Resilience 2019 Conference

Last week I was at the Resilience 2019 Conference in Cambridge, MA, co-sponsored by Biogen™ and Resilinc™. Now I go to a fair number of meetings, conferences, and summits, but this one was indeed impressive.  Yeah, they had great food and drinks, but that’s not what I’m talking about. And, yeah, we got to experience Biogen’s virtual reality “cave” where we could walk through architectural floorplans and inside molecules. Very cool, but again, not what I’m talking about. And we toured Biogen’s Global Security Operations Center (GSOC), a 24/7 command center that monitors incidents and potential threats globally while tracking the safety of employees, facilities, and products. An amazing state-of-the-art facility that made you feel like you were in the supply chain equivalent of NORAD’s Cheyanne Mountain Complex, but still not what made this conference a standout.

What I’m talking about is this summit brought together some of the most experienced and brightest people in the world of supply chain. People like:

• Dr. Yossi Sheffi, Director of the MIT Center for Transportation and Logistics (CTL) and a father of supply chain resilience;
• Bindiya Vakil, a former student of Dr Sheffi and founder/CEO of Resilinc™, the leading provider of supply chain resiliency solutions;
• Lee Spach, Sr. Director of Supply Chain and Product Support, who manages all aspects of Biogen’s supply chain resiliency and threat detection, and still had time to be our gracious host;
• Bill Hurles, Executive Director Supply Chain (Retired) at General Motors™;
• Bill Marrin, Executive Director, World 50, Inc. which consists of private peer communities that enable CEOs and C-level executives at globally respected organizations to discover better ideas, share valuable experiences and build relationships that make a lasting impact.
• M.K. Palmore, Field Chief Security Officer in the Americas for Palo Alto Networks and former Head of Cyber Security Branch for the FBI;
• Tom Linton, Chief Procurement & Supply Chain Officer at Flex, and 2017 recipient of the Lifetime Achievement Award from the Procurement Leaders Organization at the World Procurement Congress;
• Dr. Robert Handfield, the Bank of America University Distinguished Professor of Supply Chain Management at NC State University and, along with Tom Linton, co-author of “The LIVING Supply Chain”,

among many others.

Resilience vs Risk Management

And, as you have likely guessed by the title of this blog, the conference’s focus was resilience in the supply chain. So, a quick aside – if you are not really clear on the difference between risk management and resilience, it’s pretty straightforward.  While the two are closely related and there is indeed some overlap, it really comes down to this, risk management is, according to BusinessDictionary.com, “The identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. An organization may use risk assumption, risk avoidance, risk retention, risk transfer, or any other strategy (or combination of strategies) in proper management of future events.”[i]

On the other hand, Supply Chain Resilience (SCRes) is a relatively new engineering and scientific field of research. An early definition of SCRes was provided by Christopher & Peck (2004)[ii] who defined resilience as the ability of a system to return to its original state or move to a new, more desirable state after being disturbed. Joe Fiksel of Ohio State University amplified this by saying SCRes is the capacity for complex industrial systems to survive, adapt, and grow in the face of turbulent change[iii].  While these are still common base definitions of SCRes, shortly thereafter, Sheffi[iv] made an interesting shift, asserting that SCRes also carries with it the opportunity of a supply chain to be better positioned than the competition and even gain advantage from disruptions. In other words, SCRes is a strategic tool that can not only ensure the enterprise’s rebound from supply chain disruption but can potentially leverage those disruptions to actually create a competitive advantage!

So, in short, Supply Chain Risk Management (SCRM) is about identifying and avoiding risks, while SCRes is about rebounding from and leveraging disruptions that do occur. And since SCRes operates at the intersection of business and STEM, as we discussed previously, this falls squarely in the domain of the Supply Chain Engineer.

But back to the Conference

As you can imagine, with a cast of world-class academics and practitioners like those listed above, the array of topics and events was exceptional. The Role of the CISO and Cyber Risks in the Supply Chain. Managing Risk with AI and Deep Learning Tools. The Power of Analytics and Data in Manufacturing and Supply. Next Generation Operational Centers. Reshape the Enterprise to be a Risk-Ready Culture. Integrating Resilience into the Business Decision Framework. Converting Risk into Supply Chain Intelligence.

