Supply Chain Resilience Triangle

Definition

SCR can be connected to the development of readiness for an unforeseen occurrence and into providing an effective and efficient reaction that promotes speedy return to the desired condition of the system, according to the numerous definitions of SCR. The resilience triangle (RT) (Fig. 2), a graphing tool first presented by Bruneau et al. in 2003, can be used to depict this behavior. According to Tierney and Bruneau, the concept of RT might symbolize the loss of functionality due to injury and suffering. The RT aids in determining the extent of the disease and its detrimental effect on system function. Analyzing a system’s ability to recover from an unforeseen disorder is helpful. It serves as a gauge for both the length of time needed for a system to recover to pre-disaster performance levels as well as the loss of functionality that results from a disaster.

Application

Fig. 3 Resilience Triangle with dampen time

Triangle resilience is a concept that has several uses, but it was initially developed to test the resilience of infrastructures in the event of natural catastrophes. The amount of the anticipated decline in quality over time, when considering, for instance, the occurrence of an earthquake, can be used to evaluate the loss of resilience (R1) with respect to that particular event.

Mathematically, it can be defined by:
R_1=∫2_(t_0)^(t_1)▒〖[100-Q_t ]  dt〗

Contextualizing into SC performance
profile & Research Innovation

The Carvalho studies are one example of RT application in the SC field of study. He used the RT to provide a thorough study framework for SC (Fig.3). As seen in the preceding picture, the length of the triangle (b) represents the damping time (b1) and the recovery time, and the depth of the triangle (h) represents the severity and extent of the damage, or the severity of the disturbance (b2). The system or SC is more resilient to unforeseen disturbances the smaller the triangle. Therefore, it is advisable to reduce the “triangle of resilience”. The goal of a company’s actions, behaviors, and assets should be to lessen the triangle’s area.

By charting the profile of a disturbance suggested by Sheffi and Rice in their SCR study, we want to integrate the RT proposed by Bruneau in order to further this research.

Toyota experienced comparable effects as a result of manufacturing ceasing at its Indiana facility while it awaited the arrival of steering sensors, which typically arrive by air from Germany. (James B. Rice Jr. and Yossi Sheffi, 2005)

Performance Profile

Fig.4 The disruption profile plotted by Sheffi and Rice

Sheffi and Rice divided the performance profile into eight distinct periods, as shown in Fig. 4:

1. Preparation: the actions taken by businesses with the intention of preventing a specific disorder by reducing, whenever feasible, both the likelihood and the consequences of a risk;
2. Disruptive event: the precise instant that the disruptive event occurs;
3. First response: the initial response to the incident, where it is desired to find a short-term fix for the issue: Controlling the crisis and averting greater damage is the goal right now;
4. Initial impact: This is the first time that disruption can have two different types of effects on a company’s success;


Table 1
5. Time of full impact: if the disruption is not instantaneous, it takes time to the event to fully take place;
6. Preparation for recovery: The initial response of the companies was to restore operations following the catastrophic catastrophe;
7. Recovery: taking all necessary steps to quickly restore company performance to its prior levels;
8. Long term impact: the ability a disorder has to become second nature. Don’t allow businesses to perform at their previous level.

As shown in table I, these periods can be separated into two groups:
Fig.5 The Bruneau RT of a SC plotted according to Sheffi and Rice disruption profile

Resilience Triangle Sectors

Fig. 6

Fig.6 exemplifies the conceptual division of the reviewed structure of the RT:
I.Preparation;
II.Mitigation;
III.Recovery;
IV.Long-term impact;
V.Time.

Preparation

To prepare for future disruptions, manufactures should re-examine their SC approach and consider the following three strategies:

Plan for every part (PFEP):

is a solid end-to-end strategy for every component that goes into making your products. Start by performing a thorough study of each part’s demand, supply chain, cost, manufacturing process, packaging, storage, and final delivery. This data makes it possible to assess the significance of each step in the process. The risk posed by probable supply chain disruptions for that part can then be evaluated, and countermeasures can be developed.


Diversify the supply chain:

To lessen the likelihood that the absence of one supplier will destroy the company, develop a mix of suppliers with a range of sizes and locations. Other suppliers will be available to pick up the slack and minimize disturbance to the manufacturing process if a provider is forced to close its doors or temporarily halt operations due to a natural disaster or other incident.

• Strengthen supplier relationships:

Develop a variety of suppliers of varying sizes and locations to reduce the likelihood that the loss of a single source will damage the company. If a natural disaster or other incident forces a supplier to close its doors or temporarily cease operations, other suppliers will be available to pick up the slack and minimize manufacturing disruption.


Mitigation

The initial stage in the phase of mitigation is finding. It relates to the scanning and identification of anomalous signals, and is the point at which management become aware of a supply chain interruption. The discovery phase serves as a limiting element for the subsequent phases.

After discovering the disruption, and based on the causes that led to it, management must implement measures to mitigate its impact and restore the system to its prior or more resilient condition. Flexibility and redundancy are essential in order to recover from disturbances.

The first intends to develop capacity to detect hazards in order to swiftly manage them. Typical instances of flexibility include collaborative connections with partners, integration, postponement, and increasing information exchange that enables rapid discovery and recovery. The second stream relates to strategic stock, inventory expansion, spare capacity, and the maintenance of several suppliers for redundancy.


