P1252428256JvnGz

1
The European Modeling Simulation Symposium
Campora S. Giovanni, Italy September 17 19,
2008
SUPPLY CHAIN VULNERABILITY AND RESILIENCE A
STATE OF THE ART OVERVIEW
F. Longo MSC-LES, MSNet Center at Dept. of
Mechanical Engineering University of Calabria
Italy
T. Ören Founding Director of MSNet MSNet Site
University of Ottawa Canada
2
Outline

• Introduction

• Resilience applied to supply chain

• Supply chain risks and vulnerabilities

• Research fields combination for supply chain
  resilience in SMEs

• Conclusions

3
Introduction
During the last years enterprises aimed to
production efficiency increase neglecting the
innovation work (analyses and studies for new
business opportunities)

• The industrial production trend has been
  characterized by wider networks enterprises,
  global sourcing, by global market able to
  guarantee easy resources and knowledge migration.
• The enterprises approach toward global supply
  chains can be considered as business opportunity
  but it introduces supply chain risks and
  vulnerabilities as well.

• The authors are actively involved in a study
  related to the resilience in the Supply Chain.
• An accurate initial analysis of the state of the
  art and of the integration of different research
  fields for studying supply chain resilience for
  SMEs

4
Definitions of Resilience

• According to the on-line American Heritage
  dictionary, resilience is the (i) ability to
  recover quickly from illness, change, or
  misfortune (ii) the property of a material
  that enables it to resume its original shape or
  position after being bent, stretched, or
  compressed.
• According to the on-line Merriam-Webster the
  resilience is the (i) an ability to recover from
  or adjust easily to misfortune or change (ii)
  capability of a strained body to recover its
  size and shape after deformation caused
  especially by compressive stress.
• The on-line Compact Oxford Dictionary defines
  resilience as the (i) ability to withstand or
  recover quickly from difficult conditions (of a
  person) (ii) the ability to recoil or spring
  back into shape after bending, stretching, or
  being compressed.

5
Resilience applied to supply chain

• The concept of resilience applied to a logistic
  chain, intended as the capability of a system to
  come back to its equilibrium position (or to
  shift to a different and more desirable position
  of equilibrium) after a disturbing action,
  recalls the ideas of agility, flexibility,
  velocity and visibility.
• Some supply chain risks and vulnerabilities
• Terrorist attacks, wars, politic problems,
  natural disaster (external risks)
• Demand/Supply problems, manufacturing problems,
  problems related to goods, information finances
  flows (internal risks)
• RISKS INTERRUPTION OF THE SUPPLY
  VULNERABILITIES CHAIN
  CONTINUITY

6
Resilience applied to supply chain
The Agility is the company capability to quickly
respond to unforeseen and unpredictable
demand/supply markets changes. Christopher and
Rutherford (2004). The Flexibility helps
companies to rightly answer to markets
variability (concurrent processes, final goods
completing postponement inside the supply chain,
strategies sharing with suppliers), Sheffi (2006)
The Velocity can be interpreted as time
required for goods moving along the supply chain
(reduction of the number of activities of each
processes as well as decreasing lead times).
Sheffi (2006) The Visibility that is the
capability to establish end-to end supply chain
relationships, (Stenger et al., 2000).
7
Some research works on supply chain vulnerability

• Before 2001
• Choi and Hartley (1996), Christopher (1998),
  Braithwaite and Hall (1999). The first work
  presents and compares different methodologies for
  suppliers base selection the second research
  work focalizes on strategic approaches for
  reducing costs within the supply chain finally
  the last research work faces the problem of
  critical decisions (in terms of business risks)
  in supply chain management.

8
Some research works on supply chain vulnerability

• Peck and Juttner 2002 propose a survey on the
  main supply chain risks also considering the
  companies reactions for reducing/eliminating
  risks.
• Pai et al. (2003) present some methods for risks
  analysis based on Bayesian Networks, Fuzzy Logic
  and a combined approach of both.
• A number of research studies introduce the
  concept of supply chain resilience. Such studies
  propose a map of supply chain vulnerabilities and
  classify supply chain risks in different
  phenomena (i.e. Hurricanes, Earthquakes),
  incidents (i.e. Exxon Valdese, Chernobyl),
  terrorist attacks (9/11 USA, 3/11 Spain), market
  globalization (i.e. strikes, new security
  procedures, insolvency).

9
Some research works on supply chain vulnerability

• Concerning risk analysis and categorization, Wu
  et al. (2006) propose a risk analysis in the
  inbound supply chain identifying, evaluating and
  validating supply chain risks. Finally Gaonkar
  and Viswanadham (2004) present a model of a
  conceptual framework for supply chain risk
  categorization at strategic level.
• Longo and Mirabelli (2008) focalize on the
  effects of demand/supply variability by using a
  supply chain management tool based on Modelling
  Simulation (the aim is to understand the impact
  of such factors on each supply chain stage, i.e.
  distribution centers, stores, etc.). Still on
  demand/supply variability De Sensi et al. (2007)
  present and compare different inventory control
  policies considering market demand and lead times
  constraints. Nagurney and Matsypura (2005)
  propose a model of a three stages supply chain
  able to monitor network nodes competitiveness.
• The scientific researches carried out by Sun and
  Yu (2005) and Deleris and Elkins (2004)
  respectively regard the impact of catastrophic
  events on supply chain contracts and probability
  distribution of losses caused by such events.
• Further studies on supply chain vulnerability
  reduction regard the information sharing. In
  particular Sheffi (2005-a) and Suo and Jin (2004)
  states that one of the critical problems of the
  information sharing is the Bullwhip effect that
  is the amplification of the demand uncertainty
  moving back along the supply chain. Concerning
  the Bullwhip effect further information can be
  found in Lee et al. (1997).

