Resilience efforts can drive everyday i provement in costs , operations , revenues , and reputation
books
Resilience Is Powerful
Most corporate managers and business school professors simply accept global- ization as an unalloyed good . After all , if your goal is to sell more of something , more potential customers must be better than fewer . But although globaliza- tion does hold out the promise of boosting revenues , cutting costs , or both , it also exposes companies to all manner of new risks . Yossi Sheffi ’ s The Power of Resilience : How the Best Companies Manage the Unexpected , which stands head and shoulders above this year ’ s crop of the best business books on strategy , does an excellent job of covering the most important of those risks as well as best practices in everything from preparation to monitoring to drawing up crisis playbooks . And it does so while focusing on a relatively obscure corporate com- petence : supply chains .
An entire book on supply chains would seem to be a slog and particularly narrow .
But The Power of Resilience is actually a bit a page turner , with implications that go yond tactics to strategy . ( Stories of di always help a narrative along .) A professor gineering at MIT and director of the scof be-192 Center for Transportation and Logistics , Sheffi knows his material cold , and the book ben- efits from an obviously fat Rolodex of personal contacts at crucial points in various supply chains .
Sheffi delivers exactly what his subtitle prom-ises — an explanation of “ How the Best Companies Manage the Unexpected .” And there ’ s plenty to unexpect : In 2016 , managing the supply chain of a global enterprise such as microprocessor maker Intel or automaker GM is about as complicated as the science that goes into the chips or the cars themselves , and possibly more complicated . When catastrophic events such as Japan ’ s March 11 , 2011 , earthquake and tsunami and subsequent nuclear plant near meltdown happen , dozens of crucial suppliers can be put at risk . Both the quality and the timing of the corporate response can determine whether the unexpected ends up costing a company millions or billions of dollars . The unexpected starts with natural disasters such as earthquakes , hurri- canes , or fire ; in 2011 , companies lost US $ 360 billion to nature ’ s whims . But disruptions are inevitable regardless of nature ’ s input . Between 2003 and 2013 , while worldwide GDP grew 30 percent annually , global trade grew at almost double that pace , or 55 percent annually , and the size of the world ’ s largest con- tainer ships more than doubled . A storm in India , protests in Venezuela , a terror- ist attack in Europe — the supply chain of any global company can be disrupted somewhere , somehow , every single day .
When supply chains expand , companies ( and hence the economy as a whole ) become exposed to new and novel risks along the way . Not just risks to the flow of goods , but risks involving money and information as well . Whether it ’ s socalled Deep Tier risks ( disruptions at a company ’ s Tier Two , Three , or Four suppliers ), corporate social responsibility risks , raw material risks , or some- thing else , the hardened supply chain expert spends a tremendous amount of time thinking about what could go wrong .
Sheffi makes a compelling argument in support of proactive moves designed to enhance redundancy and flexibility , while swatting away superficial conclu- sions such as the idea that supply chain resiliency is an expensive option that pays off only in a disaster . Resilience efforts , he shows quite clearly , can drive everyday improvement in costs , operations , revenues , reputation , and responsiveness .
Sheffi ’ s discussion of how the “ global bullwhip ” of corporate reaction to a crisis sends tremors up and down every supply chain is also illuminating . If a retailer experiences an X percent drop in sales , for example , leaders are likely to cut orders by 2X percent , both to plan for softer future sales and to manage inventory . At the next node , the size of the cuts might double again . Although consumer demand declined by only 12 percent during the 2008 financial cri- sis , inventories were shaved 15 percent , manufacturing sales declined 30 percent , and imports fell by more than 30 percent .
The book focuses the mind on the crucial measure of time , starting with the speed of detectability ( information can and does flow faster than disaster it- self ) and going all the way through recovery , which in some cases can take years .
Resilience efforts can drive everyday i provement in costs , operations , revenues , and reputation
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