Contingency preparedness in the event of industrial action

Business disruption caused by postal strikes

The temperature of industrial relations everywhere, from letters to dustbins, is heating up. The panic caused by recent postal strikes brought warnings of enormous disruption ­ and at the Financial Director Summit in September, FDs said that the threat and impact of industrial action was high on their list of priorities for 2010.

But other businesses faced with the threat of strike action as they struggle with recession, tight credit and public spending cuts should make contingency plans for their business to work around any impact ­ retailer Argos switched to an alternative supplier in the face of the Royal Mail strikes. Those strikes are now on hold until after Christmas ­ well, that’s the line for now ­ but there are other industrial disputes threatening to boil over.

Unite has said it will ballot the 12,000 British Airways cabin crew who are union members on potential industrial action over Christmas (that ballot closes on 14 December), while 90 redundancies at Swissport, the baggage handling agent at Stansted airport, may lead to a walkout by GMB members.

Meanwhile Bob Crow, head of the RMT union, is rattling his sabre over claims that Network Rail plans to sack 13,000 workers. The RMT is also threatening to ballot 10,000 London Underground staff over pay. On the buses, FirstGroup faces industrial action by drivers in the North West, Essex and Yorkshire.

Even away from transport and communications disputes are in danger of breaking already fragile supply chains. The union is balloting 240 BP tanker drivers who deliver to Sainsbury’s forecourts on strike action following a decision to tender the work to contractors. Workers have begun an indefinite strike over changes to pay and conditions at Superdrug’s distribution centre in Yorkshire, while Leeds binmen and Sheffield firefighters recently walked out. Employees at Fujitsu’s British business voted to strike, but cancelled when the company said it would hold talks over pensions and possible redundancies. All these actions affect not only those businesses, but their customers and suppliers, too.

Federation of Small Businesses (FSB) spokesperson Stephen Alambritis says the postal dispute shows why planning ahead must be a priority for businesses at a time of industrial unrest, despite the extra cost involved.

“The best advice is to nominate a key member of staff to look at the company’s systems and at alternative sources,” says Alambritis. That kind of commitment will boost the reputation of your business in the eyes of other operators if there is a distribution blip.

The cost of doing nothing is punitive. A survey of 1,200 FSB members found that almost half fear the postal strikes could cost them up to £5,000.

Plan ahead
Jonathan Michael, managing director of procurement consultancy JMCL says it is vital companies plan ahead for the possibility of a major disruption to their supply chain, whether it means strikes, swine flu or terrorism.

With foresight, Michael says companies have plenty of options ­ one, to ensure they have an agreement with a supplier on what will happen if they are hit by a strike. “Whenever you set up a contract with a supplier there must be a contingency plan.”

He cites an example of a contract between a bank and a plastic card supplier specifying that if its plant in Germany is disrupted, it will switch production to an alternative site in Spain at no extra cost to the bank. “It is also important not just to get the supplier to say it has a contingency plan, but to understand what the contingency plan is and what you have to do if it is invoked,” he says.

An alternative, though one that may carry a cost, is to keep mothballed facilities on standby to fill the gap if a critical supplier was affected by a strike.

For credit card companies, for example, even a delay of one day in getting their statements out to customers would cost them a fortune because they cannot start charging interest, says Michael, adding that keeping a factory ready for use is an extra expense, but one that will pay for itself in times of disruption.

The postal strike itself presents a particular challenge. Retailers can switch their parcels to couriers, but when it comes to delivering cards and letters, there are no real rivals to the Royal Mail and many FSB members say the alternatives are too expensive. Companies such as UK Mail can collect letters but only take them as far as a sorting office, operated by the Royal Mail.

The hiatus in the Royal Mail dispute gives businesses that did not plan for the series of strikes over the autumn and winter an opportunity to follow the experts’ advice.

Forewarned is forearmed and it could be crucial advice for businesses preparing for a torrid 2010.