Supply chain resilience

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Supply chain resilience is "the capacity of a supply chain to persist, adapt, or transform in the face of change". [1]

Contents

Origins

Around the turn of the millennium, supply chain risk management has attempted to transfer traditional risk management approaches from the "company" system to the "supply chain" system. [2] However, the scalability of traditional risk management steps (identification, assessment, treatment and monitoring of risks) quickly reaches its limits: It is entirely possible to identify all conceivable risks within a company; However, a supply chain often consists of thousands of companies – the attempt to identify all possible risks in this system is therefore much more complex, if not in vain. [1] It is a popular concept in contemporary supply chain management. It has therefore been argued that the complexity of supply chains requires complementary measures such as supply chain resilience. [3] Resilience is able to cope with all sorts of changes and is thus less about the identification of specific risks but more about the characteristics of the system. [4]

Interpretations of supply chain resilience

Resilience in the sense of engineering resilience

For a long time, the interpretation of resilience in the sense of engineering resilience prevailed in supply chain management. [1] It is implied here that supply chain is a closed system that can be controlled, similar to a system designed and planned by engineers (e.g. subway network). [5] The expectations placed on managers come close to those placed on engineers, who should react quickly in the event of a disturbance in order to restore the system's ideal and original state as quickly as possible. [6] A popular implementation of this idea in supply chain management is given by measuring the time-to-survive and the time-to-recover of the supply chain, allowing to identify weak points in the system. [7] Acting like an engineer by redesigning the supply chain like on the drawing board, often by creating redundancies (e.g. multiple sourcing), strengthens resilience. In the short term, a supply chain can be viewed as a relatively rigid system. The idea of persistence of a supply chain that follows from engineering resilience therefore makes sense in the short term. However, this approach has mid to long-term limits. While the traditional engineering resilience approach in supply chains focuses on a quick response to restore the system to its ideal and original state after a disturbance, emerging perspectives suggest a shift towards a more proactive adaptation approach. This new viewpoint highlights the importance of not just reactive measures, but also proactive strategies like redundancy, flexibility, and adaptability to ensure the supply chain's persistent performance and adaptability in the face of disruptions. [8]

Resilience in the sense of socio-ecological resilience

The resilience of social-ecological systems changes in the four phases of each adaptive cycle. This applies at all levels of a panarchy separately. Panarchy-adaptive-cycles.png
The resilience of social-ecological systems changes in the four phases of each adaptive cycle. This applies at all levels of a panarchy separately.

Social-ecological resilience goes back to ecological resilience, adding to it human decision-makers and their social interactions. [9] A supply chain is thus interpreted as a social-ecological system that – similar to an ecosystem (e.g. forest) – is able to constantly adapt to external environmental conditions and – through the presence of social actors and their ability to foresight – also to transform itself into a fundamentally new system. [5] This leads to a panarchical interpretation of a supply chain, embedding it into a system of systems, allowing to analyze the interactions of the supply chain with systems that operate at other levels (e.g. society, political economy, planet Earth). [5] For example, Tesla's supply chain can be described as resilient because it reflects the transformation from internal combustion engines to electric engines, which is based on the ability of human actors to foresee long-term changes in the planet in the context of the climate crisis and to implement them in a business model. In contrast to engineering resilience, the supply chain is not interpreted as a system that needs to be stabilized in a fixed state (focus: persistence), but as a fluid system or even as a fluid process that interacts with the rest of the world (focus: adaptation or even transformation). [1]

Recent studies and data have examined how the European Union firms responded to significant supply chain disruptions caused by the COVID-19 pandemic, maritime transport issues, and geopolitical conflicts. These events exposed the vulnerabilities of EU supply chains, particularly their reliance on foreign imports. [10]

For example, in 2023 44% of EU firms that imported from China experienced transport and logistics challenges, while only 22% of firms that import solely within the EU reported similar numbers. [11]

In response to challenges like these, trade patterns have shifted. The share of EU exports directed to the US increased to 21% in 2023, compared to a 14% in 2010. This is in order to mitigate risk and enhance supply chain resilience. [11]

Literature

Related Research Articles

<span class="mw-page-title-main">Supply chain management</span> Management of the flow of goods and services

In commerce, supply chain management (SCM) deals with a system of procurement, operations management, logistics and marketing channels, through which raw materials can be developed into finished products and delivered to their end customers. A more narrow definition of supply chain management is the "design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronising supply with demand and measuring performance globally". This can include the movement and storage of raw materials, work-in-process inventory, finished goods, and end to end order fulfilment from the point of origin to the point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

<span class="mw-page-title-main">Business continuity planning</span> Prevention and recovery from threats that might affect a company

Business continuity may be defined as "the capability of an organization to continue the delivery of products or services at pre-defined acceptable levels following a disruptive incident", and business continuity planning is the process of creating systems of prevention and recovery to deal with potential threats to a company. In addition to prevention, the goal is to enable ongoing operations before and during execution of disaster recovery. Business continuity is the intended outcome of proper execution of both business continuity planning and disaster recovery.

