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Happy Holidelays!

Posted by janhusdal Dec 23, 2009

So this is Christmas: Again, severe weather all over Europe, the UK, and the US, leaving travellers stranded on the Eurostar trains under the English Channel, prompting a major rethink of Eurostar’s customer service. People were stuck at airports like Frankfurt, Germany or Luton, UK. It’s the same scene everywhere, chaos, chaos and chaos and lots of people desperate to get home for the holidays.



Last year, the same thing happened, at least here in Norway. The news are always about the poor travellers who are stuck and cannot get anywhere, and the airlines or train operators not giving out any information, let alone compensation. While that is a sad story, what about all the goods that is transported now, just three days before Christmas. All the Christmas presents? Those too are stuck somewhere, but we rarely see news flashes of truck drivers stuck in snow, or perishable goods that has to be scrapped. That is not news that sells. But freezing car drivers, and freezing train passengers do sell.


Supply chain disruptions are the order of the day right now. Keeping supplies running is just as important as keeping people running. Let’s not forget about that. Without roads, let alone cleared roads, nothing really works.



I’m always late in sending my Christmas gifts to friends and family, as usual. This year is no exception, and I can only hope that my letters and packets will make it there in time. There’s only one thing left to say: Happy Holidelays!

In ancient times as in modern times, global trade has always relied on maritime supply chains. Shipping in the literal sense of the word. But shipping lanes are no longer safe, and in maritime supply chains there are mainly three attack points or penetration points that can contribute to security problems:



Cargo: Using cargo to smuggle people or weapons.

Vessel: Using the vessel as a weapon.

People: Using fraudulent identity to gain access to vessel or cargo for the above.


The airline industry has long enforced a strict security regime, and now, the coming of terrorism and other security threats has prompted the rise of maritime regulations and initiatoves like ISPS, CSI and C-TPAT. Are those regulations perhaps a threat to global trade in themselves?


Paul Barnes and Richard Oloruntoba from the Queensland University of Technology in Brisbane, Australia, suggest that the complex interaction of ports, maritime operations and supply chains creates vulnerabilities that requires analysis that extends beyond the immediate visible that these regulations are aimed at.In their 2005 article, Assurance of security in maritime supply chains: Conceptual issues of vulnerability and crisis management they highlight that there is a complex interaction between the above initiatives, and that governments imposing these initiatives on businesses do not always consider the  wider financial and social impact of compliance with these regulations. More often than not then, these initiatives lack the necessary balance between the requirements for efficiency and security in the supply chain.


Ports are the meeting points of many modes of transportation, usually two (sea and road), sometimes three (sea, road and rail), or perhaps even four (sea, road, rail and air). How can security regulations possibly match all of those?


BARNES, P., & OLORUNTOBA, R. (2005). Assurance of security in maritime supply chains: Conceptual issues of vulnerability and crisis management Journal of International Management 11  (4), 519-540.

Have you ever played SimCity Maybe that's why I decided to buy this book, because the cover picture looks like a scene taken from SimCity And in some ways, reading the 2009 book Enterprise Supply Chain Management by Vivek Sehgal really feels like playing SimCity. It's that detailed, very detailed, indeed.


The books covers everything there is to know about supply chains. It can be read from cover to cover, but it is probably better as a reference, thanks to its extensive and easy to navigate contents. Secondly, it contains an index that explains all the acronyms used in the book, e.g. COGS, OUTL, CTP, BOR or whatever. Thirdly, there is an appendix on important issues such as ERP, RFID and cross-docking, emerging themes such as green supply chains, commonly used EDI codes and International Commercial Terms. It is an excellent supply chain handbook.


The book is a "How to" book on supply chains, and it covers practically every aspect of managing a supply chain.  It is a book for the supply chain professional, perhaps not for the company CEO, and neither for a student or researcher like me. It is a  practical handbook, and it provides the answer to many questions, if not all, of managing a supply chain.


