resilience

Resilience or Lean SCM - This Week in Supply Chain Management (15 / 2012)

Daniel Dumke — Fri, 13 Apr 2012 12:43:22 +0000

Finally I was able to hand in my dissertation to my professor. I hope to get his feedback soon.
This week I found several interesting articles, just pick those you find useful.

Articles

Russ Banham wrote about “Reducing Disruption in the Global Supply Chain” summarizing some strategies and case studies (Wall Street Journal)
Enterra Insights presents an overview on the trade-offs between lean and resilient principles. (Enterra Insights)

Already tweeted

These are the tweets from this week. You can follow me on twitter.

RT @Industrialmfg: Factors Impacting Risks in Today’s Supply Chains http://t.co/sDoD5nX4
RT @benscm: @SCRMBlog Social Engagement for Supply Chain Improvement http://t.co/mLspDy7k
Supply chain interdependency creates new risks http://t.co/T4qXUVV3

Enjoy your weekend!

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New Credo - This Week in Supply Chain Management (2 / 2012)

Daniel Dumke — Fri, 13 Jan 2012 14:15:38 +0000

The new blog design seems to be accepted quite well, at least nobody complained ;-).
But there is one objective measure of site performance: Since switching to Drupal and the new design the site speed should have increased by about one third. I hope you enjoy the new site, let me know if you have any comments or suggestions!

Figure 1: The faster Content Management System and lighter Theme leads to reduced load times.

Blogs

This week have a look at these articles!

Supply chain risks have been a high-level topic in many companies for several years now, but Maxwell Murphy argues that the catastrophes 2011 reinforced the urgency of the problem. But companies still fight for the right trade-off between cost savings and resilience. (WSJ)
The US Pharmacopeial Convention suggested some best-practices for pharma supply chains, focussed on mitigating the risks of counterfeit drugs and medical devices. (atrisk)
Enterra Insights posted and commented on some longer excerpts from the 2008 paper by Wagner and Bode on “An Empirical Examination of Supply Chain Risk Performance along Several Dimensions of Risk” (which I reviewed here) they reach the conclusion, that:
The bottom line I reached from reading their study is that a company must know every aspect of its business and the environment in which it operates if it is going to make informed choices about how to deal with supply chain risks.
(Enterra Insights)
Ken Simpson presents a report about new concerns by the Chatham House that the just-in-time credo might put companies at risk… I can only agree with Ken: “finally!” (Contemplating)

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Resilience Survey and Blogs - This Week in Supply Chain Management (45 / 2011)

Daniel Dumke — Fri, 11 Nov 2011 10:11:00 +0000

During this week my research took a turn to the quantitative side. During the last month my focus was on the evaluation of the current research, now I finally can do my on supply chain simulations. So this week was all about getting the output format that I want and calibrating the supply chain model. I hope to be finished during the next week and then I can start assessing some supply chain risks.

News

I found this short article on “Plan now for serious hard drive shortages: Tips to reduce risk”, which highlights one possible mid-term impact scenario of the Thailand flooding. (Tech Republic)

Blogs

Bob from @risk summarizes a survey on the prospects of supply chain finance from a banking point of view. (atrisk)
Ken has a short article on shifting paradigms in management that makes curious for more on that topic. (Contemplating)
@RiskMgmtMonitor made me aware of another weekly roundup of risk management related articles on the web. (Workers’ Comp Insider)
RIMS has two upcoming risk management webinars on “Analytical Tools for Effective Risk Professionals” and “Implementing Risk Management Programs from Afar” the later one goes into implementing international risk management at Walt Disney. (RIMS)
The AppleInsider published a story on how “Apple leverages deep pockets to gain supply chain edge over rivals”. (Apple Insider)

Research

On Supply Chain Brain you find a short summary and a link to a survey by the Business Continuity Institute on “Supply Chain Resilience 2011” with over 500 respondents. (Supply Chain Brain ; survey free of charge)

Also have a look at my related articles from this week:

Monday, I explored Supply Chain Flexibility in an uncertain Environment: exploratory Findings from Five Case Studies.

Enjoy your weekend!

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UK Infrastructure Resilience - This Week in Supply Chain Management (44 / 2011)

Daniel Dumke — Fri, 04 Nov 2011 14:06:00 +0000

Yet another week. I finally handed in the first part of my dissertation thesis, of course just-in-time on the 31st. So right now I prepare the second part, with the results of my exploratory expert interviews on supply chain risk mitigation strategies and insights of a simulation study using agent based simulation.