And that’s only about half of the sessions.

Obviously, there was too much information to even summarize in a blog but let me try to give you a taste of a few of the key takeaways, at least from my perspective.

Resilience Tools

The SCRes toolset has two main components, redundancy and flexibility. 

Redundancy takes several forms such as redundant means of production, redundant suppliers, and redundant (excess or buffer) stock.  Each of these provides resiliency with little or no loss of speed.  If my plant is damaged by a typhoon, I bring up a corresponding line on one or more of my other production facilities (a bit more about that later when we discuss plant standardization). If my primary vendor has an interruption of supply, I simply use my buffer stock or shift demand to my alternate supplier. There are a few caveats to keep in mind when it comes to redundancy, though. First, any form of redundancy costs you money, money that you are gambling on a disruption occurring at the expense of investment elsewhere. Second, when it comes to alternate suppliers, what at first appears to be a hedge against disruption isn’t always.  Take this all too common example: We get our Referential Universal Digital Indexer (RUDI) from Spacely Sprockets. As insurance against disruption, we spend the time and money to develop an alternate source, Cogswell Cogs. That should protect us from any interruption of supply, right?

Not entirely.

Turns out that both Spacely and Cogswell share a strategic tier-one supplier who is the sole source for one of RUDI’s components, the Sub-Etha, without which the RUDI cannot be manufactured. So, no matter which supplier you go with, you have an equal danger of interruption when it comes to the Sub-Etha channel.

Flexibility is really interchangeability through standardization. Okay, that’s a little oversimplified, but for a short piece like this it will have to do. Think in terms of the Intel™ production facilities. Each one is completely, totally identical … down to the paint on the walls. Now that is standardization. But consequently, what is produced at any Intel™ production plant can be made at any other. So, if an Intel™ plant is knocked out by an earthquake in California, any other one in the world with open capacity can pick up the lost production.

Then there is product standardization.  Here the example is the HP™ Printer. In the US they come assembled and complete with decals.  But go to Europe and it’s a different story.  There, printers are built and boxed, but there is a hole in the side of the box as it sits in the warehouse.  When the order comes, a series of language appropriate labels and font card are added to the container and the package sealed. This one printer can be in western Europe, or in Greece, or Turkey, or Russia.  The core product is standardized, and destination-specific details are added at the last minute.

Next there is part standardization.  Years ago, I worked for an Aerospace & Defense arm of Raytheon™.  We had dozens, perhaps over a hundred, government contracts going on in that facility.  And each time an engineer designed a metal fab part, he or she reached over, grabbed the nearest Granger catalog, turned to the screw section and chose a screw. Consequently, we had several hundred types of screws in inventory.  Had we had a part standardization program in place back then (I’m certain they do now), that number could likely have been reduced to a few dozen. And standardization = interchangeability = resilience.

To carry this whole concept of interchangeability one step further, people should be pliable (read: cross-trained). No one should be the only person who can do a particular job.  If he or she quits, dies, wins the lotto or even calls in sick, that creates a potentially disruptive bottleneck.  By the same token, everyone should know how to do more than one thing.  In many warehouses, each person may be trained to be a forklift operator, a picker, a sorter, and a receiver. This makes each one pliable, able to step in when there is a shortage in another area. And this eliminates another area of risk.