What I like in this book is the definition of supply chain management as concerned with the flow and management of resources across the enterprise for the purpose of maintaining the business operations profitably. This extremely generic definition looks at the supply chain as an enterprise-wide undertaking, not only something relegated to the company's logistics department. I like that.


This is a book written by and for the supply chain industry. It's an excellent book for the professional, but perhaps not so excellent for the academic. That said, as an academic with little (no) hands-on supply chain experience this is an excellent book for understanding how supply chains work in real life.


And BTW, Vivek Sehgal is a member of the Kinaxis Supply Chain Expert Community: Vivek Sehgal

Sehgal, V. (2009). Enterprise Supply Chain Management: Integrating Best-in-Class Processes. Hoboken: Wiley & Sons.


Business DIS-Continuity

Posted by janhusdal Dec 11, 2009

More often than not, supply chain disruptions are a mere annoyance, but there are many cases to prove that what was thought to be a "minor disturbance" in the end turned out to threaten a company's very existence. The textbook example is Nokia and Ericsson in the now (in)famous Albuquerque Philips plant fire incident. While Nokia managed to act quickly, Ericsson didn't. In the end, Nokia went on to become a world leader in mobile phones, while Ericsson had to merge with Sony in order to survive.




The story of Nokia and Ericsson is intruiging indeed, because both companies took a very different approach toward the incident, and in hindsight, clearly displaying how to and how not to handle supply chain disruptions. In his book "The Spiders Strategy", Amit S Mukherjee spends a whole chapter detailing the incident and how Nokia and Ericsson acted upon it.


Ericsson learned its lesson and now has a completely different supply chain risk management system in place. It starts with mapping all the components and and products many tiers upstream the supply chain and identifies critical suppliers and sites that have to be prioritized and assessed further. After a rough assessment on how shortage will affect the supply chain, a more thorough investigation into probability and impact of different accidents at different suppliers is conducted to assess the impact on the supply chain as a whole, particularly the impact on business recovery time. Finally, risk management actions (protection) are evaluated against risk costs (impact and consequences), to avoid over-action or over-insurance against incidents.


Not only Ericsson, but many other companies have also learned from this incident. Exposure to risk always has a price, and as a company one should think through what price (or rather cost, as in disruption cost) that is acceptable or not. Remember, a well-handled supply chain disruption is a prerequisite for business continuity, while an ill-handled supply chain disruption in a worst-case scenario may mean business dis-continuity.

Norrman, A., & Jansson, U. (2004). Ericsson’s proactive supply chain risk management approach after a serious sub-supplier accident. International Journal of Physical Distribution & Logistics Management, 34 (5), 434-456

Sometimes the best research articles are the ones that do not directly relate to one's research, and sometimes, the older, the better. The 1998 article An Approach to Vulnerability Analysis of Complex Industrial Systems by Stefan Einarsson and Marvin Rausand does not immediately appear to be linked to supply chains, but on closer inspection I realize that a supply chain is indeed comparable to a complex system. Moreover, the risk sources in this article resememble very much the risk sources in Manuj and Mentzer (2008) Global Supply Chain Risk Management, which only proves that complex industrial systems and supply chains have much common ground.


The most interesting about the Einarsson and Rausand paper is how they clearly show the difference between risk analysis and vulnerability analysis. While a risk analyis is concerned with the immediate impact of potential threats, a vulnerability analyis is concerned with how and whether these impacts can be dealt with and how or if the system can survive the threats. In the paper, Einarsson and Rausand suggest a two-step worksheet approach for a vulnerability analysis, where you first identify possible risk scenarios, and then assess the actual vulnerability for each scenario.


Reading the article took me back to the late 80s, when I was working with several regional government agencies in Norway, and where my job was to audit the risk assessment and disaster management plans of the local government authorities. That two-step approach was exactly what we were using when we were advising the local governments on how to perform a risk and vulnerability analysis. I enjoyed that work, because it taught me how every community is different, with different challenges, but most of all with different resources for dealing with the challenges. And in the end, it's the resources and most of all, the people in charge of the resources that count. That has always been my approach towards vulnerability and crisis management.