<span class="mw-page-title-main">Supply chain</span> System involved in supplying a product or service to a consumer

A supply chain is a complex logistics system that consists of facilities that convert raw materials into finished products and distribute them to end consumers or end customers. Meanwhile, supply chain management deals with the flow of goods in distribution channels within the supply chain in the most efficient manner.

Robustness is the property of being strong and healthy in constitution. When it is transposed into a system, it refers to the ability of tolerating perturbations that might affect the system's functional body. In the same line robustness can be defined as "the ability of a system to resist change without adapting its initial stable configuration". "Robustness in the small" refers to situations wherein perturbations are small in magnitude, which considers that the "small" magnitude hypothesis can be difficult to verify because "small" or "large" depends on the specific problem. Conversely, "Robustness in the large problem" refers to situations wherein no assumptions can be made about the magnitude of perturbations, which can either be small or large. It has been discussed that robustness has two dimensions: resistance and avoidance.

A supply network is a pattern of temporal and spatial processes carried out at facility nodes and over distribution links, which adds value for customers through the manufacturing and delivery of products. It comprises the general state of business affairs in which all kinds of material are transformed and moved between various points to maximize the value added for customers. In the semiconductor industry, for example, work-in-process moves from fabrication to assembly, and then to the test house.

Psychological resilience is the ability to cope mentally and emotionally with a crisis, or to return to pre-crisis status quickly.

<span class="mw-page-title-main">Ecological resilience</span> Capacity of ecosystems to resist and recover from change

In ecology, resilience is the capacity of an ecosystem to respond to a perturbation or disturbance by resisting damage and subsequently recovering. Such perturbations and disturbances can include stochastic events such as fires, flooding, windstorms, insect population explosions, and human activities such as deforestation, fracking of the ground for oil extraction, pesticide sprayed in soil, and the introduction of exotic plant or animal species. Disturbances of sufficient magnitude or duration can profoundly affect an ecosystem and may force an ecosystem to reach a threshold beyond which a different regime of processes and structures predominates. When such thresholds are associated with a critical or bifurcation point, these regime shifts may also be referred to as critical transitions.

<span class="mw-page-title-main">Supply chain risk management</span> Preventing failures in logistics

Supply chain risk management (SCRM) is "the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity".

Digital transformation (DT) is the process of adoption and implementation of digital technology by an organization in order to create new or modify existing products, services and operations by the means of translating business processes into a digital format.

<span class="mw-page-title-main">Yossi Sheffi</span>

Yossi Sheffi is the Elisha Gray II Professor of Engineering Systems at the Massachusetts Institute of Technology. He founded or co-founded five companies, has authored numerous scientific publications and nine books.

A social-ecological system consists of 'a bio-geo-physical' unit and its associated social actors and institutions. Social-ecological systems are complex and adaptive and delimited by spatial or functional boundaries surrounding particular ecosystems and their context problems.

<span class="mw-page-title-main">LARG SCM</span>

LARG Supply Chain Management attempts to put together lean, agile, resilient, and green approaches in supply chain management. Lean supply chain managements aims are to maintain close to zero inventories and reduce work-in-process; Agile goes for quick responses to customer inquiries and market changes while controlling costs and quality; resilience is about reacting quickly to disruptions impacting supply chain; and green refers to sustainability in supply chain through low emissions to the environment and a recycling strategy for products.

The Journal of Business Logistics is a peer-reviewed academic journal published by Wiley-Blackwell on behalf of the Council of Supply Chain Management Professionals (CSCMP), covering research and best practices in logistics and supply chain management. In October 2020, Robert 'Glenn' Richey, Jr. and Beth Davis-Sramek, both of Auburn University's Harbert College of Business, were appointed as the incoming editors-in-chief, taking over from Thomas J. Goldsby and Walter Zinn, of The University of Tennessee-Knoxville and The Ohio State University Fischer College of Business, respectively. Some notable writers include Dean Matthew Waller of the University of Arkansas Sam M. Walton College of Business, Stanley E. Fawcett, and John T. Mentzer. According to the Journal Citation Reports, its 2020 impact factor is 6.677 and its 5-year impact factor is 7.362, ranking it 48th out of 226 journals in the category "Management".

An important part of the heritage of family resilience is the concept of individual psychological resilience which originates from work with children focusing on what helped them become resilient in the face of adversity. Individual resilience emerged primarily in the field of developmental psychopathology as scholars sought to identify the characteristics of children that allowed them to function "OK" after adversity. Individual resilience gradually moved into understanding the processes associated with overcoming adversity, then into prevention and intervention and now focuses on examining how factors at multiple levels of the system and using interdisciplinary approaches promote resilience. Resilience also has origins to the field of positive psychology. The term resilience gradually changed definitions and meanings, from a personality trait to a dynamic process of families, individuals, and communities.

