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Good OM Reading: Supply Chain Resilience

September 25, 2015

disasterSemiconductor companies shaken by earthquakes; transportation companies battered by weather; retailers outwitted by rivals — nearly every company has endured some type of catastrophe, and then learned from its experience, disruption after disruption. For example, GM became more resilient with every crisis it faced, from the bankruptcy of its strategic supplier, Delphi, in 2005 to the Japan earthquake in 2012. “Technology is an increasingly important tool in the arsenal of resilience” writes MIT Sloan Management Review (Oct., 2015) .

From sensors to cloud computing to social media, various technologies can help prepare for, detect and manage disruption. Sensors can warn of impending events, from industrial accidents to earthquakes. When interconnected into Internet of Things networks, these smart devices can alert employees to a potential or existing disruption. During and after disasters, every human being on the scene can now be a sensor. Social media channels can provide an informal, real-time damage assessment. But even as technology makes it easier to detect and manage risk, it is also a major source of risk. A cyber-security breach can disrupt as much as an earthquake can– as the many retailers that fell victim to digital theft discovered in 2014. A large part of the problem is not rooted in sophisticated penetration of firewalls, but with insiders whose mobile devices are infected inside the firewall.

Collecting information from every source — weather reports, sensors, industrial intelligence — is only half the job. What organizations do with the information is key. The technology will sound the alarm, but the decision-making process that ensues is the real issue. Consider the actions taken by dispatchers when alerted to an earthquake in Mexico City a few years ago. Those empowered employees were able to shut down the subway system 40 seconds before the earthquake hit, avoiding a possible disaster. Employee empowerment illustrates a key difference between resilient and non-resilient companies: Resilient companies delegate to the lowest level. They organize in advance for disruption and consolidate crucial information in an emergency operations center. With the increasing use of cloud technologies, these centers can be virtual so that employees can work on the disruption, even from home.

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Supply Chain Management Research

Andreas Wieland’s supply chain management blog for academics and managers

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