This week, thinking about the case of Thailand, I also realized how a country’s level of infrastructure affects the individual companies risk. But also the individual risk management is important: When I was in Thailand this year (July), I asked the supply chain manager of a large retailer with a DC just north of Bangkok, what risks were on his priority list. I did explicitly ask for floods, but sadly, they were not on the list…

News

The Financial Times had two nice articles on supply chain disruptions this week: “Do complex supply chains make you too vulnerable?” with a summary and lessons from the Thailand flooding and “Supply chain disruption: sunken ambitions” with interviews on how to mitigate supply chain risks. (FT: 1, 2, (free) registration required)
Kyle Krug reports on recent disruptions at the port of Oakland and its impacts on supply chains and especially 3PLs. (Griffin Logistics)

Blogs

Ken Simpson summarized a current infrastructure resilience initiative by the UK government, focussing on resistance, reliability, redundancy and response and recovery. (Contemplating)

Research

GXS has a short summary of some of the results of the 2011 “Supply Chain Risks” study by the The Association for Operations Management (APICS). Companies are most vulnerable to natural disaster disruptions and missing information sharing. (GXS)

Also have a look at my related articles:

On Monday I had a look at an open access book on supply chain management with several articles related to supply chain risk management: Supply Chain Management Book Review.
And on Wednesday, I reviewed the Disaster and Crisis Pyramid.

Enjoy the weekend!

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Demand Forecasting, Resilience and Mapping (Book Review)

Daniel Dumke — Mon, 31 Oct 2011 14:30:00 +0000

I am a huge fan of Open Access in research and a while ago I was made aware of a book on supply chain management, which has recently been published under an open access license. The full book can be downloaded on the web site of the publisher.
The book contains 27 chapters / articles on a range of supply chain related topics, such as optimization, public sector supply chains, modeling and simulation, but also several papers which addressed supply chain risks in one way or the other.
I was especially interested in the risk related chapters, so I will give you a short overview on three of the papers:

A Hybrid Fuzzy Approach to Bullwhip Effect in Supply Chain Networks, by H. Tozan and O. Vayvay

The authors of the first paper propose a fuzzy-neural-network approach for demand forecasting. In supply chain management a test case for demand forecasting, has always been the bullwhip effect. The better your demand forecasting the less pronounced the bullwhip effect will be. And this can be a real money saver.

A simulation of their new approach shows that for a three tier supply chain (customer, retailer, factory) especially the fluctuations at the retailer can be reduced quite drastically (figure 1 a and b).

Figure 1: Orders and Production in the Base vs. Proposed Model (Tozan and Vayvay, 2011)

Integrating Lean, Agile, Resilience and Green Paradigms in Supply Chain Management (LARG_SCM), by H. Carvalho and V. Cruz-Machado

The second article I would like to highlight, tries to integrate the supply chain concepts of lean, agile, resilience and sustainability / green. One of the weaknesses in supply chain management research has always been the strong focus on one of the concepts, neglecting the fact that successful companies often have to integrate different aspects in one supply chain. A supply chain of a high-end computer manufacturer for example might have to be green and agile at the same time, a military supply chain probably should integrate the concepts of agility and resilience to be successful.
First the authors introduce the mentioned concepts and compare them in a nice table view.

Next they build a graphical model of the supply chain and added vectors to symbolize how the different concepts influence decisions in the supply chain.
Figure 2 aggregates the results.

Figure 2: Impact of different Concepts on Supply Chain Management Decisions (Carvalho and Cruz-Machado, 2011)

Supply Chain Resilience Using the Mapping Approach, by A.P. Barroso, V.H. Machado and V. Cruz-Machado

The last paper analyzes supply chain resilience using the example of a supply chain in the automotive industry. Supply chain mapping is a simple technique where the elements and connections of a supply chain are drawn on a map. The elements and connections are the enriched with additional information like inventory levels and policies or lead times.
After describing the methodology the authors use a case study to analyze the resilience of the chain. The supply chain mapping enables them to unveil several points for improvement:

The assembler has no alternative suppliers for part B. An identical situation is found for all the other parts.
Like the assembler, the 1st Tier B has no buffer stock. There is no inventory of raw materials, work in progress, and final products.

