A Supply Chain View of the Resilient Enterprise

Many companies leave risk management and business continuity to security professionals, business continuity planners or insurance professionals. However, the authors argue, building a resilient enterprise should be a strategic initiative that changes the way a company operates and increases its comp...

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Bibliographic Details
Published inMIT Sloan management review Vol. 47; no. 1; p. 41
Main Author Yossi Sheffi, James B. Rice Jr
Format Journal Article
LanguageEnglish
Published Cambridge Massachusetts Institute of Technology, Cambridge, MA 01.10.2005
Subjects
Competitive advantage
Earthquakes
Flexibility
Insurance industry
Lockouts
Logistics
Manufacturing
Probability
Risk assessment
September 11 terrorist attacks-2001
Strategic planning
Strikes
Suppliers
Supply chains
Terrorism
United States > US
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Summary:Many companies leave risk management and business continuity to security professionals, business continuity planners or insurance professionals. However, the authors argue, building a resilient enterprise should be a strategic initiative that changes the way a company operates and increases its competitiveness. Reducing vulnerability means both reducing the likelihood of a disruption and increasing resilience. Resilience, in turn, can be achieved by either creating redundancy or increasing flexibility. Redundancy is the familiar concept of keeping some resources in reserve to be used in case of a disruption. The most common forms of redundancy are safety stock, the deliberate use of multiple suppliers even when the secondary suppliers have higher costs, and deliberately low capacity utilization rates. Although necessary to some degree, redundancy represents pure cost with no return except in the eventuality of disruption. The authors contend that significantly more leverage, not to mention operational advantages, can be achieved by making supply chains flexible. Flexibility requires building in organic capabilities that can sense threats and respond to them quickly.
ISSN:1532-9194