Contingency Planning for Lean Operations – Part III
“Deaths spark huge crib recall” was the main headline of today’s Toronto Star (24-Nov-09). This recall was the result of 4 infant deaths and affects up to 2.1 million units sold. Click here to access the full article. This announcement has made headlines throughout North America and is certain to be featured on all of the major network news stations.
Managing a major product recall is likely one of the more significant events where contingency plans are fully executed and developed. As tragic or unfortunate as the events may be, it is imperative for a company to manage the recall event in professional and responsible manner. While it may seem difficult to prepare for an event that has not yet occurred, learning to anticipate the sequence of events to recovery and to script are necessary steps to developing an effective contingency plan.
What are the elements of an effective contingency plan?
We will be covering the elements of an effective contingency plan over the next few posts. Before we get too far into the process, it is important to recognize that one of the critical skills required as part of the contingency planning process is the ability to perform an effective risk assessment.
It is not our intent to cover all aspects regarding risk assessments and analysis as this would require a book in itself.
A newly released book, The Failure of Risk Management – Why It’s Broken and How to Fix It, by Douglas W. Hubbard (copyright 2009) and published by John Wiley & Sons, Inc., provides extensive insight and resources to perform effective Risk Management Assessments and Analysis. The reasons why some risk management methods fail or are susceptible to failure are also covered in detail.
As exemplified in the opening article, there is no real means to measure the net effect or impact of a recall campaign of this magnitude. Elements such as Consumer Confidence, Brand Loyalty, Loss of Life, or Warranty are difficult to value in tangible terms.
Unfortunately, there are too many examples of crisis events where the knowledge was available to rectify or fix the situation before any tragic event occurred. As heard in many workplaces, “Why is that nothing is done until something bad happens?”
An effective contingency planning is not only designed to manage tragic or crisis events, it should also aid to identify potential failure modes that can be captured and addressed before a product is ever released for mass production or to market. Consider the following two scenarios:
What if the dialogue took a different turn as follows:
Developing a Contingency Plan – The Process
1. Corporate Responsibilities – Charter
If contingency planning ever concerns an individual person in the company directly, it is the Chief Executive Officer or the president who are personally at risk of significant legal ramifications and also the greatest level of exposure.
This past year Maple Leaf Foods experienced a major Listeria outbreak at one of their food processing facilities. Contaminated product reached the market place resulting in illness and loss of life. A major recall was initiated and the company immediately initiated corrective actions. During this crisis, the CEO took personal responsibility for public relations, communicating the strategy, and ultimately overseeing the recovery process.
The CEO or President should be leading the charge for the development of contingency plans and to assure their effectiveness. To this end, it is also imperative that the team responsible for formulating the plan includes a cross-section of people from across the company.
The CEO or President will also want to assure that everyone is trained to respond to events that pertain their specific areas of responsibility.
2. Contingency Planning – Form a Team
As we mentioned in our previous posts, contingency planning is an enterprise-wide process. The collective intelligence of the team is greater than that of any team member.
You should consider the skill sets that may be required to support the team. Although we are not suggesting that you need to be an expert in probability theory or statistics, someone having exposure to these types of assessment tools or an outside consultant may be worth the effort.
It is not possible for one committee to prepare contingency plans for every area in the company. When forming teams, how the skills and levels of expertise required to support the team in one area may be vastly different for another area. For example, Product Engineering and Operations will have different failure modes to contend with.
To ensure the appropriate resources are available, we recommend that executive management or a steering committee are assigned to oversee the contingency planning and development process.
Based on some of the scenarios cited in this post, it would stand to reason that most CEO’, Presidents, and / or owners are primary stake holders in the Contingency Planning process.
More will follow:
- Performing Risk Assessments
- Contingency Planning Tools
- Do The DRILL
Until Next Time – STAY Lean!