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.