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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congress hearing

Links between Supply Chain Resilience and Homeland Security

Disruptions and their Causes

Dealing with Disruptions

Conclusion