Supply Chain Disruptions

A question of structure and organization

organization?
?

Researcher Jan Husdal, MSc

Møreforsking Molde/Molde Research Institute
jan.husdal@himolde.no
+47 71214289

International Conference on Flexible Supply Chains in a Global Economy

Molde University College
17.07.08
 Summary

• Why are supply chain disruptions important?

• Freight transport in Norway
• Research Questions
• Supply Chain Disruptions
– Robustness, Flexibility and Resilience
– Mitigation and Contingency actions
– Resilient Organizations
• Supply Chain Characteristics vis-a-vis Disruptions
• Location and Preparedness
Why are supply chain disruptions important?

• Even a relatively small supply

chain disruption caused by a
localized risk event may have
consequences across the
global economic system.
system
• Supply chains appear to
disperse risk between multiple
parties, but they can also
aggregate risk.
risk
• Global supply chains,
offshoring and outsourcing
leads to lesser control over
disruption causes.
Source:
• As a result, companies are left
World Economic Forum (2008) Hyper-optimization and
supply chain vulnerability: an invisible global risk? In:
”only” with control over
Global Risks 2008 – A Global Risk Network Report, disruption consequences.
REF: 090108, World Economic Forum, Switzerland.
Supply chain disruptions in sparse networks
• The vulnerability of the transportation network as part
of the supply chain is of particular interest in countries
or regions with sparse transportation networks.
networks

– only one mode of transportation available between

population centers
– only one route available between population
centers
– extremely vulnerable to any disruption in the
transportation system or supply chain
– no suitable alternative exists in a possible worst-
case scenario
Norway vs. Europe
 Freight Transport in Norway, 1965-2007, tonkm

18000

16000

14000

12000

Sea
10000
Rail
8000
Road
Air
6000

4000

2000

0
65

70
75

80
85
90

95
98

99
00

01
02
03

04
05

06
07
19

19
19
19

19
19

19
19
19

20
20

20
20

20
20
20

20
 Road/rail Network Length (all roads) % National Regional Secondary roads
% Motorways (above)
700
70
600
60

500
50

400
Road 40
% N+R+2nd
Rail
300 %M
30

200 20

100 10

0 0
NO IE NL UK DE NO IE NL UK DE

Road/rail density km/km2 Modal spilt %

3
120

2,5 100

2 80
Road
Rail Road
1,5 60
Rail

1 40

0,5 20

0
0
NO DE NL UK IE
NO IE NL UK DE
 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?
• Does the location reflect on the companies’ preparedness for
certain disruptions?
– Situation awareness?
• Does the location reflect on mitigation and contingency actions?
• What level of risk (supply chain disruptions/costs) exists at which
locations?
Robustness, flexibility, resilience

• Different supply chain

characteristics will result in
different ways a suply chain
disruption is handled.
• A resilient supply chain is
impacted, but it is able to come
back to a stable state, although
not necessarily to where it was
before the disruption.
• In business setting the ability
to survive (resilience) is more
important than regaining
stability (robustness)
 A typical disruption profile

Warning?

Adapted from:

Sheffi (2005)
Asbjørnslett (1997)
Cornish (2007)
Mitigation and contingency measures

Adapted from:
Asbjørnslett, B E and Rausand, M (1997) Assess the vulnerability of your production system.
ReportNTNU 97018. Norwegian University of Science and Technology NTNU, Department of Production
and 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
 Resilient organizations

Resilient organisations

Resilient 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
 Supply Chains vis-a-vis Disruption

Factors 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. Decision
Sciences, Vol. 38, No. 1, pp. 131-156.
Risk and vulnerability in Supply Chains
 Location and Preparedness

• Structure
Structure:
– Badly located

– Well located

Structure
• Organization
Organization – Badly prepared

– Well prepared
 Conclusion

In regions or countries with sparse transportation

networks or few transportation mode choices the
structure or design of the supply chain, along with the
organization and preparedness become important
factors in determining if a company has an favorable or a
unfavorable location.