Conclusion

The first paper shows a quite interesting approach to demand forecasting, which (at least in the simulation) was able to produce much better results than more traditional approaches. If you are interested in this topic, I already discussed several other aspects of forecast risk and problems with forecasting, but I also touched other methods to improve forecasting (e.g. by information sharing).

The second paper contributes to the understanding of the effect of different aspects of some generic concepts in supply chain management. Even though it only considers a small amount of supply chain decisions, the results are quite clear: It is not possible to easily combine the different concepts and it highlights the need either to find trade-offs or to develop new approaches to satisfy all goals.

The third paper introduces the supply chain mapping methodology, which is quite simplistic in nature, but in my point of view one of the most powerful methods to analyze supply chain risks in practice. The case study should be read as an example only and gives a few hints on how to implement the methodology and analyze the results.

Reference:

Tozan, H., & Vayvay, O. (2011). A Hybrid Fuzzy Approach to Bullwhip Effect in Supply Chain Networks Supply Chain Management, 49-72

Carvalho, H., & Cruz-Machado, V. (2011). Integrating Lean, Agile, Resilience and Green Paradigms in Supply Chain Management (LARG_SCM) Supply Chain Management

Barroso, A.P., Machado, V.H., & Cruz Machado, V. (2011). Supply Chain Resilience Using the Mapping Approach Supply Chain Management

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Resilience from a Psychological Perspective

Daniel Dumke — Wed, 28 Sep 2011 13:16:00 +0000

Resilience developed to one of the dominating concepts in supply chain risk management and this review takes a different look on corporate resilience by viewing it from a psychological perspective.

Why do some people and some companies buckle under pressure? And what makes others bend and ultimately bounce back?

Today I review “How Resilience works” by Diane Coutu, a summary of which can be found here.

Resilient people

There is also some research on the topic of the resilience of the individual. HR departments of high-profile consulting firms for example take resilience as a virtue in a potential candidate really seriously. But also from a non-corporate view, one can ask the question, why do some people cope better with hardship than others?

One branch of research did investigations together with survivors of the concentration camps after the second World War. One finding there is that these people had something like a “plastic shield” build by components like humor, social attachment to others and a inner psychological space for protections.

Together with other studies Coutu summarizes that the following three characteristics play a major role in the individual resilience:

“a staunch acceptance of reality;

a deep belief, often buttressed by strongly held values, that life is meaningful; and

an uncanny ability to improvise.”

The author then expresses her hypothesis that: These characteristics are also necessary for truly resilient organizations.

Resilient organizations

The first step to a resilient organization is to face reality. This may be especially hard when times are bad, since then “most people slip into denial as a coping mechanism”. As an example Coutu used the case of Morgan Stanley which realized after the 1993 attics on the World Trade Center that offices in iconic buildings face additional risks by terrorist assault. So already prior to the September 11 attacks MS took their emergency drills very seriously and also had not one but three emergency backup sites to continue business afterwards.

The second step is to search for the meaning in grim situations. The author includes here the defined value system of a company. Of course not everybody (at least outside of the company) has to agree to these values so she also adds:

In this context, it is worth noting that resilience is neither ethically good nor bad. It is merely the skill and the capacity to be robust under conditions of enormous stress and change.

The last step is about ingenuity. It refers to the ability of an organization to search and find ways to profit also in times of pressure. And one major factor in finding new solutions to new problems can be to improvise:

Indeed, companies that survive regard improvisation as a core skill. Consider UPS, which empowers its drivers to do whatever it takes to deliver packages on time.

But this also works into the other direction not only creativity can help through disruptions but also a sense of precision of routine which can be employed during stressful times.

The rules and regulations that make some companies appear less creative may actually make them more resilient in times of real turbulence.

Conclusion

I thinks Coutu presents a nice article which connects the concepts of corporate and personal resilience. Since this is not a article published in a scientific journal I overlook the fact that there is very little discussion and sometimes also foundation to the supporting examples. For example the article started by stating that companies are keen to employ resilient individuals, but there is another quote where she talks about the disadvantage of a resilient person who might rather sacrifice the company than him- or herself in times of trouble.

