Plan B vs. Contingency Plan: Which Supply Chain Fallback Is Best?

Author Pauline Lees

Posted Mar 2, 2023

Reads 2.6K

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The coronavirus pandemic has taught purchasing personnel that having a fallback plan is critical to supply-chain management. Fallback plans, also known as contingency plans, are pre-defined potential sources for needed parts in case the primary approaches fall through.

In the electronics industry, electronic product companies typically rely on contract manufacturers located primarily overseas. These contract manufacturers make the actual products, leaving OEM customers with little wiggle room when it comes to manufacturing waste and generic manufacturing processes. However, developing unique processes for specific products can financially protect OEMs by establishing long-term agreements and production schedules.

The main difference between a Plan B and a contingency plan is that a contingency plan includes multiple sources supplying the same part or component, which can add cost but also provides flexibility in case of short-fuse sourcing changes. Dual sourcing is a common form of contingency planning that involves selecting both an overseas supplier and a local supplier in order to react flexibly to customer demand. While there may be extra costs involved, this strategy relative to tooling fixtures, higher piece-prices, and reduced logistics costs can provide oem customers with an agile order fulfillment capability while reducing internal overheads.

Understanding the Meaning of Contingency Plan

Contingency plan simply put is a backup plan or an action plan designed to guide organizations in responding to potential future incidents that may occur unexpectedly. It is often created to prepare for the worst-case scenario and mitigate risks associated with unfavorable events. Organizations including government organizations create contingency plans to ensure that when faced with unforeseen circumstances, the team isn't panicking but instead following a pre-determined course of action.

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Contingency plans are essential in today's world where disasters can strike at any moment. They serve as guidelines on how to react during an emergency, helping organizations avoid chaos and confusion. The purpose of a contingency plan is to provide a framework for decision-making and actions that will be taken in response to an adverse event. By having a well thought out contingency plan, organizations can minimize the impact of unexpected situations and quickly recover from them.

Mistakes to Steer Clear of in Contingency Planning

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Contingency planning is an important strategy for any business or organization. However, it can get off to a rocky start if common mistakes are made. One of the most common mistakes is failing to identify all potential risks and vulnerabilities. Another mistake is not having a clear chain of command or communication plan in place. Lastly, not testing the contingency plan regularly can lead to failure when it's needed most. By avoiding these mistakes, businesses and organizations can ensure that their contingency plan is effective and reliable in times of crisis.

1. Not securing executive buy-in first.

Not securing executive buy-in first is a common mistake in contingency planning that can have disastrous consequences. Without the support of the executive team, a plan put in place by a single department may not be comprehensive enough to address potential risks and impact guidelines across the organization.

Risk creating a doomed plan by failing to get executive support from the start ensures that any efforts made at the department level will be limited in their effectiveness. It's important to get the entire executive team onboard with the contingency plan so that everyone is working together towards a common goal. This also helps to ensure that all potential risks are identified and addressed, and that impact guidelines are consistent throughout the organization. Don't make this mistake – take the time to get everyone on board before moving forward with your contingency plan.

2. Failure to cover multiple scenarios.

When it comes to contingency planning, one of the biggest mistakes that can be made is failing to cover multiple scenarios. It's important when assessing potential risks to consider all possible outcomes and plan accordingly. Cutting corners or engaging in slack scenario planning means leaving yourself vulnerable if an unexpected event happens.

The success of contingency plans relies heavily on considering all potential risks and having a plan in place for each one. From supply chain issues to natural disasters, there are countless factors that can disrupt business operations. By taking the time to thoroughly assess these risks and create plans for each scenario, businesses can ensure they are prepared for anything that may come their way.

3. Set it and forget it.

"Set it and forget it" may work for some kitchen appliances, but it's not a wise approach to your business contingency plan. A contingency plan is a living document that requires due diligence and continuous updates to ensure its effectiveness.

Starting with a solid contingency plan is key, but the work doesn't stop there. Obstacles will be thrown your way, and your one-and-done process won't cut it. Your contingency plan needs to be regularly reviewed and updated to reflect changes in your business environment or potential risks. So start with a solid contingency plan, but don't forget to keep it up-to-date as circumstances evolve.

Contingency Planning: How to Make a Business Contingency Plan

A contingency plan is a course of action designed to help an organization respond effectively and efficiently to sudden or unexpected events that could disrupt its normal operations. Every business needs a contingency plan, especially those that operate in high-risk environments such as areas prone to natural disasters like floods and hurricanes. A well-designed contingency plan can help businesses avoid financial losses and reputational damage caused by unplanned disruptions.

