Supply Chain Crisis and Disaster Pyramid

Daniel Dumke — Wed, 02 Nov 2011 15:43:00 +0000

With this review I take a look at supply chain disruption management. There is a huge number of actual and potential crisis (floods in Thailand, typhoons and risks of a greek collapse).

So it does make sense to think about preparation and recovery ahead of time.

Method

This article presents a new approach on how to improve preparedness and recovery after disaster strikes. It is built completely on a literature review of the resource, risk, crisis and disaster recovery, and preparedness literature. At its core this research is built on four different theories:

resource-based view of the firm

communication theory,

competing values theory, and

relationship management theory.

Figure 1: Four Corners of the Supply Chain Disaster and Crisis Pyramid (Richey, 2009)

Disaster and Crisis Pyramid

The four theories also form the pillars of the Disruption and Crisis Pyramid (DCP; figure 1).

Resource Management

The resources a company controls are an important factor in mitigating the effects of disasters. The authors summarize:

Still, given the prominence of resource management in the literature, and rightfully so, it seems logical that the DCP would “point” to resource management. Human resources must be moved from crisis locations to safe locations or from traditional operations to crisis locations. Physical and technological resources must be allocated, moved, opened, cleared, and customized. Informational resources must be collected, cleaned, warehoused, and redistributed. Financial resources must be acquired, allocated, distributed, and governed. The activity component in DCP research is huge and seems to thus be the consistent under current in the literature.

Collaboration: relationship management theory

The second element of the pyramid is the collaboration between the stakeholders in a disaster situation.

In crisis situations, collaboration will likely be the glue that holds organizations together. Additionally, Stewart et al. (2009) point out the broadness of the web that forms the extended supply chain in disaster and crisis situations. There is little doubt that such a tangled web will provide a huge opportunity for not only new research, but also to challenging the existing assumptions of relationship management logic.

Communication: communication theory

To achieve coordination and collaboration between all stakeholders, established and continued communication methods are essential.

Supply chain disaster and crisis situations demand effective communication. […] Examining issues such as bi-directionality, formality, modality, and frequency could be of serious importance as public and private entities attempt to understand what, when, and how much to communicate.

Contingency planning: competing values theory

A supply chain brings together a multitude of different companies. And usually instead of having on clear cut strategic goal, each company works for its own goals which also often are not properly aligned.

Competing values theory provides grounding for future supply chain disaster and crisis research by suggesting that firms simultaneously pursue various different and often conflicting strategic goals regardless of the situation

Conclusion

All in all Richey’s framework is aimed at providing a guideline for future researchers to find new insights into supply chain disaster management and how to improve supply chain reactions at the intersection of communication, collaboration, resources and values. And these four aspects should not only be considered by researchers, but also by supply chain professionals.

I especially liked the inclusion of the competing value theory, which might lead to a shift in research from the currently leading paradigm that goals of supply chain partners are always well aligned.

On the other hand, this framework could also be used beyond only disaster and crisis management, the aspects could perhaps prove influential in a larger number of supply chain related research fields and applications.

Reference:

Richey, R.G. Jr (2009). The supply chain crisis and disaster pyramid: A theoretical framework for understanding preparedness and recovery International Journal of Physical Distribution & Logistics Management, 39 (7), 619-628 DOI: 10.1108/09600030910996288

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Supply Chain Crisis Management

Daniel Dumke — Mon, 25 Oct 2010 10:23:00 +0000

Supply Chain Risk Management is one way to look at risks within a company (and beyond). But there are broader and more narrow disciplines as well, with Business Continuity on the one end and Supply Chain Crisis Management on the other.

I wanted to get an overview of current research on Supply Chain Crisis Management first, so today I explore “Managing supply chains in times of crisis: a review of literature and insights” by Natarajarathinam, Capar and Narayanan. The article is focussed on providing the researcher with a current state of supply chain crisis management, but practitioners will probably find the “Practical Implications of SC Crisis Management” in figure 3 (below) useful.

Crisis

So how do crises fit into the Supply Chain Risk Management landscape? The authors cite Merriam-Webster on crisis, where it is defined as:

an unstable or crucial time or state of affairs in which a decisive change is impending; especially: one with the distinct possibility of a highly undesirable outcome.

So in a supply chain context, a crisis is comparable to a disruption where the flow of goods, information or money is interrupted.

Methodology

The authors used an review of peer-reviewed articles as a basis for their work. For their sample they were using keywords like “crisis”, “risks”, “disaster”, “uncertainty” and more. This search resulted in 118 relevant articles published between early articles before 1990 and 2008.

Figure 1:Published Articles on Supply Chain Crisis Management by Year (Natarajarathinam et al., 2009)

Classification

As a next step the articles were classified according to the framework in the figure below.

Figure 2: Classification Framework (Natarajarathinam et al., 2009)

Results

One purpose of the article was to guide future research on the topic of supply crisis management, so the authors conclude:

Sources: More than 60 percent of the literature reviewed is exclusively concerned with external sources of risk and there is a high concentration on handling natural and man-made crises.
Scale: Most research focusses on crises on the supply chain or regional level, so no surprise there.
Stages: A major part of the current research is done on the proactive side, like preparation and mitigation rather than response and recovery
Research method / Respondent: The authors conclude that “There is a need for more case studies and empirical research in crisis management for not-for-profit supply chains.”

The authors also filtered the practical implications of current supply chain crisis management research and listed them in figure 3.

Figure 3: Practical Implications of SC Crisis Management Literature (Natarajarathinam et al., 2009)

Conclusion

It has been a long time since I have read such a clearly written article. I liked the presentation of the methodology. The only thing missing there would be the inclusion of non-peer reviewed journals as well considering the relatively small number of articles screened.

I found that the discussion of the term “Crisis Management” could have been more elaborate. How is the relation between Disruptions and Crisis? Are crises really just grave disruptions? If yes, is there really a need for another category here and how are the less grave disruptions called?

Reference:

Natarajarathinam, M., Capar, I., & Narayanan, A. (2009). Managing supply chains in times of crisis: a review of literature and insights International Journal of Physical Distribution & Logistics Management, 39 (7), 535-573 DOI: 10.1108/09600030910996251

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