Building resilience for the next supply chain disruption [Part 1].

James Rice discusses supply chain resilience and how organizations can prepare for the next big problem.

 

The great supply slowdown of the early 2020s has generated renewed interest in the topic of supply chain resilience — the practice of building a supply chain that can resist disruptions. As companies patch holes from shortages related to the Covid-19 pandemic, many are wondering what will cause the next big disruption. Will it be another pandemic or a war, terrorist attack, cyberattack, earthquake, or something unexpected?

Yet, organizations should not focus too much time prepping for another pandemic or trying to handicap the next disruption, says MIT supply chain resilience researcher Jim Rice. Instead, they should build resilience to protect against any threat.

“We are seeing a recency bias in which people say we need to prepare for the next pandemic,” says Rice, deputy director for the MIT Center for Transportation and Logistics. “But the next big disruption is probably going to be something else. My guess would be a cyberattack, but nobody knows. It does not matter if you lost your factory because of a labor strike or a hurricane. You still need a plan to recreate your core capabilities. Resilience is not mitigation — it is creating the capability to recreate lost capacity.”

Before the rise of the hyper-connected global supply chain, the impacts of disruptions tended to be more localized, says Rice. “But these days, most organizations have global suppliers and global customers, so any local disruption is likely to affect many more supply chains.”

Even today, most disruptions are more region- and industry-specific. Supply chain problems happen all the time, and they can destroy your business even if they don’t make the news. With extreme weather events on the rise, the likelihood of disruptions is increasing.

Supply chain slowdowns often have multiple causes, which further complicates recovery. “The pandemic was not the only cause,” says Rice. “This is an age-old problem that has become much more acute with Brexit and the U.S./China trade wars, and then erupted in 2020 with Covid.”

Even as Covid has faded, the Russian invasion of Ukraine and various climate emergencies have continued supply shortages. Underlying the current problems is a global semiconductor shortage, which has been caused more by soaring demand than by the pandemic.

“The semiconductor shortage differs in that it is a disruption caused by demand exceeding capacity,” says Rice. “It is not easy to fix because there is a long lag between the time you determine you need more capacity and the time you can create that capacity.”

 

By Eric Brown | MIT Industrial Liaison Program. November 21, 2022
Source: MIT News.https://news.mit.edu/2022/building-resilience-next-supply-chain-disruption-james-rice-1121 . 30 November2022.

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