Reference:

Coutu, D.L. (2002). How Resilience works Harvard Business Review, 46-55

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Resilient and Sustainable Systems

Daniel Dumke — Mon, 08 Aug 2011 14:01:00 +0000

In today’s post I would like to highlight how the concepts of resilience and sustainability can be aligned.
Resilience is often interpreted as a property of a supply chain most often associated in a risk management sense; sustainability on the other hand, usually refers more to social and environmental goal orientation. So how can these concepts be aligned?

You can download a copy of the full article by Joseph Fiksel Designing Resilient, Sustainable Systems.

Sustainability

Nowadays shareholders show more and more interest in the ecological and social footprint of their company, therefore companies aspire to become more sustainable.

Fiksel defines sustainability as:

A product, process, or service contributes to sustainability if it constrains environmental resource consumption and waste generation to an acceptable level, supports the satisfaction of important human needs, and provides enduring economic value to the business enterprise.

Sustainability therefore is not an objective (which could be put into a mathematical model) but a property of a system.
For a supply chain system the analysis starts at the process level up to the an economy and ecosystem (see figure 1).

Figure 1: Levels of System Design (Fiksel, 2003)

Sustainable companies

The author points out a study which has been conducted by Royal Dutch Shell in the 90s to find properties of long-lived companies. They unveiled the following factors:

sensitivity and adaptability to the business environment
cohesion and sense of identity
tolerance of diversity (decentralization)
conservative use of capital

Interestingly, profitability was seen rather as an outcome of these factors than a good prediction for long life. The study concludes that learning, growing and long term survival should be the goal; and these objectives cannot be reached by simply maximizing profits.

Resilience vs. sustainability

First, resilience can be best described using the diagram in figure 2.

A resistant system returns to its desired / stable state very fast, however if the system state is moved too far of the original state (in the diagram too far left or right) it may collapse and not be able to return.
A resilient system has a broader range of possible states, and therefore can survive larger disruptions.
The last system is an extension of the resilient system, and able to withstand even larger changes in the environment, maybe changing its equilibrium point.

Figure 2: Characterizing System Types (Fiksel, 2003)

Resilience in systems design

Fiksel suggests four system characteristics which can be / are used on different system levels to increase resilience of that system:

Diversity, existence of multiple forms and behaviors;
Efficiency, performance with modest resource consumption;
Adaptability, flexibility to change in response to new pressures;
Cohesion, existence of unifying forces or linkages.

Figure 3 contains supporting examples.

Figure 3: Properties of Resilient Systems (click to enlarge; Fiksel, 2003)

Conclusion

The author introduces a system theory framework, where sustainability and resilience are properties of the system. From the title and introduction I was expecting a more systematic approach in comparing these two concepts and defining their relationship.
There is one direct quote (“Perhaps the essence of sustainability is resilience, the ability to resist disorder.”) indicating that resilience might be the more general term, but it is not confirmed.

There are of course some overlaps mentioned, e.g. efficiency as a mean to improve resilience, which works towards a sustainable system. But there is no direct comparison between the two.

The author also introduces a process to design sustainable systems. If interested please download the paper and have a look at page 5335.

Reference:

Fiksel, J. (2003). Designing Resilient, Sustainable Systems Environmental Science & Technology, 37 (23), 5330-5339 DOI: 10.1021/es0344819

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From Supply Chain Vulnerabilities to Risk - Important Concepts in Supply Chain Risk Management

Daniel Dumke — Mon, 27 Jun 2011 13:43:00 +0000

This blog may be a good starting point for supply chain risk management related research and literature, but even with more than 140 articles reviewed in the blog I still just touched the tip of the iceberg. There are still many basic articles left. Like this one by Helen Peck (2006): “Reconciling supply chain vulnerability, risk and supply chain management”

Terms in SCRM

Today I have a look at, what is basically a literature review concerned with clarifying the confusion with the terms used when talking about risks in supply chains.

There are a wide range of different terms and concepts used in the wider field of supply chain risk management. How do the terms vulnerability and risk correlate and how are those embedded in supply chain management? On another level: How are corporate governance, business continuity management and security and emergency planning relating to SCRM?

Supply Chain

Starting from a “standard” supply chain definition as a system, comprising…

…flows of materials, goods and information (including money), which pass within and between organisations, linked by a range of tangible and intangible facilitators, including relationships processes, activities and integrated (information) systems.

