2.5 Resilience

Risk management tries to prevent or reduce shocks.

Resilience prepares the supply chain to function, adapt and learn when prevention fails.

Risk management mainly focuses on known scenarios, probabilities and prevention.

Resilience also focuses on uncertainty, adaptability, recovery and learning.

Risk handles known or expected risks

Reslinice also targest unknown risks

“Resilience begins where risk management ends — in the unknown.”

Risk Management: A return to the previous condition or status quo.

Resilience: The organization should absorb, adapt, recover and possibly transform into a stronger state.

1. Absorb

2. Adapt

3. Recover

4. Transform

The supply chain withstands the shock without collapsing. Buffers and redundancy help operations continue under stress.

E.g: Have “redundancy” -> Extra buffer storage for when there are shoratges. Or have an extra manufacturing site contractually “on hold” in case the normal manufactruing sites break

During the disruption, processes, suppliers or routes are flexibly reconfigured to maintain flow.

e.g -> adjust the supply chain rout/ have alternative stooring methods -> addaptive supply chain community

After the disruption, full functionality is restored quickly.

-> E.g. by having a system in place that warns about coming disruption companies can react quickly and recover faster e.g. Nokia vs erikson

transformation is a long-term, fundamental redesign of your entire network or product to completey remove the risk.

E.g. changing the product from a polyester shirt to 100% cotton shirt

or

Nike's wholesale-to-digital transformation:

• Old Way: Sold bulk shoes to retailers, leaving Nike blind to real-time customer demand.

• New Way: Shifted to direct online sales using AI demand-forecasting and robotic fulfillment centers.

1. Invest in redundancy -

2. Increase velocity in sensing and responding

3. Create an adaptive supply chain community

Maintaining extra plants, suppliers, capacity, inventory or alternative routes that can be used when a disruption occurs.

Sensing: Detecting a disruption and understanding its importance.

Responding: Taking fast action to protect supply and continue operations.

Sensing and responing Example:

Ericsson and nokia

1. A group of supply chain partners that can reorganize, share resources and work together during a sudden crisis.

1. Partners must share a culture, follow common objectives, trust one another and share financial gains.

EXAMPLE:

Toyota and the Aisin’s (Supplier) fire 1997

In supply chains, an OEM is the company that sells the final product under its own brand and usually coordinates the suppliers.

Example: Toyota is an OEM because it sells the finished car, while many suppliers produce parts such as brakes, seats and electronics.

They often lack information about lower-tier suppliers beyond their direct Tier-1 suppliers.

1. TTR is the time needed to restore a process or supply-chain node to full functionality after a disruption.

1. TOR is the time that operations can continue after a process is interrupted, using available inventory, capacity or alternatives.

When Time to Recover is greater than Time Operations Remaining

TTR>TOR

Operations will stop before the failed process can be restored.

The Risk Exposure Index is the maximum financial impact across all nodes in the supply chain.

Because the probability of an uncontrollable event may be impossible to estimate accurately.

The company can instead analyse what would happen if a node failed -> e.g. how much it would cost

(A node is one point or location in a supply chain network.)

The RPN uses severity, likelihood and detection. (For risk)

The REI focuses on recovery time and financial impact, without needing an exact disruption probability. (for resilience)

It asks, “How much would we lose if this node stopped?” rather than trying to predict exactly why or when it will stop.

It can prioritize that node for redundancy, alternative sourcing, additional inventory, faster recovery plans or other resilience measures.

1. Redundancy,

2. fast sensing and responding,

3. and an adaptive supply chain community.

Supply chain resilience is the ability of a supply chain to continue functioning during unexpected disruptions and recover quickly afterwards.

Its four main goals are to:

1. Absorb the shock without collapsing.

2. Adapt by changing suppliers, routes or processes.

3. Recover normal performance quickly.

4. Transform by learning from the disruption and becoming stronger.

The main tasks are identifying critical dependencies, creating buffers and alternatives, monitoring the supply chain, preparing emergency plans and learning after each crisis.

Unlike normal risk management, resilience also prepares the company for unknown events.