Business resilience

Unpredictable and changing behaviors, natural disasters, labor conflicts, terrorism, have all led to serious disruptions for CS. Today's market is characterized by short product life cycles, more competitive product introductions, and demand volatility, making life cycle demand more uncertain and difficult to predict.[3]​

Next, historical events will be reviewed, where large companies have tested their level of resilience and the results obtained in the face of unexpected adverse events.

Sheffi (2006) reports clear examples of supply chain breakdowns. After the terrorist attack of 9/11, in the US it caused the exaggerated closure of the borders by the government to Canada and Mexico forcing Chrysler and Ford to handle production intermittently. The Toyota chain thanks to its redundancy in terms of multiple suppliers and multiple inventories was more resistant (resilient) than Chrysler and Ford.[4]​.

An analogous situation was that after the earthquake in Taiwan, the supply of semiconductors from that country was stopped for a time. Also in this case, the supply chains of some companies, such as Dell, were more resistant (resilient) than other companies such as Apple.[5]​.

On March 17, 2000, due to a power line problem at a Philips Electronics plant, millions of silicon wafers containing chips for mobile phones from Nokia and Ericsson were destroyed (at that time Philips was the sole supplier to Nokia and Ericsson and demand for cell phones was booming).[5]

Ericsson, unlike Nokia, did not investigate the problem, relying on its first and only supplier with a loss that was estimated at approximately $400 million, which consolidated Nokia as the leader in the mobile phone market.[5]​.

Resilient Supply Chain Principles

Because currently the crises and disturbances that a CSR must face, regardless of its field of development, have evolved due to the change in different factors. Four principles need to be established to guide resilience, namely: 1) have a good understanding of the supply chain and apply reengineering practices; 2) implement a collaborative, information-based strategy 3) create and maintain agile supply chain networks capable of quickly responding to changing conditions and 4) introduce a culture of risk management in the supply chain. The clear implication is that managers must design chains with vulnerability in mind with careful design, agile operations, visibility, customer and supplier relationships, culture, etc[6]​.

The emergence of resilience in all organizations and specifically in SCs originates from within it, through decision-making at the level of each agent, which in turn is influenced by interactions with other agents. Each agent is able to design and control its own internal resource network (intragent) as well as define supply and distribution networks (interagent).

In this sense, Levalle and Nof establish activities to be carried out for the construction of resilience in the local (and therefore global) collaborative work framework, two activities at the agent level: a) knowledge of the situation and b) agent-agent negotiation; and two others at the network level: a) team design and b) collaboration for resilience.[7]​

CS design managers will see benefits in their work if they have in-depth knowledge of the processes involved in it, this having positive underlying effects (for example, cost reduction), as a consequence of an increase in the resilience of CS.[8]​.

Risk management in CS has had better results in study situations where the organizations that make up a network implement a cooperative effort model and, therefore, a better structured contingency plan to face disturbances. That is, the resilience of the CS is a combination of its low vulnerability to degradation in cases of disturbance, and the minimum time within which it can be recovered to expected levels of performance.[9]​.

The measurement of resilience in the SC establishes important bases for decision-making in logistical aspects, since, once the shortcomings in the capacity of the SC are recognized, it will be necessary to prioritize them to mitigate disturbances to its desirable state.[8]​.

Vulnerabilities in CSR cause counterproductive effects on its efficiency, which is why it is necessary to establish strategies that allow mitigating these effects. In organizations, in general, it is possible to highlight strategies that can be classified as first order, among which are mentioned: standardization of products, unification of costs, reduction of uncertainty and postponement of investments.[10]​.

Monitoring the vulnerability faced by the CS approves managers and administrators of organizations to accept a risk-benefit that provides a promising future. In addition to this, the identification of the SC variables and their comparison with other related ones contribute to increasing resilience in the SC and therefore, to the identification and strengthening of the weakest links. When designing the CS, it is relevant to take into account its characteristics, since they directly influence its resilience and, as a consequence, impact the exposure to the risks it may have.[8]​.

