jan husdal iflex 2008

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SupplySupply ChainChain DisruptionsDisruptionsAA questionquestion ofof structurestructure andand organizationorganization? ?

Researcher Jan Husdal, MScMreforsking Molde/Molde Research Institute [email protected] +47 71214289

International Conference on Flexible Supply Chains in a Global EconomyMolde University College

17.07.08


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Why are supply chain disruptions important? Even a relatively small supply

chain disruption caused by a

localized risk event localized risk event may haveconsequences across the consequences across the global economic system global economic system .

Supply chains appear todisperse risk disperse risk between multiple

part es, ut t ey can a soaggregate risk aggregate risk . Global supply chains,

offshoring and outsourcingleads to lesser control overdisruption causes.disruption causes.

As a result, companies are leftonly with control overdisruption consequences.disruption consequences.

Source:

World Economic Forum (2008) Hyper-optimization and supply chain vulnerability: an invisible global risk? In: Global Risks 2008 A Global Risk Network Report,REF: 090108, World Economic Forum, Switzerland.


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Supply chain disruptions in sparse networks The vulnerability of the transportation network vulnerability of the transportation network as part

of the supply chain is of particular interest in countriesin countries

or regions with sparse transportation networksor regions with sparse transportation networks .

only one mode of transportation available only one mode of transportation available betweeno ulation centers

only one route available only one route available between populationcenters

extremely vulnerable extremely vulnerable to any disruption in thetransportation system or supply chain

no suitable alternative exists no suitable alternative exists in a possible worst-case scenario


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Norway vs. Europe


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Freight Transport in Norway, 1965-2007, tonkm

12000

14000

16000

18000

0

2000

4000

6000

8000

10000

1 9 6 5

1 9 7 0

1 9 7 5

1 9 8 0

1 9 8 5

1 9 9 0

1 9 9 5

1 9 9 8

1 9 9 9

2 0 0 0

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

RailRoad

Air


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% National Regional Secondary roads% Motorways (above)

0

10

20

30

40

50

60

70

NO IE NL UK DE

% N+R+2nd

% M

Road/rail Network Length (all roads)

0

100

200

300

400

500

600

700

NO IE NL UK DE

Road

Rail

Road/rail de nsity km/km2

0

0,5

1

1,5

2

2,5

3

NO IE NL UK DE

Road

Rail

Modal spilt %

0

20

40

60

80

100

120

NO DE NL UK IE

Road

Rail


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Research questions

Does the location reflect on typical supply chain disruptions? What is the critical transportation mode/network/route?

Does the location reflect on supply chain structure? Does a sparse transportation network induce a certain sc structure?

oes e oca on re ec on e compan es prepare ness orcertain disruptions? Situation awareness?

Does the location reflect on mitigation and contingency actions? What level of risk (supply chain disruptions/costs) exists at which

locations?


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Robustness, flexibility, resilience Different supply chain

characteristics will result indifferent ways a suply chaindisruption is handled.

A resilient supply chain is,

back to a stable state, althoughnot necessarily to where it wasbefore the disruption.

In business setting the ability

to survive (resilience) is moreimportant than regainingstability (robustness)


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A typical disruption profile

Warning?

Adapted from:

Sheffi (2005)Asbjrnslett (1997)Cornish (2007)


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Mitigation and contingency measures

Adapted from:

Asbjrnslett, B E and Rausand, M (1997) Assess the vulnerability of your production system .

ReportNTNU 97018. Norwegian University of Science and Technology NTNU, Department of Productionand Quality Engineering, Trondheim Norway.

Tomlin, B. (2006) On the Value of Mitigation and Contingency Strategies for Managing Supply Chain Disruption Risks . Management Science, Vol. 52, No. 5, pp. 639-657

Ritchie, B. and Brindley, C. (2004) Risk Charcteristics of the Supply Chain A Contingency Framework . In: Supply Chain Risk. Ed. Brindley, C. , Ashgate Publishing, pp. 28-42,197-202


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Resilient organizations

Resilient organisations organisations

Resilient supply chains supply chains Source:

Mc Manus, S. et al (2007) Resilience Management A Framework for Assessing and Improving the Resilience of Organisations . Research Report 2007/01, Resilient Organisations, New Zealand.

www.resorgs.org.nz


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Supply Chains vis-a-vis DisruptionFactors that can aggravate or lessen supply chains disruptions:

Supply Chain Design supply chain density supply chain complexity

node criticality

Supply Chain Mitigation Capability adaptive capacity (recovery capability) 1

information sharing/ visibility (warning capability)1

1. Craighead, C. W., Blackhurst, J., Rungtusanatham, M. J. & Handfield, R. B. (2007) The Severity of Supply Chain Disruptions: Design Characteristics and Mitigation Capabilities . DecisionSciences, Vol. 38, No. 1, pp. 131-156.


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Risk and vulnerability in Supply Chains


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Location and Preparedness

Structure Structure : Badly located

Well located

Organization Organization Badly prepared

Well prepared

Structure

Organization


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ConclusionIn regions or countries with sparse transportation sparse transportation

networks networks or few transportation mode choices few transportation mode choices thestructure structure or design design of the supply chain, along with theorganization organization and preparedness preparedness become importantfactors in determinin if a com an has an favorable favorable or a

unfavorable unfavorable location.

jan husdal iflex 2008

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