The first definitions for “supply chain management” came up in the early 1980s and developed from a very logistical view on a supply chain towards a network understanding, comprising aspects like marketing or product development as well. There also has to be a clear distinction between a strategic level tasks in SCM and their functional execution.

Vulnerability and resilience

Within SCM there is no clear consensus as to whether supply chain vulnerability is simply a symptom of poor SCM—to be remedied with more effective SCM and the wider adoption of a SCO—or whether it is the unintended downside consequence of its successful application. Perhaps it should rightly be regarded as a combination of all of these.

Supply chain vulnerability can be defined as an “exposure to serious disturbance, arising from risks within the supply chain as well as risks external to the supply chain” and as “a condition that is caused by time and relationship dependencies in a company’s activities in a supply chain”. Vulnerability is therefore seen as a combination of a disturbance and the resulting negative consequence.

The concept of “resilience” is related to risk and vulnerability in so far as it accepts that not all “risks” (hazards or threats) can be avoided, controlled, or eliminated. Instead, resilience focuses on the “ability of the system to return to is original or desired state after being disturbed”, i.e. its ability to absorb or mitigate the impact of the disturbance.

Corporate risk management

Supply chain (risk) management and its counterpart on a corporate level do not share the same origin. Where supply chain management stems from a more comprehensive view on operational management aspects like logistics and operations; corporate risk management originates in a strategic / macroeconomic view on the company.

These roots also lead to a different understanding for risk management. In a case where corporate risk management suggests outsourcing of non-core processes for risk reduction, a supply chain risk management view would imply a larger weight on the negative effects of the reduction in control.

Conclusion

Finally, Peck emphasizes the different aspects of risks in supply chains and highlights the distinctive factors:

Consequently, it is suggested that managerial views of supply chain risk, based on assumptions drawn principally from best practice in manufacturing enterprises, offer a familiar, convenient but incomplete picture of supply chain vulnerability. SCM is an integrative, cross-functional discipline, so it must be recognised that supply chain vulnerability is also a concern for practitioners and academics in other disciplines, including BCM and corporate risk management.

Reference:

Peck, H. (2006). Reconciling supply chain vulnerability, risk and supply chain management International Journal of Logistics, 9 (2), 127-142 DOI: 10.1080/13675560600673578

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Supply Chain Resilience: Development of a Conceptual Framework, an Assessment Tool and an Implementation Process

Daniel Dumke — Wed, 01 Jun 2011 12:54:00 +0000

This is the sixth contribution to my series on doctoral dissertations on supply chain risk management. An immense effort and dedication is spent on these works only to find the results hidden in the libraries. So the goal is raise interest in the research of my peers.

Author / Topic

This dissertation was written by Timothy J. Pettit and published as his doctoral thesis at The Ohio State University, Columbus, USA in 2008. It can be downloaded here.
I have already seen his presentation of the results in 2010 at the CSCMP conference in San Diego together with Joseph Fiskel. His current employer is still the US Airforce, now as Assistant Professor of Logistics and Supply Chain Management.

The title of his thesis is:
Supply Chain Resilience: Development of a Conceptual Framework, an Assessment Tool and an Implementation Process

Summary

In his dissertation Pettit develops a framework and processes to improve implementation of resilience into supply chains. His thesis is devided into three parts:

Development of a supply chain resilience framework, based on literature and focus group workshops. The building blocks “vulnerabilities” and “capabilities” emerge as main dimension (see figures below).
Building on this framework Pettit creates an assessment tool (SCRAM) and tests the tool with seven global manufacturing supply chains, by evaluating their current state.
In this part critical links between vulnerability and controllable capabilities are identified and analyzed.

I will not quote the whole dissertation here. But I want to show two graphics from his work highlighting the relationship between capabilities, vulnerabilities and resilience.
Figure 1 shows the first proposition and basically the operationalized definition of resilience: When vulnerabilities decrease and capabilities increase resilience increases.

Figure 1: Measuring Resilience using Capabilities and Vulnerabilities (Pettit, 2008)

Since capabilities are usually costly and vulnerabilities often fixed, figure 2 suggest that there is an optimum balance of capabilities and vulnerabilities in the Zone of Balanced Resilience.

Figure 2: Zone of Balanced Resilience (Pettit, 2008)

Finally, Figure 3 finally presents the combined framework.

