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Jan Husdal

Business DIS-Continuity

Posted by Jan Husdal 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.

 

nokia-ericsson-albuquerque-fire.gif.png

 

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

Jan Husdal

Vulnerability explained

Posted by Jan Husdal Dec 6, 2009

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.

 

The other day I was flipping through a book on supply chain risk research that I was going to review when I noticed something odd with one of the chapters, it only had very few references, six to be exact, and three of them were simply working papers or conference presentations. For an academic work that is rather unusual, and upon closer inspection I found many more references in the text, but none of them had made it into the reference list. Presumably, as I later found out, because the non-listed references were in paragraphs that were lengthy verbatim copies of paragraphs from the listed references...so why list them again? Anyway, even these verbatim citations were not marked as citations or anyhow connected to the listed references. While I agree that content is what matters most, the form must be considered, too. And this form wasn't right.

 

 

One of the lynchpins of academic writing is proper referencing and proper citations, but this chapter seemd to lack it all. Interestingly, the other 18 chapters in the book held an impeccable academic standard, which begs the question: How could this article have slipped by editorial control? I myself have been subjected to vigorous oversight and inspection when I have submitted articles or book chapters for review. This one article however made me question the editorial craftsmanship of the editor of said book.

 

 

I am a full-time researcher, and I've read and reviewed many excellent books and papers in my field of research. Really good ones are hard to come by, but when I come across the bad ones, I can't help but stop and wonder, if this stuff made it, how come my stuff is rejected? Truly, academic publishing must have a Catch 22...</p></body>

Anyone who has flown more than just a couple ot times has probably experienced the Seatbelt sign coming on in mid-flight and heard the captain announce that there could be some turbulence ahead. And if you're a seasoned traveller you will know that unless the captain asks the cabin crew to sit down and suspend inflight services, there's not really much to worry about. Supply chain turbulence is a new term that I had not heard about before I read Supply chain risk in turbulent environments – A conceptual model for managing supply chain network risk by Peter Trkman and Kevin Mc Cormack. At first I thought it to be nothing more than old wine in new bottles, having exchanged "uncertainty" with "turbulence", but Trkman and Mc Cormack come up with a profoundly new model of four factors working together to create supply chain disruptions:

 

trkman.jpg

 

 

The model divides risks into two categories, internal (endogenous) and external (exogenous):

 

Endogenous uncertainty: The source of uncertainty/risk is inside the supply chain and can lead to changing relationships between focal firm and suppliers. Endogenous uncertainty: The source of uncertainty/risk is from outside the supply chain. Internal to the supply supply chain are market and technology turbulence. Market turbulence arises from the heterogeneity of the market, and technology turbulence refers to the degree to which technology changes over time within an industry. External to the supply chain are continuous risks and discrete events. Continuous risk: Events where the costs of potential changes are continuous in nature and relatively easy to predict. Discrete events: This category consists of low-likelihood, high-impact events.

 

Matched with supplier attributes on one side and supply chain design and structure on the other side, this provides the optimal breeding ground for supply chain disruptions.

 

Trkman, P., & McCormack, K. (2009). Supply chain risk in turbulent environments—A conceptual model for managing supply chain network risk International Journal of Production Economics, 119 (2), 247-258

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