Although the strategies regarding CSR have not been greatly developed in the publications made so far, some authors such as Roberta Pereira have emphasized that the repercussions of the interruptions of the CS in the first links of this have a greater negative impact on its efficiency, therefore, the implementation of strategies that have empirically shown favorable results is key, for example, supply strategies.[11]​.

Design emergency procedures in such a way that allows for an agile response to unexpected challenges in the CS; emergency procedures can be directed by ICT.

Globalization offers both risks and opportunities in the control of variability and through increased resilience such as diversification of supply, scale production accelerates learning and the rate of product output. The visibility of Information Technologies has enabled the ability to be alert early to problems with decentralized solutions, some of these IT improvements are[12]​.

a) Improving information exchange between governments and companies.

b) Standards of harmonized legal and regulatory norms.

c) Building a risk management culture through suppliers.

d) Common risk assessment frameworks.

e) Improvement of alert systems.

Measuring resilience.

Measuring CS resilience performance has had various approaches and definitions. For example, it is possible to define resilience as the recovery time, dependent on the maximum loss.[13]​

The objective of measuring resilience is to achieve a quantitative approach to CSR, seeking to exercise an indicator to increase resilience capacity. Mohapatra and Adhikari Nanda propose a model for measuring resilience through the relationship and weighting of the following determining factors:

a) Reliability of the process.

b) Response time.

c) Excess production.

d) Chaotic reliability in supply.

e) Recovery.

It is a tool that can provide a feasible method for measuring resilience in a SC.[14]​

Obtaining relevant data for organizations is essential, since, as these are inputs for the CS, it will be necessary to take correct data to obtain beneficial results for the design of the CS. Likewise, it is essential to have adequate tools for data analysis, as well as a forecast of performance indicators that measure the resilience of the company and its CS, satisfactorily obtained from different models for this purpose. This statement results from the fact that the models do not depend on the sources, nor on the way in which the system generates the data[15]​

The financial systems of organizations have direct repercussions related to CSR, understanding that resilience must strengthen the organization's processes (for example operational, logistical and management). The positive effects of resilience are observed in an improvement in cost indicators, working capital, efficiency, liquidity, among others.[16]​.

Business resilience

Unpredictable and changing behaviors, natural disasters, labor conflicts, terrorism, have all led to serious disruptions for CS. Today's market is characterized by short product life cycles, more competitive product introductions, and demand volatility, making life cycle demand more uncertain and difficult to predict.[3]​

Next, historical events will be reviewed, where large companies have tested their level of resilience and the results obtained in the face of unexpected adverse events.

Sheffi (2006) reports clear examples of supply chain breakdowns. After the terrorist attack of 9/11, in the US it caused the exaggerated closure of the borders by the government to Canada and Mexico forcing Chrysler and Ford to handle production intermittently. The Toyota chain thanks to its redundancy in terms of multiple suppliers and multiple inventories was more resistant (resilient) than Chrysler and Ford.[4]​.

An analogous situation was that after the earthquake in Taiwan, the supply of semiconductors from that country was stopped for a time. Also in this case, the supply chains of some companies, such as Dell, were more resistant (resilient) than other companies such as Apple.[5]​.

On March 17, 2000, due to a power line problem at a Philips Electronics plant, millions of silicon wafers containing chips for mobile phones from Nokia and Ericsson were destroyed (at that time Philips was the sole supplier to Nokia and Ericsson and demand for cell phones was booming).[5]

Ericsson, unlike Nokia, did not investigate the problem, relying on its first and only supplier with a loss that was estimated at approximately $400 million, which consolidated Nokia as the leader in the mobile phone market.[5]​.

Resilient Supply Chain Principles

Because currently the crises and disturbances that a CSR must face, regardless of its field of development, have evolved due to the change in different factors. Four principles need to be established to guide resilience, namely: 1) have a good understanding of the supply chain and apply reengineering practices; 2) implement a collaborative, information-based strategy 3) create and maintain agile supply chain networks capable of quickly responding to changing conditions and 4) introduce a culture of risk management in the supply chain. The clear implication is that managers must design chains with vulnerability in mind with careful design, agile operations, visibility, customer and supplier relationships, culture, etc[6]​.