Figure 3: Supply Chain Resilience Framework (click to enlarge; Pettit, 2008)

Conclusion

As with Tomlin’s thesis the dissertation is split into three separate parts which are cumulated into the thesis.

Resilience is a necessity if you agree that some risks are just not forecast-able and hedge-able by traditional means. Overall Pettit designed a great way to assess resilience, and this is definitely not just an academic discussion, for businesses it is equally important to measure resilience to, a) be up to date about improvement activities and b) being able to get these activities started in the first place by showing improvement potential:

Although further validation is required, managers should be encouraged to make the minimal investment required to determine their current state of resilience and compare their strategy with the resilience fitness space.

Reference:

Pettit, T.J. (2008). Supply Chain Resilience: Development of a Conceptual Framework, an Assessment Tool and an Implementation Process The Ohio State University, Dissertation

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Links between Supply Chain Resilience and Homeland Security

Daniel Dumke — Mon, 23 May 2011 14:10:00 +0000

In the United States May 2008 was declared to be “Resilience Month” with several congressional hearings on the topic of how to improve organizational resilience on a societal level.

Yossi Sheffi from the MIT is one of the leading researchers on supply chain resilience and he was part of the hearings as well.

In his statement Sheffi described his view on organizational resilience. The full text of the hearing can be downloaded here. I summarized the main points here.

Disruptions and their Causes

Resilience can be defined as the ability to bounce back from large scale disruptions. Those disruptions can be caused by:

Random events, containing natural causes. Where probabilities can be estimated and which can be insured.

Accidents, which are caused by operational errors and can be prevented by “near miss” analysis as done in the aviation, chemical and nuclear industries.

Negligence, which includes non-compliance with regulations, standards and shifting public opinion.

Intentional disruptions, are caused by a “smart adversary” and therefore harder to circumvent.

On a societal level large disruptions can have several effects that accompany the actual disruption, like (1) significant public fear, (2) governmental reactions that exaggerate the disruption, due to alleged public fear, (3) cascading effects of the disruption (e.g. car makers slow down of production due to the Japanese earth quake)

Dealing with Disruptions

The first step in dealing with disruptions is to avoid them where possible. Depending on the cause of the disruption this may be an option to proceed, for some e.g. natural disasters it is often not.

As the second step a disruption detection system has to be established, since most disruptions can be handled better when caught early.

The last step is to plan and prepare for the disruption. There a two categories to prepare for a disruption: redundancy and flexibility.

Redundancy, in an organization as spare capacity, inventory or know how, can be quite costly especially as it has to be available at all times (e.g. see this article on how the military prepares for disruptions).

Flexibility comes in different shapes. For example standardization and modularity can lead to higher flexibility. Furthermore, unlike redundancy, flexibility can also improve the competitive advantage of companies in times without a disruption. The most important factor in the authors view is the culture of flexibility, which has to incorporate continuous communications, distributed power, passion for work and the mission, deference to expertise in times of disruption and conditioning for disruptions.

Conclusion

To draw the line from the (supply chain / organizational) disruption to what the government can do Sheffi introduces the cultural aspects into the disruption mitigation. Cultural changes on a societal level happen several times every century (e.g. recent health or current green trends). So the government should encourage and accelerate these trends to improve resilience of the overall chain.

It is an interesting twist that Sheffi, does not say much about increasing safety by more regulation or reducing the effects of disruptions by more direct means.

He also does not explicitly talk about the trade-off between regulatory cost and security, it even seems that he deliberately refrains from suggesting specific measures which may lead to increased governmental involvement in supply chain and logistics matters.

Reference:

Sheffi, Y. (2008). Resilience: What it is and how to achieve it? Congress Hearing, 1-5

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System Failure

Daniel Dumke — Mon, 21 Feb 2011 09:14:00 +0000

I was looking for more general insights into the topic on why systems fail. I stumbled on a talk of Eleanor Saitta from last years Chaos Communication Congress in Berlin. There is a recording of the talk here and the slides for the talk can be obtained here.

I am going to summarize some of the key points Saitta made in her talk in this article.

Types of System Failures

There are two general types of system failures: Simple and chained failures.

The systems propensity for failure is related to the complexity of the system and affected by the aspiration to increase efficiency, optimality and accelerate the Prozesses weithin the system.

