Resilience in Complex Supply Networks

As extended supply chains in the high-tech industry continue to straddle multiple geographies, new vulnerabilities get introduced.

Each additional supplier, manufacturing site, or distribution center is a potential failure point in the extended network, and large disruptions can have significant impact on revenue, customer experience, and brand loyalty. Natural disasters over the past few years have led to greater urgency in understanding and managing risks associated with increasing number of nodes in supply chains.

While configuring supply chains that account for every single risk is not feasible, some demonstrate better resilience — that is, their ability to rebound from disruptive events is significantly better than others. These organizations leverage the resilience of their supply chains for competitive advantage.

Research published in the MIT Sloan Management Review provides insight into the factors that affect performance when a disruptive event occurs. Leading organizations in the technology industry have focused on improving resilience by understanding these factors and taking an integrated view of risk management across the enterprise. Others have opted for addressing resilience through additional raw material or finished inventory, along with manufacturing capacity redundancy — this approach ends up being expensive and runs counter to the goal of reducing waste through lean manufacturing.

Source: Yossi Sheffi & James B. Rice Jr., MIT Sloan Management Review, 2005

Source: Yossi Sheffi & James B. Rice Jr., MIT Sloan Management Review, 2005

{complink 577|Avnet Inc.} takes an integrated approach to supply chain resilience. We focus on three drivers, and offer services that assist our customers improve resilience of their supply chains. A critical lever in driving resilience is visibility into the extended supply chain. This directly affects first response, recovery preparation, and recovery phases of a supply chain's response to a disruptive event.

These drivers can be summarized as:

  1. Understanding risks in the network and defined mitigation strategies.
  2. Understanding the upstream and downstream capabilities in the network relative to criteria such as production capacity, tooling modification, and production process modification. The FMCG industry has successfully linked Collaborative Planning, Forecasting, and Replenishment (CPFR) and S&OP to create Integrated Business Planning (IBP) that creates a competitive advantage for every participant in the extended supply chain.
  3. Reliable communication links that allow information to flow through the supply chain despite geographic, time zone, and language diversity.

Customers leverage Avnet's services — focused on component and supplier selection, IP security, inventory solutions, transaction-level visibility into their geographically dispersed supply chains, and transportation and warehousing services — to increase resilience. These customers engineer resilience into the supply chain at the design phase through an understanding of factors such as impact to revenue for critical components, product life cycle, and network maps for wafer/assembly/test and packaging of sole-source components.

If you face similar challenges in your complex and geographically dispersed supply chain, I invite you to share your experiences and insights.

15 comments on “Resilience in Complex Supply Networks

  1. stochastic excursion
    December 23, 2011

    The ideas of “eco-system” and resilient network links brings to mind a topic in non-linear physics where self-healing pathways are observed.  This comes from the study of supply lines in army ant networks, and the effort to describe them using nonlinear dynamics.  The study is covered well in this wikipedia article and supporting references.

  2. mario8a
    December 23, 2011

    Unfortunately there's. No easy way to prevent components And supplier selection issues, and trying to find a better strategy will be always the challenge, but what happens when root cause can't be find for an issue? Well, all the effort should be focus on containment actions, same case with supply chain networks, always have FIFO and good inventory control

  3. Houngbo_Hospice
    December 24, 2011

    When a link in the network is broken, there is no way the network can be healed without human's intervention. What is important is to be able to understand the potential failure points and define mitigation and fast “relief” strategies.

  4. Taimoor Zubar
    December 26, 2011

    When it comes to dealing with supply chain disruptions, I think flexibility is the key. If your supply chain has been designed to cater to unexpected events, you can handle the resilience very well. However it's important to know beforehand about all the possible sources and causes of disruptions.

    December 26, 2011

    Accurate forecasting and having very flexible supply partners with excess capacity helps.  We are very careful choosing our partners and have extensive quality and supply metrics that they must meet before we engage with them.

  6. Ariella
    December 26, 2011

    @TaimoorZ I agree, if you can't expect the unexpected, you still need a contingency plan to anticipate it. 

  7. Eldredge
    December 26, 2011

    @Flyingscot – True, but most manufacturers don't want to have to much excess capacity – efficiency depends on full use of as many resources as possible.

  8. Houngbo_Hospice
    December 27, 2011

    “it's important to know beforehand about all the possible sources and causes of disruptions.”

    Agreed! When you can't possibly predict every points of failure, you can still know in advance which sources are more reliable and less subjcet to disruptions than others. 

  9. t.alex
    December 28, 2011

    Definitely, sometimes forecast and prediction do not work. Only contingency plans help the most in these cases.

  10. Kunmi
    December 30, 2011

    Unforeseen situations must be expected. That is why contingency plans has to be in place.

  11. Kunmi
    December 30, 2011

    This is the reason why lean program is embraced in most manufacturing companies. Reduction in waste and effective use of all available resources. Lean process is a smart move!

  12. Himanshugupta
    December 31, 2011

    Lalit, i am curious to know the reason of the double dip in the plot/curve during 'Preparation for recovery'. Is it only artistic impression or something hardcored into the recovery process? I expect a single dip if the disruptive event is transient.

  13. Lalit Wadhwa
    January 1, 2012

    Great question, Himanshugupta! The shape of the curve is representative of the fact that measures such as finished goods or raw material inventory are leveraged, but ultimately depleted during “Time of Full Impact” portion of the curve. A relevant article related to the resilient enterprises can be found here.

  14. Barbara Jorgensen
    January 3, 2012

    After reading this blog, it occurred to me that everyone in the supply chain–with the exception of the OEM–seems to be scrambling to build in this flexibility and resilience we are talking about. Natural disasters are one thing, but it seems to me there is not enough focus on the poor forecasting that pervades the industry. It seems to be a given that this problem will never be solved, but isn't it easier for one company to change, rather than 50 or 100?

  15. Himanshugupta
    January 5, 2012

    Thanks Lalit for the article. I am sure that i will something new about supply chain today!

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