10
Some research works on supply chain vulnerability

• Different Sectors
• Hopper and Beck (2004) propose a study on supply
  chain risks in the automotive sector,
• Agrell et al. (2004) in the telecommunication
  sector.
• Marine security levels analysis in marine
  terminals (Barnes and Oloruntoba, 2005 Longo and
  Bruzzone, 2005 Longo et al. 2005, Bruzzone et
  al. 2005), costs evaluation for disruptive events
  in railways networks (Bruzzone et al. 2007),
  innovative tools for risk management in the
  aeronautical sector (Haywood and Peck, 2003) and
  the introduction of strategies for minimizing and
  contrasting the effects of the new products from
  foreign markets/countries in the textile sector
  (Chandra, 1999).

11
Supply Chains disruption some real case studies
Many cases in literature report that supply chain
vulnerability impact to Large Enterprises too. We
can recall as samples cases as Nokia, Ericsson
and Land Rover.
Correct strategy

• Nokia
• new collaborations
• phones changes

External risk (2000)
Millions of components for Nokia and Ericcson
mobile phones destroyed
Disruption of a Philips Electronics plant

• Ericcson
• no new collaborations
• no phones changes

Wrong strategy
Internal risk (2001)
Wrong strategy
VPF Thomson stops the supplies to Land Rover
Land-Rover was able to afford production stop but
the economic impact was unexpected
Land Rover had no other supplier
12
Supply Chains disruption some real case studies

• BSE Epidemy
• UK, 1996. Commonly known as mad cow disease, In
  the UK, 179,000 cattle were infected and 4.4
  million killed. estimated damages between 0.1
  and 0.2 of UK national income.

Colgate First july 2007, FDA found some samples
of colgate thoothpaste contain up to 13.7 per
cent diethylene glycol (DEG), used in antifreeze
and as a solvent.
13
Supply Chains disruption some real case studies

• Acquabomber
• November 2003, Italy. Several bottles of mineral
  water poisoned with bleach selled in retail
  stores, 27 peoples intoxicated, Damages
  estimated in 17 reduction of sales
• Lead Contamined Toys
• August 2007. excess of lead found in certain
  Mattels toys. 23 millions of toys where retired
  from market. economical estimations of damages
  around 4 billions dollars

14
Supply chain risks and vulnerabilities for SMEs
Risks characterize a global supply chain and take
effect on Large Enterprises, but higher impacts
strike SMEs, due to their lower decisional power
and poorer management tools. The consequent
main idea is to create decisional models
(opportunely integrated in development tools)
that could allow SMEs to react in an agile, lean
and flexible way to the events that characterize
the evolution of competitive and international
markets (both internal or external to the supply
chain, controllable or not, unexpected,
destructive or catastrophic). These tools has to
grant a correct and adequate process management,
as well for controls, infrastructures and
business strategies (as for example demand
forecasting, stock management, supply chain
configuration, information management) to
increase the resilience of the system.
15
Identification of the research fields involved

• The development of the research defines the
  integration of the following research fields
• Supply chain vulnerability, security and
  resilience management for SMEs.
• Methods for demand forecasting and risk analysis
  for SMEs in supply chain.
• Information management and visibility
  methodologies in supply chains.
• Modeling Simulation integration.

16
Supply chain vulnerability, security and
resilience management for SMEs.

1. The increase of security and resilience in supply
   chains can not leave out consideration the
   analysis and classification of risks, uncertainty
   and vulnerability. Processes of change management
   will be studied in SMEs to evaluate the effects
   in supply chains.
2. In particular, the attention should be pointed on
   the identification of cause-effect relations that
   connect strategic business choices of SMEs
   (operating in different sectors) to elements of
   vulnerability, security and resilience of supply
   chains.

17
Methods for demand forecasting and risk analysis
for SMEs in supply chain

1. Its also well known how, among the most
   important risks, a great importance is to put in
   supply/demand thats to say the market
   variability and uncertainty that companies bear
   upstream and downstream (demand analysis).
2. In this sense demand forecasting models together
   with inventory management models has to be
   studied and analyzed, to prevent risks and
   improve supply chain resilience.

18
Information management and visibility
methodologies in supply chains

• A correct management and information sharing
  becomes one of the key elements to increase
  visibility in supply chains and reduce
  vulnerability. Information management is a
  process of knowledge data discovery, highly
  interactive and iterative, that consists of
  identifying valid, new, potentially useful and
  understandable relations among data.
• This states a set of activities that involves the
  preparation of data, the research of relations,
  the evaluation and refinement of the extracted
  knowledge

19
Simulation Modeling integration

1. In the end, the decisional models require to be
   integrated in Modeling Simulation tools a
   simulator able to combine the different models
   studied in the research and to operate as a
   complete and process integrated decisional tool,
   is the final step.
2. In this way, it is possible to build dedicated
   decisional models to evaluate and increase supply
   chain resilience for SMEs

20
Conclusions

• The study proposed is based on the co-operation
  among University of Calabria, University of
  Ottawa and University of Genoa.
• The research is still in the start up phase,
  actually, they are focused on the critical
  components that characterize the presented
  issues.
• The most challenging aspects involve the
  development of different activities for instance
  it is critical to perform a preliminary, but
  exhaustive, analysis concerning the
  State-ofthe-art in order to be able to identify
  how many model can be reused.
• The authors are currently involved also in some
  of the next steps such as the development of
  operative simulation tools.
• After this phase the authors plan to concentrate
  their activities on the validation of the
  decision models, including the integration with
  other simulation models in relation to real case
  studies.