Resilient Supply Chain

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Resilient Supply Chain


In the recent years many disasters and catastrophic events such as hurricane Mitch, tsunamis, SARS, terrorist attacks and earthquakes have shown that we live in world with increasing uncertainty. These events can cause major disruptions in the supply chain. Although similar events have occurred, since the terrorist attacks of September 11 of 2001 the firms began to reassess the benefits of commonly accepted strategies for sourcing, transportation, demand, planning and managements in a stable environment (Martha and Subbakrisha 2003).

In a competitive environment many firms have developed global supply chains which are complex to manage and vulnerable to disruptions. The literature has documented many cases of what can possible go wrong in this supply chains due to unexpected events and what can we learn. For example, Ericsson lost 400 millions euros and the dominant position in the mobile phone market because the managers misestimated the consequences of a fire suffer by their semiconductor supplier’s plant in Albuquerque (Chopra & Sodhi (2004, Rice and Caniato (2003). Norman and Jansson (2004) follow up this case and show how Ericsson implemented proactive supply risk management.

Supply chain disruptions can potential compromise facilities, equipment and human resources and the value of stock market shares. Consequently, some studies have quantified the repercussions both in the short and the long run of disruptions in the supply chain. For example, Rice and Caniato (2003) present the results from a company survey that estimates a $50 million to $100 million cost impact for each day its supply network was disrupted. Hendricks and Singhal (2005) analyze the stock market reaction when firms publicly announce they are experiencing disruption during 1989–2000. On a sample of 827 the authors find that one year before through two years after the disruption announcement date, the mean abnormal return of their sample firms was from 33 - 40%. The author point out that their results suggest that the firms need to invest and develop capabilities and infrastructure that allow them improve reliability and responsiveness in their supply chain

The associated operation and financial risk of supply chain disruptions has been an increasing interesting topic for doing research for academic and practitioners (Craighead et al (2007). The dynamic and evolving nature of supply chain risk does not allow being free of vulnerability (Peck 2005) so it is important to design supply chain that can overcome disruptions and adapt a changing environment. This supply chain is called “resilient” and there is an increasingly number of papers that discuss the main strategies to build resilient supply chain. The main propose of this paper is to survey the literature in resilient supply chain and try to identify possible research opportunities.

Managers Perceptions

Catastrophic events and disruption had occurred form a long time and managers are aware of their economic and operational consequences. For example, Knight and Pretty (1996) found that the impact of a disruption on shareholder was a sharp decrease of almost 8% and a recovery time (if recovery is possible) of 50 trading days. Despite manager’s recognition of the importance of risk assessment, little investment of resources and time for mitigating supply chain risks have been done. Research has found that is difficult to perform cost/benefit analysis or return on investment analysis to justify certain risk reduction programs or contingency plans (Closs and McGarrell (2004), Rice and Caniato (2003)). Consequently, passive acceptance is often the default strategy even when it is not appropriate (Tomlin 2006). Furthermore as Repenning and Sterman (2001) point out firms rarely invest in improvement programs in a proactive manner because ‘‘nobody gets credit for fixing problems that never happened.’’

In a recent survey (Poirier and Quinn 2004)...
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