The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage

416 Pages·2007·5.06 MB·English

by  Yossi Sheffi

The Resilient Enterprise
The Resilient Enterprise
Overcoming Vulnerability for Competitive
Advantage
Yossi Sheffi
To Anat
Contents
Preface ix
Acknowledgments xi
I When Things Go Wrong: Disruptions and Vulnerability 1
1 Big Lessons from Small Disruptions 3
2 Understanding Vulnerability 17
3 Anticipating Disruptions and Assessing Their Likelihood 35
4 Effects of Disruptions 57
II Supply Chain Management-A Primer 75
5 Basic Supply Chain Management 77
6 Demand-Responsive Supply Chains 93
III Reducing Vulnerability 113
7 Reducing the Likelihood of Intentional Disruptions 115
8 Collaboration for Security 137
9 Detecting Disruptions 155
10 Resilience through Redundancy 171
IV Building in Flexibility 181
11 Flexibility through Interchangeability 183
12 Postponement for Flexibility 195
13 Strategies for Flexible Supply 209
14 Customer Relations Management 225
15 Building a Culture of Flexibility 243
V Resilience for Competitive Advantage 267
16 Moving Ahead 269
Notes 287
Index 317
Preface
This book examines the ways in which companies can recover from
highimpact disruptions. The focus is on the actions they should take to lower
their vulnerability and increase their resilience. A notion borrowed from the
materials sciences, resilience represents the ability of a material to recover its
original shape following a deformation. For companies, it measures their
ability to, and the speed at which they can, return to their normal performance
level following a highimpact/low-probability disruption.
After 9/11, governments around the world elevated the fight against
terrorism to the top of their agendas. The U.S. government reorganized its
defense and intelligence agencies and adjusted its foreign policy for that
mission. In contrast, the private sector quickly went back to business. The
daily pressures to performworrying about yields, supplier performance,
machine up-time, customer requirements, product launches and market
responsequickly overtook most terror worries.
Yet in the United States, and increasingly in Europe, most of the economic
infrastructure, such as transportation, energy, retail, manufacturing, and
finance, is in the hands of the private sector. In early 2002, a group of
researchers and several corporate members of MIT's Supply Chain Exchange
program began a series of discussions to address the rising concerns about
terrorist disruptions. It quickly became apparent that there are no clear
management guidelines, models, or theories for corporate security and
resilience. These discussions spawned a three-year research effort that
culminated in this book.
As the research progressed, it became clear that the study needed to expand
to include different kinds of disruptions. Many random phenomena, such as
earthquakes, floods, and accidents, have just as much impact on a company as
a terrorist action. Furthermore, the high frequency of general disruptions
provided more data for the research.
Questions raised as part of this research effort include the following:
• How should companies define and prioritize threats?
• What are the common characteristics of all highimpact disruptions?
• Can companies prepare without knowing the type of disruptions they may
face?
• How should companies maintain lean operations, which aim to reduce
redundancy, without increasing vulnerability?
• Are intentional disruptions fundamentally different from accidents and
random phenomena?
• How can disruptions be detected when so many simultaneous events are
taking place in the normal course of commerce?
• How can a company build in flexibility so that it can be resilient?
• Should companies always prefer multiple suppliers to singlesourcing?
• What new risks and rewards affect collaboration in this new world?
• What is the role of corporate culture in resilience?
• How can security investments support the main mission of the enterprise?
Can they be cost-justified?
This book sheds light on all these questions and more. It is a call for action
based on the experience of many companies-those who did well in the face of
disruptions and those who faltered. Furthermore, a company is typically a
citizen of its supply chain. Thus, the book answers many of these questions
with emphasis on the extended enterprise-the web of suppliers, manufacturers,
distributors, retailers, transportation carriers, and the other participants in the
process of bringing products to markets.
Acknowledgments
This book is a product of a research project conducted between 2002 and 2005
at the Center for Transportation and Logistics (CTL) at the Massachusetts
Institute of Technology (MIT). The project was funded, in part, by the U.K.
government through the Cambridge-MIT Institute (CMI) to study the impacts
of disruptions on supply chain operations. In addition, the following
companies have contributed funds through the Integrated Supply Chain
Management Program at the CTL: Avaya, Helix, Intel, Lucent, Monsanto,
Proctor & Gamble, and Texas Instruments.
The project was directed by Jim Rice of the CTL. Jim contributed with
leadership, vision, and able day-to-day management of the project. He also
managed the interviews and the interaction with the many of the companies
and executives who contributed to the research effort and to the book. In
addition, he edited, commented and pushed. Without him this book would not
have been written.
Dan Dolgin offered ideas, comments and editing throughout the project.
Andrea and Dana Meyer organized the material, added many examples, and
put on paper many of the early drafts. Scott Campbell edited various versions
of the text and made invaluable suggestions. Nicole Blizek collected and
checked references. Yali, my brother, was very generous with his time,
providing unique access to senior Israeli executives.
Many students participated in the project and the fruits of their labor show
up in many parts of the book. They include Abby Benson of the 2005 class of
the Master of Engineering in Logistics (MLOG) at MIT, Deena Disraelly
(MLOG 2004), Chris Picket (MLOG 2003), Reshma Lensing (MLOG 2003),
Chris Hamel (MLOG 2003), Sophi Pochard of the 2004 Technology and
Policy Program at MIT, and David Opolon of Ecole Nationale Superieure des
Mines de Paris and Federico Caniato of the Politecnico di Milano, who were
visiting students at MIT at the time.
The interactions with Dr. Helen Peck and Professor Martin Christopher of