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Rethinking Supply Chain Resiliency

Supply-chain resiliency is something companies in the high-tech sector and other industries have been talking about for years. Even with all the talk, it still remains a relatively vague concept mentioned in the same dreamy way people discuss supply-chain flexibility and agility.

As elusive and ever-changing as resilience may be (mostly because changing world circumstances require companies to stay flexible in how they construct and reconstruct resilient supply-chain practices), it certainly remains top of mind for many executives globally, according to a recent report from the World Economic Forum.

In the most basic sense of the word, according to dictionary definitions, resilience is the ability to spring back into shape; it's elasticity, and a capacity to recover quickly from difficulties. The aptitude and skill needed to rapidly bounce back is more frequently being tested as companies confront many more complex risks and supply-chain disruptions.

Things like Hurricane Sandy on the East Coast, flooding in Thailand, a tsunami in Japan, sourcing conflict-free minerals from central Africa, and uncertainty about recessionary recovery puts companies and their supply chain under notable stress, both physically in terms of moving products around the world and financially as these upheavals hit the balance sheet.

Flexible world: Resiliency is key for many executives globally, according to the World Economic Forum.

Flexible world: Resiliency is key for many executives globally, according to the World Economic Forum.

Disruptive impact
Not unexpectedly, “significant supply chain disruptions have been found to cut the share price of impacted companies by 7 percent on average… and more than 80 percent of companies are concerned about supply chain resilience,” notes the new WEF report, “Building Resilience in Supply Chains,” citing research done by Accenture.

Given these issues and the fact that supply-chain volatility isn't likely to lessen anytime soon, maybe it's time to rethink resiliency and put a more common framework around it. It's something the WEF is thinking about, at least.

Under its Supply Chain Risk Initiative, the WEF aims to bring together leading cross-industry experts “to explore the most critical threats facing supply chain networks, and to apply new risk response tools that can promote efficient risk management, security and resiliency in the complex global trading environment.” Ultimately, it wants to do noble things like “strengthen the framework for global risk assessment” and “improve collaboration and transparency across supply chain actors.”

Fine-tuning good ideas
Perhaps this is just more chatter being added to already ambiguous conversations around resiliency, but the Forum has at least formulated a few ideas about which measures need to be developed, fine-tuned, and implemented. Generally, they sound like good starting points to get more companies involved in the conversation and could provide a framework for companies trying to make clearer sense of all this.

While the report outlines common challenges, it emphasizes three “must-have” requirements to develop a resilience framework:

  • The need for a common risk vocabulary;
  • Improved data and information flow across supply-chain actors; and
  • Building greater agility and flexibility into the supply chain.

More specifically, the top five measures the WEF named as the roll-up-your-sleeves-and-dive-in focus areas for creating a more comprehensive resiliency blueprint are:

  1. Improved information sharing between governments and businesses
  2. Harmonized legislative and regulatory standards
  3. Building a culture of risk management across suppliers
  4. Common risk assessment frameworks
  5. Improved alert/warning systems

These topics will likely come back up as Velocity and EBN discussion points as more cross-industry collaboration becomes evident. They are big issues, and it's about time that companies step out of their individual silos of putting to address the broad impact resiliency, flexibility, and agility has on the entire industry. The supply chain is, in fact, only as strong as its weakest link, and while moving the global conversation from chatter to action may be a monumental task causing its own kind of disruption, it has to happen sooner or later.

Any best-practices to share about building a resilient supply chain? Let us know in the comments section and email me at .

4 comments on “Rethinking Supply Chain Resiliency

  1. FreeBird
    February 21, 2013

    I think a close examination of the supply chain is always a valuable effort, but since we are taking the definition of resiliency literally, do we really want a supply chain that snaps back to its original shape after facing a crisis? It would be better to resume a different shape after the crisis is over. For example, JIT and BTO left the supply chain empty after the Japan crisis in 2011, and many analysts suggested the industry revisit JIT. I don't see that that has happened to a great extent, but I might be wrong. Any feedback?

  2. Brian Fuller
    February 21, 2013

    I second your call for inputs. As the saying goes, you should never let a good crisis go to waste. At a different level, every recession brings industry transformation (in almost every industry). So what happened in the supply chain? Just more consolidation? Or….?

  3. Ariella
    February 22, 2013

    One of the points that Taleb makes in his book Antifragile is “Someone paid a price for the system to improve.” In other words, when some businesses are knocked out, the industry learns from their mistakes how to improve resiliency for the businesses that do survive. 

  4. Houngbo_Hospice
    February 25, 2013

    @FreeBird,

    ” and many analysts suggested the industry revisit JIT.”

    The problem is not about JIT effectiveness, but rather whether the manufacturing industry can stiil rely on JIT strategy -with the current global economic challenges-and improve ROI, quality and efficiency. 

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