Example of the Determinants of System Collapse

Figure 1: System Effect Circle (in Saitta 2010; from Vinay Gupta 2009)

In many cases, system complexity is very overwhelming. So the task of analyzing why a system fails can be very demanding.

To answer the specific question what kind of failure of the economic system (eg. the near-collapse of the financial system in 2008) leads to the death of one or more individuals, Saitta presents the system effect circle.

The individual is placed in its center, next come the possible causes of ones death, the essential foundations of society (like work, resources, transportation and communication). The last two circles show the underlining concepts to generate and sustain the former items.

Multiple systems are affected by those concepts, the following example should clarify the logic.In Figure 2 Saitta shows the connections between the individual systems and how they affect each other.

Figure 2: Example of Connections within the System Effect Circle (Saitta 2010; from Vinay Gupta 2009)

Preventing Collapse

To prevent collapse systems have to be designed to be resilient. The graphic shown in the example above can be used as a basis for the analysis of “what can go wrong”. These results can be generated by defining the Need-Matrix (Figure 3) for the system in focus.

Figure 3: Need Matrix for System Analysis (click to enlarge; Saitta 2010; from Vinay Gupta 2009)

A system not only consists of the foundation factors found in the Need-Matrix, but also the assets and actors within the system, and the rules which control the the access from the actors on the resources.

The goal for building resilient systems is therefore to analyze the connections between actors and assets and explore how the rules have to be designed for the system to work effectively.

Conclusion

Building resilient systems is hard on every level. On a large scale (eg. banking system) existing power distributions often prohibits the establishment of a resilient infrastructure. Nonetheless an in-depth analysis might help prevent the most severe consequences.

For smaller scale systems, like a supply chain, analyzing the foundational factors, actors, assets and rules is mandatory for building a resilient system.

The key concepts are the same on every level: actors, assets, their connections and access rules.

Update:

You can find more on the Simple Critical Infrastructure Model on these slides by Vinay Gupta.

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Supply Chain Risk Management Sessions @CSCMP 2010

Daniel Dumke — Mon, 04 Oct 2010 12:20:00 +0000

Most of the time during the conference I was busy interviewing companies for my dissertation, but I also found time to listen to some of the sessions on SCRM.

SCRM Keynote

The first session on supply chain risk management was held by Garry Lynch (Marsh, author of “Single Point of Failure”) on Supply Chain Risk Management. The contents were: Challenges, Current State, Successful and unsuccsessful practices.
Sadly, I had to leave before the practice part, but the key strategies can be found in his book mentioned above.

Combining Research and Practice

The second session SCRM was on “Global Supply Chain Resilience”. The presentation was held by: Dow Chemical Company (Darrel Zavitz, Martin Fernandes), Ohio State University (Joseph Fiskel, Center for Resilience), US Air Force (Timothy Pettit). They described a research project on SC resilience and its execution.The first interesting point was their highlighting of the interrelation between sustainability and resilience, since the focus of resilience is on being able to work under changing/turbulent conditions and missing sustainable behavior may exactly lead to these conditions.

The speakers defined supply chain variability as consisting of supply risks, deliberate threats, market change and internal change. Resilience on the other hand is described as the capability to adapt to turbulent change.

On the above mentioned definition Fiskel and Pettit built a framework of resilience consisting of vulnerabilities, capabilities and a resulting zone of balanced resilience.
One underlying premise of the process described below is, that usually SC managers do not worry about the unforeseen but about the familiar, but the goal has to be adaptability to real uncertainty!
Together with Dow Chemical they developed a process of “Design for Resilience” which consists of:

Supply Network Mapping
SCRAM (SC Resilience Assessment and Management) Analysis (vulnerabilities and capabilities, where is improvement potential)
Supply Network Simulation (stress testing the SC, weekly basis, the goal is to find clues how to improve resilience)
Strategy selection (a weighing of increasing capabilities vs. cost has to be done, the suggestion was to use kind of a break even analysis for the probability of an adverse event)

Pettit and Fiskel also build a list of possible vulnerability / capability combinations using literature review, a survey and focus group interviews. They use method triangulation to increase the validity of the resulting listing.

All in all they presented a very business oriented modeling system (including a software using a systems dynamics model) to show effects of different scenarios on the supply chain. It is important to note they are not trying to predict future events, but focus on more general agility and resilience of the SC in case of a disruption.

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