Business Continuity Management Programs:How valuable are they in facing supply chain disruptions?

Abstract:

Are business continuity programs (BCPs) effective? While supply chain disruption research notes that BCPs are essential for maintaining supply chain operations, some critics suggest that BCPs are overly complicated, costly and not as effective in facing major disruptions. BCPs typically rely on identified risks and past experiences. In addition, BCPs advocate for a culture of discipline and order, suggesting that an orientation towards procedural compliance may be a necessary to ensure their effectiveness. Yet the unpredictable and complex nature of supply chain disruptions may require a more flexible approach as opposed to a regimented plan. This study provides empirical evidence as to whether BCPs are associated with operational response and recovery in the face of supply chain disruptions and with firm financial performance. Using the Competing Values Theory, we develop hypotheses on how BCPs use resources to recover from supply chain disruptions by comparing (1) a more procedural response with (2) a more flexible response. The hypotheses are tested using a combination of survey responses and historical financial performance gathered and matched from 268 supply chain managers and their firms. Results suggest that BCPs are more beneficial to those with a procedural orientation, but can also offer significant help to those with a flexible orientation. Firms with strong BCPs lower the effects of major supply chain disruptions on their operational performance (e.g. operational cost, delivery speed). More importantly, those with strong BCPs show better financial performance in comparison to their competition, higher Return on Asset (ROA), Return on Sales (ROS) and Return on Equity (ROE).

Keywords: Business Continuity, Supply Chain Disruptions, Risk Management, Response and Recovery