Forethought

A little preparation can go a long way to avoid disruption and to ease the pain when it does happen.  The first step in that groundwork is to source key materials and services with risk as part of the plan. Three specific ways to do this are:

1. Single vs Multi-sourcing. Common wisdom says to always multi-source where possible in order to minimize risk, but as we have seen, that can just be an illusion.  If you multi-source a key product but those various vendors share critical sub-tier suppliers, you are not really getting the diversification of risk you were looking for.  In cases like this it may be better to partner with one vendor and collaborate on – perhaps even co-invest in – mitigating risk together.
2. Supplier Location. When selecting a supplier consider where the supplier’s production and distribution facilities are located.  Are they subject to geo-political threats such as civil unrest, nationalization, or war? Are those areas prone to natural disasters – earthquakes, floods, or tsunamis? Will your intellectual property be adequately protected from competitors and foreign entities? Will your brand be put at risk by local practices such as child labor or the use of conflict minerals?
3. Supplier Financial Health. A vendor’s current fiscal health is a strong indicator of future performance. Rapid Ratings™ reports that companies with poor fiscal ratings are twice as likely to have very poor quality and 2.6 times as likely to have very poor delivery performance as those who are financially healthy.  A 2019 Gartner™ study identified several causes of disruption.  Of the top causes, 36% – the largest single cause – were directly attributed to poor supplier financial health. Another 34% resulted from inadequate supplier capacity, an indirect result of undercapitalization.

Another critical preparatory step is developing playbooks.  These are detailed, step-by-step guides for what to do in a given crisis. Good playbooks are developed through “desktop war games” where key personnel go to a conference room for a day and simulate their response to a given catastrophe, critiquing, refining, and documenting their responses as they go. Don’t waste a lot of time with scenario planning – was the plant wiped out by a typhoon? A fire? An act of terrorism?  While each situation has unique nuances, the main point is that the plant – the resource – is removed from operation; how do we respond and rebound quickly?

Further, the playbooks should focus on three elements in descending order of priority:

1. Life preservation;
2. Asset preservation; and,
3. Business continuity

They should also contain a prioritized list of roles to call when a crisis occurs, listing not only the primary contact’s information, but also that of a secondary and tertiary contact. In addition to business team members, this list should include contact information for fire, ambulance and other first responders including both local and federal law enforcement.

When it Happens

In the event the day does come and a catastrophe occurs, take a lesson from GM: Create a Crisis Suite.  While this should ideally be on premises at the company facility, like the contact list in the playbook, there should also be a secondary and even tertiary location predefined.  Those roles identified in the playbook should report to the Crisis Suite as quickly as possible. Don’t wait to be called as communication lines are sure to be maxed out if it is a regional crisis. Just go.

And what roles should be included? Naturally, every resource is going to require somewhat different teams, but in general you might want to include local operational management from supply chain, operations/manufacturing, engineering, and facilities. Note, I said operational management, not senior management. In the chaos of crisis it is imperative that everyone “swims in their lane”, and that means letting those people who understand the operations best respond quickly.

Final Thoughts – Resilience Future-proofs the Organization

To wrap things up, it’s important to think about “future-proofing” the enterprise.

Remember, resiliency is driven by speed.  Accurate, real-time data drive speed in human decision making. But it is the accurate part that people stumble over.  “I need to clean up my Master Data.”  Well, I‘m sorry to tell you, no matter how much time you spend on it today, you’re going to need to work on it again tomorrow. And the next day. And the next.

Master Data Maintenance (MDM) is an ongoing process in a living, growing organization. It always will be. So, don’t let that be the reason you aren’t building resilience into your organization. Focus on speed and transparency and the data will correct itself. Transparency is, in fact, the key.  Broadcast the shortcomings in your master data rather than hide them. Use intuitive graphics to display what’s wrong, where, and who owns it. People will be motivated to correct those failures under their purview. Enlightened self-interest is a powerful thing, and none of us want to be seen as the weakest link (and, consequently, the greatest risk) in the organization.

---

[i] http://www.businessdictionary.com/definition/risk-management.html

[ii] Christopher M. & Peck H. (2004). Building the Resilient Supply Chain. International Journal of Logistics

Management, Vol. 15 Iss: 2, pp.1 – 14.

[iii] Fiksel, Joseph (2003), “Designing Resilient, Sustainable Systems,” Environmental Science & Technology,

Vol. 37, No. 23, pp. 5330-5339.

[iv] Sheffi J. (2005). Building a resilient supply chain. Harvard Business Review, Vol. 1, No. 8, pp.1-4.