<span class="mw-page-title-main">Resilience (engineering and construction)</span> Infrastructure design able to absorb damage without suffering complete failure

In the fields of engineering and construction, resilience is the ability to absorb or avoid damage without suffering complete failure and is an objective of design, maintenance and restoration for buildings and infrastructure, as well as communities. A more comprehensive definition is that it is the ability to respond, absorb, and adapt to, as well as recover in a disruptive event. A resilient structure/system/community is expected to be able to resist to an extreme event with minimal damages and functionality disruptions during the event; after the event, it should be able to rapidly recovery its functionality similar to or even better than the pre-event level.

Climate resilience is a concept to describe how well people or ecosystems are prepared to bounce back from certain climate hazard events. The formal definition of the term is the "capacity of social, economic and ecosystems to cope with a hazardous event or trend or disturbance". For example, climate resilience can be the ability to recover from climate-related shocks such as floods and droughts. Different actions can increase climate resilience of communities and ecosystems to help them cope. They can help to keep systems working in the face of external forces. For example, building a seawall to protect a coastal community from flooding might help maintain existing ways of life there.

Cyber resilience refers to an entity's ability to continuously deliver the intended outcome, despite cyber attacks. Resilience to cyber attacks is essential to IT systems, critical infrastructure, business processes, organizations, societies, and nation-states. A related term is cyberworthiness, which is an assessment of the resilience of a system from cyber attacks. It can be applied to a range of software and hardware elements.

David Simchi-Levi is an American academic working as a Professor of Engineering Systems at Massachusetts Institute of Technology. He is also the founder or co-founder of several companies. Simchi-Levi's research focuses on supply chain management, revenue management, and business analytics.

<span class="mw-page-title-main">Agrifood systems</span> Systems of types of food production

Agrifood systems encompass the primary production of food and non-food agricultural products, as well as in food storage, aggregation, post-harvest handling, transportation, processing, distribution, marketing, disposal and consumption. Within agrifood systems, food systems comprise all food products that originate from crop and livestock production, forestry, fisheries and aquaculture, and from other sources such as synthetic biology, and that are intended for human consumption.

<span class="mw-page-title-main">Gary Gereffi</span> American academic and author

Gary Allan Gereffi is an American economic sociologist, policy activist, author, and academic. Gereffi is emeritus Professor of Sociology and Founding Director of the Global Value Chains Center at Duke University. He is one of the originators of the Global Value Chains (GVC) framework and he is known for his work on governance structures and upgrading strategies in GVCs, global commodity chain (GCCs), dependency theory, cross-regional development strategies in Latin America and East Asia, and the role of multinational corporations (MNCs) in development.

References

  1. 1 2 3 4 Wieland, A., & Durach, C. F. (2021). Two perspectives on supply chain resilience. Journal of Business Logistics. https://doi.org/10.1111/jbl.12271
  2. ↑ Norrman, A., & Jansson, U. (2004). Ericsson’s proactive supply chain risk management approach after a serious sub‐supplier accident. International Journal of Physical Distribution & Logistics Management, 34(5), 434-456. https://doi.org/10.1108/09600030410545463
  3. ↑ see Walker, B. (2020). Resilience: what it is and is not. Ecology and Society, 25(2).
  4. ↑ Sheffi, Y. (2007). The resilient enterprise: overcoming vulnerability for competitive advantage. Zone Books.
  5. 1 2 3 Wieland, A. (2021). Dancing the supply chain: Toward transformative supply chain management. Journal of Supply Chain Management, 57(1), 58-73. https://doi.org/10.1111/jscm.12248
  6. ↑ see Holling, C. S. (1996). Engineering resilience versus ecological resilience. In: Engineering within ecological constraints, 31(1996), 32.
  7. ↑ Simchi‐Levi, D., Wang, H., & Wei, Y. (2018). Increasing supply chain robustness through process flexibility and inventory. Production and Operations Management, 27(8), 1476-1491.
  8. ↑ Ivanov, Dmitry (2023-09-04). "Two views of supply chain resilience". International Journal of Production Research: 1–15. doi:10.1080/00207543.2023.2253328. ISSN   0020-7543.
  9. ↑ Folke, C. (2006). Resilience: The emergence of a perspective for social–ecological systems analyses. Global Environmental Change, 16(3), 253-267.
  10. ↑ Attinasi, Maria Grazia; Balatti, Mirco; Mancini, Michele; Metelli, Luca (2022-01-13). "Supply chain disruptions and the effects on the global economy".{{cite journal}}: Cite journal requires |journal= (help)
  11. 1 2 Bank, European Investment (2024-10-03). Navigating supply chain disruptions: New insights into the resilience and transformation of EU firms. European Investment Bank. ISBN   978-92-861-5807-0.
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