The emergence of resilience in all organizations and specifically in SCs originates from within it, through decision-making at the level of each agent, which in turn is influenced by interactions with other agents. Each agent is able to design and control its own internal resource network (intragent) as well as define supply and distribution networks (interagent).

In this sense, Levalle and Nof establish activities to be carried out for the construction of resilience in the local (and therefore global) collaborative work framework, two activities at the agent level: a) knowledge of the situation and b) agent-agent negotiation; and two others at the network level: a) team design and b) collaboration for resilience.[7]​

CS design managers will see benefits in their work if they have in-depth knowledge of the processes involved in it, this having positive underlying effects (for example, cost reduction), as a consequence of an increase in the resilience of CS.[8]​.

Risk management in CS has had better results in study situations where the organizations that make up a network implement a cooperative effort model and, therefore, a better structured contingency plan to face disturbances. That is, the resilience of the CS is a combination of its low vulnerability to degradation in cases of disturbance, and the minimum time within which it can be recovered to expected levels of performance.[9]​.

The measurement of resilience in the SC establishes important bases for decision-making in logistical aspects, since, once the shortcomings in the capacity of the SC are recognized, it will be necessary to prioritize them to mitigate disturbances to its desirable state.[8]​.

Vulnerabilities in CSR cause counterproductive effects on its efficiency, which is why it is necessary to establish strategies that allow mitigating these effects. In organizations, in general, it is possible to highlight strategies that can be classified as first order, among which are mentioned: standardization of products, unification of costs, reduction of uncertainty and postponement of investments.[10]​.

Monitoring the vulnerability faced by the CS approves managers and administrators of organizations to accept a risk-benefit that provides a promising future. In addition to this, the identification of the SC variables and their comparison with other related ones contribute to increasing resilience in the SC and therefore, to the identification and strengthening of the weakest links. When designing the CS, it is relevant to take into account its characteristics, since they directly influence its resilience and, as a consequence, impact the exposure to the risks it may have.[8]​.

Although the strategies regarding CSR have not been greatly developed in the publications made so far, some authors such as Roberta Pereira have emphasized that the repercussions of the interruptions of the CS in the first links of this have a greater negative impact on its efficiency, therefore, the implementation of strategies that have empirically shown favorable results is key, for example, supply strategies.[11]​.

Design emergency procedures in such a way that allows for an agile response to unexpected challenges in the CS; emergency procedures can be directed by ICT.

Globalization offers both risks and opportunities in the control of variability and through increased resilience such as diversification of supply, scale production accelerates learning and the rate of product output. The visibility of Information Technologies has enabled the ability to be alert early to problems with decentralized solutions, some of these IT improvements are[12]​.

a) Improving information exchange between governments and companies.

b) Standards of harmonized legal and regulatory norms.

c) Building a risk management culture through suppliers.

d) Common risk assessment frameworks.

e) Improvement of alert systems.

Measuring resilience.

Measuring CS resilience performance has had various approaches and definitions. For example, it is possible to define resilience as the recovery time, dependent on the maximum loss.[13]​

The objective of measuring resilience is to achieve a quantitative approach to CSR, seeking to exercise an indicator to increase resilience capacity. Mohapatra and Adhikari Nanda propose a model for measuring resilience through the relationship and weighting of the following determining factors:

a) Reliability of the process.

b) Response time.

c) Excess production.

d) Chaotic reliability in supply.

e) Recovery.

It is a tool that can provide a feasible method for measuring resilience in a SC.[14]​

Obtaining relevant data for organizations is essential, since, as these are inputs for the CS, it will be necessary to take correct data to obtain beneficial results for the design of the CS. Likewise, it is essential to have adequate tools for data analysis, as well as a forecast of performance indicators that measure the resilience of the company and its CS, satisfactorily obtained from different models for this purpose. This statement results from the fact that the models do not depend on the sources, nor on the way in which the system generates the data[15]​

The financial systems of organizations have direct repercussions related to CSR, understanding that resilience must strengthen the organization's processes (for example operational, logistical and management). The positive effects of resilience are observed in an improvement in cost indicators, working capital, efficiency, liquidity, among others.[16]​.