Severity of Supply Chain Disruptions

Daniel Dumke — Wed, 26 Jan 2011 11:24:00 +0000

We already know that supply chain disruptions can be quite costly, and have not only direct but also indirect effects (eg. on stock prices). So do all supply chain disruptions have the same effect on the focal company? Of course not, but what are the driving factors that influence the impact?

In their conceptual note Craighead et al. (2007) analyse the factors of the impact supply chain disruptions.

As many companies, the authors take the view that supply chain disruptions are inevitable and at some point in time some part of the supply chain will fail. The important question therefore is:

How and why one supply chain disruption would be more severe than another

Categorization of Factors influencing the Severity of SC Disruptions (Craighead et al., 2007)

Methodologies

To answer this question the following methods are employed, to get an holistic image of the relevant factors.

Single Case Analysis

Analysis of the supply chain and interviews with managers from different firms within the supply chain

Semi-structured Interviews
Interviewing experts from different industry sectors

Focus Groups

Refinement of the results found in the first two phases

Results

As a result the following supply chain design characteristics which influence the severity of disruptions have been found:

Supply Chain Density
SC density corresponds to the geographical spacing of nodes within a supply chain. The severity of a supply chain disruption within a supply chain appears to be positively related to supply chain density.

Supply Chain Complexity
The authors propose that disruptions to complex supply chains are more severe than disruptions to relatively less complex chains.

Node Criticality
This refers to the importance of a node for value creation. And the authors propose that a disruptions of more critical nodes will very likely be more severe.

Furthermore the following supply chain mitigation capabilities were found to influence supply chain disruption severity:

Recovery Capability
Can be defined as the coordination of supply chain resources to return the SC to a normal and planned level of product flow. Obviously, a supply chain with a greater recovery capability should experience relatively less severe disruptions.

Warning Capabilities
This is the capability to (early) detect a disruption and distribute the information within the supply chain. The proposition here is that the severity of disruptions is decreased by better warning capabilities.

Conclusion

The authors explain the reasoning and evidence for each of their propositions and they have been very careful describing their results, using words like “[SC density] appears [to have an effect]”. This is very necessary!

Even though the author employed various methods, there is no method which improves the statistical significance of the sample. So, the methods are used to support theory building and not theory testing.

On the other hand, this does not reduce the validity of the theory, but further testing will be needed.

Reference:

Craighead, C.W., Blackhurst, J., Rungtusanatham, M.J., & Handfield, R.B. (2007). The Severity of Supply Chain Disruptions: Design Characteristics and Mitigation Capabilities Decision Sciences, 38 (1), 131-156

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Research Issues for Managing Supply Chain Disruptions

Daniel Dumke — Thu, 06 May 2010 06:37:00 +0000

What do professionals in the domain of supply chain management think about disruptions? How do they prepare for them, how do they act when a disruption occurs?

Blackhurst et al. (2005) answer these questions in their work about “An empirically derived agenda of critical research issues for managing supply-chain disruptions”.The authors are using three different empirical methods to achieve this goal empirically: Case study, surveys and focus groups.

Disruptions

As you would expect from a theoretical article they start with the question: What are disruptions anyway? They can show themselves in different forms: eg. transportation delays, natural disasters, part shortages, quality issues. The common theme is, that disruptions are costly and can trigger stock-outs, which leads to the inability to meet customer needs.

Other authors like Hendricks and Singhal (2003) show that supply chain disruptions can cause huge cost.

And disruptions are on the rise due to global sourcing, which increases the potential for disruptions and the movement towards increased responsiveness, higher levels of agility and lower inventories.

Results

The empirical study results in the following three steps to master supply chain disruptions.

Disruption discovery
Visibility and predictive analysis are most important to discover disruptions, the update of risk measures therefore has to be more dynamic (up to real-time) to be useable.
Disruption recovery
Recovery starts with damage control, it should be build on a model to understand hwo disruptions will affect the supply chain
Supply chain redesign
The goal for redesign is to include all relevant (hidden?) costs of a global supply chain and to aim for a flexible and robust supply chain optimization

Conclusion

The article builds a framework to think about disruptions within a supply chain. As the title already suggests this article only points at the issues researchers are/should be working at the moment. And there is still a lot of work to do.

Reference:

Blackhurst, J., Craighead, C., Elkins, D., & Handfield, R. (2005). An empirically derived agenda of critical research issues for managing supply-chain disruptions International Journal of Production Research, 43 (19), 4067-4081 DOI: 10.1080/00207540500151549

Hendricks, K., & Singhal, Vinod (2003). The effect of supply chain glitches on shareholder wealth Journal of Operations Management, 21 (5), 501-522 DOI: 10.1016/j.jom.2003.02.003

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Christopher W. Chraighead

Severity of Supply Chain Disruptions

Methodologies

Results

Conclusion

Research Issues for Managing Supply Chain Disruptions

Disruptions

Results

Conclusion