Unit 1 : Historical Background

Definition of OR

The concept of resilience was first proposed in the field of ecology by Holling, (1973), who defined it as:

1. a system (ecosystem, society or organisation) that persists in a state of equilibrium (stability) and;

2. how dynamic systems behave when stressed and moved from this equilibrium.

However, many areas have defined the term resilience in their respective dimensions:
•Computing
•Psychology
•Materials science
•Infrastructure …

Why focus on resilience?

From an organisational point of view, specifically in a business environment, there are different definitions of OR:


Based on the above definitions, OR can be broadly defined as:


From this definition it can be seen that organisations need to anticipate, prepare and recover, adaptively.


“Resilience is accepting your new reality, even if it’s less good than the one you had before. You can fight it, you can do nothing but scream about what you’ve lost, or you can accept that and try to put together something that’s good”.
Elizabeth Edwards


Essentials of OR

Constituent capacities of OR

Based on the above definition of OR, a resilient organisation is considered to be one that is prepared, have adaptive capacity and recovery abilities to bounce bak from any disruptive event.


Preparedness capacity is related to the proactive perspective, so that organisations prepare for and anticipate disruptive events, which is a necessary capacity in the pre-crisis stage; whereas resilience is a reactive capacity that occurs in the post-crisis stage, once the disruptive situation has already occurred. Both to prepare (preparedness capacity) and to recover (recovery capacity), organisations need to adapt quickly and efficiently, which is why this adaptive capacity is considered necessary for the pre- and post-crisis perspectives.


Triggers of the lack of OR

Across the different definitions of resilience, there is a common element that is the trigger for organisations not being resilient: disruptions.

Disruptions are composed of the following elements:


Level of the source of disruption

The first aspect related to the sources of disruption is the level at which the disruptive event occurs, to recognise whether it is in the organisation itself, where the disruptive event occurs, or whether the effects of the event, which impact the organisation, occur due to a disruptive event from other entities in the supply network and even from sources of disruption external to the supply network in which the organisation operates.

Current trends of globalisation, collaborative working and outsourcing guide the search for solutions to not only focus on one organisation, or even on the different entities that make up a supply network, but to extend beyond the organisation’s relationship with the entities in its network.

-Intra-organisational. This level refers to the fact that the disruption originates within the organisation.

-Inter-organisation. This level encompasses all entities in the supply network. Therefore, the source of disruption can be found in any entity of the supply network under study.

-Extra-organisational. This level encompasses sources of disruption originating from other entities outside the organisation’s supply network or even due to natural phenomena, political, …

The classification of disruptive events according to the 3 levels of source of disruption is used to determine whether the organisation’s preparedness is impaired by disruptive events occurring in the organisation itself or by disruptive events occurring in entities in its supply network or in entities outside the supply network in which the organisation operates.


Origin and sub-origins of sources of disruption

“A bend in the road is not the end of the road…Unless you fail to make the turn.”
Helen Keller

Disruptive Event

Another element that triggers the lack of OR are disruptive events themselves, also known as shocks, risks, crises and uncertainties, among others.

Disruptive event: A predictable or unpredictable situation that alters the normal level of operation and activity of an enterprise, regardless of where it occurs and has a negative impact on the enterprise.


Disruptive Event Phases

Any significant disruption has negative consequences on firm performance, whether measured in sales, production level, profits, customer service or other relevant metrics. A disruption is usually divided into 8 different phases (Sheffi et al. (2005):

1.- Preparedness. In some cases, companies can anticipate and prepare for a disruption in order to minimise its effects. For example, weather forecasts for snowstorms, tornadoes, etc. can be key for companies to prepare for such a situation.

Disruptive event: A predictable or unpredictable situation that alters the normal level of operation and activity of an enterprise, regardless of where it occurs and has a negative impact on the enterprise.

2.- Disruptive event. Any situation that threatens the daily operations of a company, for example strikes, government bans, etc…

3.- First response. When faced with a disruptive situation, at first, the appropriate measures are taken so that the consequences are not more serious, for example, in the case of danger to people, the necessary actions are taken to prevent them from greater harm.

4.- Initial impact. The impact of some disruptions is immediate, while others affect companies in the long term, depending on factors such as the magnitude of the disruption, the redundancy of the company and the inherent resilience of both the company and its supply chain.


5.- Total impact. Whether the impact is immediate or long-term, once the impact of disruption is present, business performance declines dramatically.

6.- Preparing for recovery. Preparing for recovery usually starts in parallel with the first response and sometimes even before the disruption if it can be foreseen.

7.- Recovery. To return to pre-disruption production levels, many companies compensate for their production losses through higher-than-normal capacity utilisation, using overtime and resources from customers and suppliers. 

8.- Long-term impact. After a disruption, companies need time to recover, and depending on the severity of the consequences, they will need more or less time. In some cases, if customer relationships are dramatically damaged, the recovery period will be especially long and difficult.

Constituent capacities of OR

Preparedness capacity

Human beings tend to think that we are more prepared for any adverse circumstance than we really are (Paton and Johnston, 2001).

Companies tend to take more “calculated risks” (Svensson, 2002).

Reasons why companies are currently more susceptible:
•Increased dependence on customers and suppliers.
•Efficiency vs. effectiveness.
•Globalisation.

•Uncertainty.

•Transactions.


Adaptive capacity


Definition: The degree to which a system can modify its circumstances and move towards a stable condition (Luers et al., 2003).

Ability to modify its strategy, operations, systems management, management structure and decision-making capabilities to withstand disruptive events (Starr, Newfrock and Delurey, 2003).

The more adaptable the company is, the more easily it will return to the standard operating level at which it normally operated before being shaken by the disruptive event.

•Uncertainty.

Recovery capacity


From a resilience point of view, after a disruptive event, a company should not aim to recover and overcome the disruption by returning to its initial state, but rather to recover and reach the level at which its competitive advantages are maintained.

Restoration of social routines and economic activities.
Main barriers in the recovery phase: (i) lack of communication and (ii) non-cooperation.

•Uncertainty.

•Transactions.


Summary and Key Takeaways

1. OR is the ability of organisations to anticipate disruptive events and recover from them in a way that adapts to new circumstances efficiently.

2. The constituent capacities of enterprise resilience are preparedness, adaptive and recovery.

3. It is important to characterise the potential disruptive events affecting the organization to define the proper actions to be implemented


Check your understanding

1 At which level of operation should an organisation be recovered after the impact of a disruptive event?
From a resilience point of view, after a disruptive event, a company should not aim to recover and overcome the disruption by returning to its initial state, but rather to recover and reach the level at which its competitive advantages are maintained.

2 From a business point of view, which resources usually use the companies to recover from a disruptive event?
Through higher-than-normal capacity utilisation, using overtime and resources from customers and suppliers.

3 Which are the reasons why companies are currently more vulnerable to disruptive events?

•Increased dependence on customers and suppliers.
•Efficiency vs. effectiveness.
•Globalisation.
•Uncertainty.
•Transactions.

ns.


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