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One of the first steps in creating a contingency plan is identifying potential risks that could affect your business, such as storefront floods or power outages. Once you have identified the potential risks, think about how they would impact your business operations and what steps you need to take to mitigate those impacts. For example, if your storefront floods, you may need to relocate temporarily or find ways to protect your products from water damage.

Contingency planning is an ongoing process that requires regular review and updating. As your business grows and evolves, so do the risks it faces. You should review your contingency plans regularly and make any necessary changes based on new insights or changing circumstances. By doing so, you can ensure that your contingency plans remain effective at all times and that your business stays prepared for any unforeseen eventuality.

1. Contingency Planning in 7 Steps

Contingency planning is an important aspect of any business, and it begins with the phase identify critical areas essential to ensure that operations continue if scenarios arise. Start by putting stress on the main functions, or critical areas, of day-to-day operations to identify situations where a positive situation could turn into negative repercussions. Risk assessment involves creating a long list of potential threats and prioritizing the highest priority threats that may put significant stress on job duties and responsibilities involved parties.

Once you've identified your critical areas, begin brainstorming to create contingency plans. It's helpful to have a template to prepare ahead and plans distribute to key stakeholders. Make sure that everyone agrees on the desired plan before moving forward, or else the plan won't work when worst-case scenarios occur. Creating a shared folder accessible to all parties involved creates transparency so they know what they're responsible for if such scenarios occur.

Continuously test contingency plans as businesses scale, spending dedicated periods reviewing plans and testing specific scenarios. As progress is made, risks may arise that make sense to address as executives join the team - but it's important to remember that a contingency plan must be flexible enough to adapt over time as necessary.

2. Contingency Planning Timeline

Creating a contingency plan is an involved process that requires a lot of effort and time. The first step is to identify the operational areas essential to your business function, conduct probability assessments, and market research. Based on this data, you can create plans for potential emergencies, such as natural disasters, cyber attacks or supply chain disruptions.

However, creating the final plan is not the end of the process. Plan maintaining is a continuous effort that involves reviewing plans regularly, simply fine-tuning them as needed. Quarterly reviews should be conducted with input from existing employees to ensure that everyone understands their roles and responsibilities during an emergency situation. In short, creating a contingency plan is not a one-time event but rather an ongoing process of preparation and review to keep your business safe in any situation.

Craft Your Own Plan for Business Contingency

Contingency plans are critical in business, as they help organizations prepare for the unexpected. Every company should have a plan in place that outlines what to do in different challenging situations. The first step in crafting your own business contingency plan is to identify potential risks and create what-if scenarios.


After identifying these possible scenarios, you need to come up with a plan that will ensure that your business continues even when faced with these challenges. Your contingency plan should include steps to be taken if there is a sudden change or disruption in your operations due to an unforeseen event such as natural disasters or cyber-attacks.

Originally published in November 2021, this article emphasizes the importance of developing a comprehensive contingency plan. It is essential to review and update your plan regularly, ensuring it still aligns with any changes made within the organization. With a well-crafted contingency plan, you can be confident that your business will continue operating smoothly regardless of any unexpected events.

Frequently Asked Questions

What is the difference between management reserve and contingency reserve?

Management reserve is a portion of the budget set aside for unforeseen events that may affect the project's success, while contingency reserve is a portion of the budget set aside for known risks.

What is the difference between a contingency and fallback plan?

A contingency plan is a proactive approach to deal with potential problems, while a fallback plan is a reactive approach to manage issues that have already occurred. Both plans are crucial in risk management and help to ensure business continuity.

What are some common examples of contingency plans?

Some common examples of contingency plans include backup power sources, emergency evacuation protocols, and disaster recovery plans.

When should a contingency plan be consulted?

A contingency plan should be consulted when there is a possibility of disruption in normal operations due to unforeseen circumstances such as natural disasters or accidents. It helps organizations to prepare for and respond effectively to emergencies, minimizing the impact on business continuity.

What are the benefits of having a contingency plan?

A contingency plan helps businesses prepare for unexpected events, reduces downtime and financial losses, and improves their ability to respond and recover from emergencies.

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Pauline Lees

Writer at Chelmer Valve

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Pauline Lees is a writer who has a passion for storytelling. She loves to share her thoughts and experiences through her writing, and hopes to inspire others to do the same. Her blog focuses on personal growth, self-improvement, and mental health.

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