was not prepared to manage and those losses management realized were possible and had plans in place to address them.
Losses that were not prepared for can be extremely disruptive to an organization to the point where the organization cannot cope and stops doing business. At the very least, when the loss occurs and management does not have a pre-arranged plan, they must now generate one immediately and put it immediately into action. Throwing unplanned money, time and other resources at the situation is perhaps the most expensive way to manage the event.
It does not have to be that way. With a modicum of effort to assess where the risks are, a management team who is guided through the process can identify those areas where pre-planning can:
- Allow resources to be staged (production-critical machinery such as pumps, valves, generators, transformers and production specific equipment)
- Identify those processes and machines within those processes that contribute the most to EBITA (earning before income tax and amortization) and thus might need a higher level of protection
- Identify which processes need closer maintenance management to learn as soon as possible when replacement or spares need to be ordered.
- Identify community and vendor resources that might be able to be leveraged if an outage occurs.
- Identify key skill sets and personnel within the organization that need back up, duplication or cross training
- Manage WIP (work in process) so that no one event can destroy inventory as well as the ability to make more product.
- Identify a method to keep abreast of regulatory changes that might impact your ability to make product or expose you to significant regulatory censure, including Cease & Desist.
Areas of possible jeopardy include:
- Electrical transformers
- Limited machines that make a disproportionate amount of the EBIT
- Key material suppliers with few contractual alternatives
- Distribution bottlenecks or rail lines critical to product shipment
- Strikes from transportation companies
- Internal equipment malfunction such as cranes or testing and certifying equipment
- Regulatory intervention that halts or delays production
- Weather related emergencies that cause delay in either shipping or receiving
I can assist the executive management in investigations and planning for possible business interruption exposures. No outside person will ever know as much about your business as you do. However, I can facilitate this discussion by asking key questions and structuring the discussion so that you end up with a real plan.