Ways to guard against Disruptions

Daniel Dumke — Mon, 17 Oct 2011 17:49:00 +0000

Today I review an article called “18 Ways to Guard Against Disruption”. It was published in the Supply Chain Management Review in 2005 by Elkins et al.

Goal and method

The goal of this study was to assess the current state of supply chain risk management capabilities across multiple industries. The authors describe the results of several interviews with companies from multiple industries, which have been conducted by the Supply Chain Resource Consortium (SCRC, an university industry partnership for documenting supply chain management knowledge).

Results

Based on this study 18 best practices have been identified, which have been categorized according to their impact location (internal or external) and their time orientation (current business vs. future business).

External orientation / future business (“Strategic sourcing & advanced procurement”)

“Screen and regularly monitor current and potential suppliers for possible supply chain risks.
Require critical suppliers to produce a detailed disruption-awareness plan and/or business-continuity plan.
Include the expected costs of disruptions and operational problem resolution in the sourcing total-cost equation.
Require suppliers to be prepared to provide timely information and visibility of material flows that can be electronically shared with your organization.”

External orientation / current business (“Supply-base management”)

Conduct frequent teleconferences with critical suppliers to identify issues that may disrupt daily operations and discuss tactics to minimize these issues.
Seek security enhancements that comply with the Customs-Trade Partnership Against Terrorism (C-TPAT), Container Security Initiative (CSI), and similar initiatives.
Test and implement technologies to track containers.
Conduct a detailed incident report and analysis following a major disruption.
Create exception-detection/early-warning systems to discover critical logistics events that exceed normal planning parameters.
Gather supply chain intelligence and monitor critical supply-base locations.

Internal orientation / current business (“Real time operations management”)

Improve visibility of inventory buffers in domestic distribution channels at the part level.
Classify buffered material by its level of criticality.
Train key employees and groups to improve real-time decision-making capabilities.
Develop decision-support tools that enable the company to reconfigure the supply chain in real time.

Internal orientation / future business (“Strategic supply chain design”)

Develop predictive analysis systems that incorporate intelligent search agents and dynamic risk indices.
Construct damage-control plans for likely disruption scenarios.
Understand the cost trade-offs for different risk-mitigation strategies.
Enhance systemwide visibility and supply chain intelligence by using improved near-real-time databases.”

The authors note that none of the companies had implemented all of the identified measures at the same time and they suggest:

Companies may want to use the best-practices list as a thought-starter to help them prioritize which supply chain risk management elements to adopt. For example, companies could develop an internal survey, based on the best-practice list, which would assess their supply chain risk management capabilities.

Conclusion

This article closes a gap at the SCRM Blog of some early exploratory research on how supply chain risk management is done in practice. Even though the description of the methodology lacks several important facts, e.g. how many companies have been interviewed and how were the interviews conducted, the results still show an interesting direction.
The next obvious questions, which to my knowledge have not been pursued in an systematic manner, would be:

Which of the strategies is best used in what setting?
How should a company prioritize their efforts, if they wanted to invest in supply chain risk management?

Reference:

Elkins, D, Handfield, R.B., Blackhurst, J., & Craighead, C.W. (2005). 18 Ways to Guard Against Disruption Supply Chain Management Review

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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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Robert B. Handfield

Ways to guard against Disruptions

Goal and method

Results

Conclusion

Severity of Supply Chain Disruptions

Methodologies

Results

Conclusion