Tales of the Unexpected - The Importance of Business Continuity for the Retail Sector
by Duncan Jefferies, first published in Retail Systems Magazine Oct/Nov '08 issue
Floods, terrorist attacks, the Buncefield fire - headline grabbing events such as these have thrown retail business continuity strategies into sharp relief over the last few years. But although retailers must prepare for the unexpected, everyday business disruptions can also cause serious operational problems if not properly planned for, as Duncan Jefferies discovers.
The scale of resources set aside by retailers for business continuity depends on the number of risks facing their business. A retailer like Oxfam, for example, is unlikely to have the same number of dedicated business continuity staff as a tier one retailer like Tesco. But regardless of size, the complexity of retail operations presents challenges. "A lot of businesses in other sectors might have one HQ and a few regional offices, but the retail sector is quite different," says Chris Smith, marketing director at on365, a specialist in the installation and management of physical infrastructures and utility services. "The largest retailers have more than one HQ, and then there are the warehouses and numerous retail outlets to take into account. They're also heavily reliant on third parties for things like transaction processes and stock replenishment."
The general disruptions to business remain fairly constant: hardware failure, power interruption, software failure and denial of access (such as burst water main which prevents staff from working in the building). The last three years have also seen an increase in business disruptions caused by flooding. "It's a little early to call it a trend," says Rob Thomson, marketing director at SunGard Availability Services, "But climatic changes are clearly happening, and that is reflected by the causes of business disruptions."
Good Plan
So what are the fundamentals of a good business continuity plan? Steve Mellish, head of business continuity at Sainsbury's, believes clarity simplicity and flexibility are key. "There needs to be clarity on people's roles and responsibilties. A disaster situation has different characteristics to a business interruption. You'e got to have the right people involved, engaged and trained to deal with those types of events."
Business continuity must be approached from all levels; losing the main data centre at the HQ will affect operations throughout the company, whereas the loss of an outlet in Milton Keynes will remain a local problem. In order to create a good plan, a thorough risk assessment should be carried out across the board. And any plan must be easy to implement. "Someone within a department, and not necessarily the right person, should be able to pick it up and use it immediately," says Trevor Partridge, head of business continuity at Marks & Spencer and chairman of the Retailer Business Continuity Association (RBCA). "They should be able to quickly get an understanding of what the department does, how critical it is to the business, and the key supplier and contractor contacts should be at their disposal. This means that after a disaster you're in second gear rather than trying to get the car started."
When drawing up a business continuity plan, retailers often consider whether or not their suppliers can continue to supply them in the event of a disruption to their own operations. Sainsbury's deals with thousands of suppliers. "It's simply not possible to engage with every single one regarding their business continuity plans," says Mellish. "We focus on the critical suppliers of goods not for resale, so we know how well business continuity objectives are established in companies that might run the loyalty card scheme for example."
Ensuring power continuity for critical aspects of the business is essential , "Your IT systems have to have generator power, as do your head office functions, so that people can continue to work in the event of a power disruption," says Partridge. Network resilience is also "extremely important" according to Smith. "If you keep the power going but lose network capabilities, you're still blown out of the water. The reason the network is so important is that IP appears everywhere in retail. You've got electronic tills, weighing machines, printers, barcode readers, security, even access to the store themselves."
An interruptible power supply (UPS) maintains continuous electric power to connected equipment by supplying it from a separate source when utility power is unavailable. It differs from an auxiliary power supply or standby generator, which does not offer instant protection in the event of a power interruption. "Corporate data centres must have UPS systems and back up generators in place that are tested regularly," says Mellish. "But when it comes down to the distribution centres and stores, I think the picture is different. For example, it's not financially viable to have back up generators in every store."
Any business continuity plan must be regularly tested if it is to prove effective. "You don't have to test every aspect of it at the same time," says Smith. "You can break it down into bite sized chunks. The more important thing is making sure everyone in the organisation understands their role in the continuity plan. Otherwise you'll end up with a few people who know what they're doing and a bunch of headless chickens when there's a disaster.
Sainsbury's will shortly be running a large scale recovery centre test involving 150 members of staff. "That will be combined with a desktop exercise for our corporate business continuity management team, who will be taken into the recovery suites where their colleagues are working in order to gain insight into how things would look and feel during a real event."
The second part of BS25999, the first British standard for business continuity management (BCM), was published ast year. The first part too the form of general guidance, whereas the second specifies requirements for implementing a documented business continuity management system. Mellish calls the standard a "significant milestone" for providing organisations of all sizes with best practice guidelines.
The RBCA, formed in association with Continuous Solutions, is also working to share best practice and performed a benchmarking exercise last October for its members, which include Boots, Travis Perkins and the John Lewis Partnership. "It's the first time one had ever been done in the retail sector to that extent," says Partridge. "When updated, it doesn't mean we expect to see year-on-year improvement, but it does help to encourage the UK retail sector to be better at what they do with regards to business continuity."
For retailers without the benefit of a crystal ball such initiatives and careful planning and testing of their business continuity plan, will help secure their operations whatever the future holds.