Recovery

When in the midst of a crisis, companies must initially consider a short-term reaction in order to deploy resources throughout the whole supply chain. While worker safety and compliance with policy requirements remain top considerations, the following six activities are essential for a successful initial reaction.

Create transparency:

Creating transparency in a multitier supply chain begins with identifying the operation’s important components. Assess the risk of interruption from providers beyond the second tier after identifying the important components. If any suppliers are located in badly afflicted locations, which could dramatically increase operational costs or slow down production lines, look for alternatives in other regions. If no other suppliers are available, the only option is to collaborate with other impacted tier-one firms in order to lessen the risk.


Determine inventory availability:

Estimating all inventory availability along the value chain is another key element of supply chain capacity planning, and should address all of the following components:
– finished products stored in warehouses;
– blocked inventory reserved for testing, quality control and sales;
– spare parts that could be repurposed for the production of new products;
– defective or lower grade parts that could be fixed or enhanced to address supply issues;
-parts in transit, and particularly those in quarantine or customs, that may need to be redirected to speed up delivery
-inventory that’s currently with dealers or customers, which could be returned.

Organizations may also want to use after-sales stock and have a replenishment strategy in place to keep production running smoothly.


Estimate realistic final customer demand:

Demand for certain products naturally fluctuates during a crisis. While this poses some obvious immediate problems, it also makes estimating realistic final customer demand more difficult and more crucial.
To assess demand from the final customer can be used market insights, direct to consumer channels of communications and internal and external databases. The following tactics may further help forecast demand:

– Define the time horizon and granularity of the forecast using a demand forecasting strategy to help make risk-informed decisions.
– Realistically forecast base demand using advanced statistical forecasting tools.
– Incorporate market intelligence into product-specific models for demand forecasting.
– Ensure quick responses to inaccurate forecasts with dynamic forecast monitoring.

And just to be safe, businesses can also make smaller, more frequent orders and create more flexible contracts to avoid waste.


Improve capacity for production and distribution:

The next step is to assess the impact on production and distribution capacity, and this starts with workforce. Ensuring worker safety is the priority, therefore tactics for lessening the risk of infection and options for remote working can be used.

Then, with both worker capacity and available inventory, it’s used scenario planning and analysis to estimate the operational and financial ramifications of a prolonged shutdown.

Operations, strategy, marketing, and sales teams as well as macroeconomic experts should all be consulted during this process to get as accurate a prediction as possible. If necessary, can be considered prioritize products with the most strategic value, keeping in mind earnings potential as well as the products’ relevance to safety and health.


Determine logistics capacity:

Estimating logistics capacity by mode of transport and understanding associated trade-offs is even more crucial than usual during a crisis, as is prioritizing logistics requirements by delivery time sensitivity and necessary capacity.


As such, companies will want to prebook air and rail logistics capacity in case costs increase, ideally working with partners directly to achieve better terms. Monitoring airport congestion, border closings, and other changes will also be necessary in addition to the usual on-time status tracking of freight in transit in order to improve contingency planning. Overall, companies should be flexible, ready and willing to adapt to necessary changes.

Stress test & free up capital:

Earnings and liquidity will become increasingly tight as the crisis evolves due to decreased margins, waning sales, and strained supply chains. Companies will need to put any and all forecasting capacities they have to work to perform weekly and monthly stress tests on their capital requirements.

In terms of where to pull this cash from, look beyond accounts payable and receivable to less obvious parts of the value chain. The following strategies can be considered:

– Reduce finished goods inventory;
– Utilize more intelligent fleet management and other optimized logistics to defer capital costs without affecting customer service;
– Pressure-test purchase orders for every supplier and reduce or eliminate nonessential supply purchases;
– Negotiate supplier contracts to achieve better terms.


Long-term Impact

Once it’s finished the immediate risks to your supply chain, the bigger picture work begins. If a crisis taught companies anything, it’s that they need to be more resilient and prepared for unexpected situations not only for their own financial health, but for the health of the greater economy and the actual health of people everywhere.

Creating a resilient supply chain starts with managing supply chain risk by assessing risk, regularly revising risk impact predictions and remediation tactics, and supervising risk governance. Luckily, the tools and processes you created during the initial crisis response need not go to waste. It’s a great time to convert them into formal documentation for future use. If all supply chains not only work to improve their own resilience but also collaborate with one another, the supply chain ecosystem can grow stronger.

Key Take Aways

The resilience triangle is the representation of a disruption and its impact on the system performance;

From the SC management categories of the performance profile it is possible to obtain the resilience triangle sectors.


Check your understanding

Why and how has Nokia managed to drastically reduce losses?

What is the resilience triangle for?
What are the performance profile phases?
What are the sectors of the resilience triangle?


Bibliography

•Bruneau, M., Chang, S.E., Eguchi, R.T., Lee, G.C., O’Rourke, T.D., Reinhorn, A.M., Shinozuka, M., Tierney, K., Wallace, W.A., von Winterfeldt, D., 2003. A framework to quantitatively assess and enhance the seismic resilience of communities. Earthq. Spectra 19, 733–752

•Carvalho, H., 2012. Modelling resilience in supply chain. Universidade Nova de Lisboa

•Yossi Sheffi and James B. Rice Jr., “A supply chain view of the resilient enterprises,” MIT Sloan Manag. Rev., vol. 47, no. 1, 2005