In Part One we looked at Dr. Joseph Fiksel’s Resilience Model in general and the two slower changing quadrants in particular. In Part Two, we look at the dynamics of abrupt changes in the supply chain and what Fiksel’s Resilience Model suggests.
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As we move further to the right on Fiksel’s Model, we venture into the territory of more abrupt change. This is the business equivalent of full battle engagement. Sirens wail. Red lights flash. “Battle Stations!” is sounded over the PA. And supply chain professionals don flack jackets and helmets as they charge toward their bunkers, telephones, and computers.
To say the least, this is the part where things get a bit less routine and a tad more interesting.
So, let’s look a little closer at these next two quadrants.
Sense & Respond in Fiksel’s Resilience Model
The Low Magnitude/High Abruptness Quadrant covers those sudden disruptions you quite often didn’t see coming. These can range from short-term backorders to the black swan – the rare and unpredictable event – that can have lasting impact.
Sensing is an important part of this. Companies such as Resilinc provide supply chain intelligence and monitoring that can alert its client companies to upstream disruptions early on, allowing time to avoid or mitigate the impact. More on this in the future.
This type of data can be consolidated, visualized, and utilized to respond to changes in the supply chain ecosystem. A perfect example of this is Flex Ltd.’s (formerly known as Flextronics International Ltd. or Flextronics) Flex Pulse. Pulse is Flex’s End-to-End software-based, digital collaboration tool that provides unprecedented levels of inventory visibility and real-time global intelligence for managing supply chains. This software-based system combines and interprets live streaming data from multiple sources to provide intelligence on any global variables that may impact or disrupt manufacturing supply chains. Flex Pulse also provides a consolidated view that allows active monitoring of inventory, material quantities, and quality, as well as transportation tracking, including shipment volumes, delivery times, and other aspects of order management.
Flex Pulse Center is a physical location enabled with multiple collaboration capabilities allowing real-time monitoring of different aspects of Flex global supply chain.
Currently, there are nine Flex Pulse Centers located at strategic manufacturing locations in Milpitas (CA), Guadalajara, Tczew, Althofen, Austin (TX), Chennai, Migdal HaEmek, Wuzhong and Zhuhai.
In addition to Flex Pulse Centers, Flex Pulse is accessed through any computer, tablet, or smart phone, and serves as a platform for collaboration between multiple users.
Risk Management & Business Continuity
For most events that fall in this category, having well-defined risk management processes and emergency procedures in place will help mitigate the problem. Melinda McCants, External Supply Risk Management and Senior Resiliency Officer for Amgen, recommends the creation of broadly cause- or scenario-based (i.e., fire, flood, terrorist activity, etc.) playbooks focused on priorities:
- Life preservation
- Asset preservation
- Business continuity
At the business continuity level, things begin to shift to both a resource-based and more functional point of view. The switch to a resource-based perspective means we no longer care so much about the situation which caused the disruption (was it a chemical spill, a plant fire, etc.) to what resource was compromised or removed from action (e.g., did we lose a fabrication facility, a metal plater, or all our suppliers along the northeast coast of Japan?). In other words, the effect of the event. Here ISO 22301, Business continuity management systems – Requirements, provides an internationally recognized standard that practitioners can use to architect their organization’s business continuity management (BCM) program. From an operational standpoint, this ISO Standard contains a requirement not previously addressed in business continuity standards – the need to plan for a return to normal business. Key to this is identifying and maintaining alternate supplier(s) for mission critical materials, a plan for personnel substitution or replacement, and Business Impact Analysis.
When establishing alternate suppliers, it is important to confirm to the degree possible that these are, indeed, true alternate suppliers. The point here is that Spacely Sprockets and Cogswell’s Cogs are not genuinely alternate suppliers if they both share a common, critical first-tier supplier, Harlan’s Hardware. A plant fire at Harlan’s cripples both of these suppliers. Clearly, the more upstream suppliers our suppliers share, the more fragile our supply chain becomes and the accumulation of additional “alternate” suppliers that share those same upstream vendors adds little more than further onboarding and maintenance costs.
This is where supply chain visibility comes into the equation.
Survive and Flourish in Fiksel’s Resilience Model
“The green reed which bends in the wind is stronger than the mighty oak which breaks in a storm.” ― Confucius
The world of the Supply Chain Engineer is complex and getting more so every day. Offshoring. Nearshoring, Reshoring. Global suppliers. Regional civil unrest. Inconsistent trade regulations. On and on….
To address the issues associated with the Survive and Flourish quadrant, Fiksel recommends the following functional actions:
- Scenario-based planning,
- Crisis management,
- Opportunity realization.
He also suggests the following structural configuration changes to support this quadrant:
- Asset security and fortification,
- Modularity and redundancy,
- Business diversification.
Antifragility
With each new layer of complexity comes an exponential increase in risk and vulnerability to disruption. And catastrophic failures in supply chains are consequently becoming increasingly frequent. For this reason, companies can no longer rely solely on risk management and business continuity plans. These are reactive survival tactics, a set of tools to get through a Terrible, Horrible, No Good, Very Bad Day …. They do not, however, do anything proactive to anticipate these disruptions and to build a capacity of resilience. To lift a phrase from Nassim Taleb, traditional risk management and business continuity planning do nothing to make the supply chain organism (SCO) “antifragile”. Taleb defines antifragile as the opposite of fragile. And while Fiksel argues that the term “resilience” incorporates Taleb’s concept of the antifragile, I think they are complementary, but somewhat different, concepts. Going forward, we will use the term antifragile to describe the resilience tools and processes used in the Survive and Flourish quadrant of Fiksel’s Resilience Model.
Taleb says,” Antifragility is beyond resilience or robustness. The resilient resists shocks and stays the same; the antifragile gets better. This property is behind everything that has changed with time: evolution, culture, ideas, revolutions, political systems, technological innovation, cultural and economic success, corporate survival, good recipes (say, chicken soup or steak tartare with a drop of cognac), the rise of cities, cultures, legal systems, equatorial forests, bacterial resistance … even our own existence as a species on this planet. And antifragility determines the boundary between what is living and organic (or complex), say, the human body, and what is inert, say, a physical object like the stapler on your desk.”[i]
Imbedded in Taleb’s definition are two key ideas:
- Antifragile systems can actively benefit from disruption, chaos, volatility, and uncertainty; and,
- Antifragility is the hallmark of the “living”, complex system and differentiates them from “inert” objects.
When we look at the specific ways to address and
mitigate risks in this quadrant in later posts we will examine these two
features along with a Paleontologist’s view of what happened following the K-T
extinction event 65 million years a
[i] Taleb, Nassim Nicholas. Antifragile (Incerto) (Kindle Locations 331-336). Random House Publishing Group. Kindle Edition.