Supply Chain Matters Book Review: The Power of Resilience- How the Best Companies Manage the Unexpected
From time to time Supply Chain Matters will feature book reviews which we believe would be of value and a learning asset to our extended global supply chain management community of readers.
In this particular posting, we share our review of: The Power of Resilience, How the Best Companies Manage the Unexpected. The author, Yossi Sheffi, is a well-known thought leader among the global supply chain management community serving as the Elisha Gray II Professor of Engineering Systems at the Massachusetts Institute of Technology (MIT) and Director of the MIT Center for Transportation and Logistics. He has authored a number of previous books including: The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage and Logistics Clusters: Delivering Value and Driving Growth. Professor Sheffi was gracious to this blog by previously contributing a guest commentary related to his Logistics Clusters book.
If you have been a long time reader of this blog, you have undoubtedly read of the many disruptive events that have impacted industry and global supply chains, along with some of the consequences. Events would include Hurricane Katrina that devastated New Orleans and the U.S. Gulf Region in 2005, the 2011 devastating earthquake and tsunami that impacted Japan and the severe floods that impacted Thailand that same year. Other events we have noted, such as additional earthquakes, major factory or warehouse fires, natural disasters and product recalls continue to uncover the vulnerabilities and dependencies among today’s globally based supply chains. In this new book, Sheffi provides with in-depth case studies that illustrate how companies have prepared for, coped with, and demonstrated resilience following such disruption, along with important learning related to the encroaching threats facing today’s supply chains. Further included are the business processes, corporate culture and technology tools utilized to prepare and learn from disruption. Indeed, the interconnectedness of global economies, the lean aspects of multi-industry supply chains today, and the implications of vast arrays of information amplified by all forms of media imply that unexpected events in any corner of the globe can ripple through the supply chain and affect customers and shareholders.
This blogger, analyst and consultant thoroughly enjoyed reading this book which I managed to read cover-to-cover on a recent roundtrip coast-to-coast plane ride. The book immediately captures interest, flows from chapter to chapter and compels one to read more. I highly recommend this text to current or aspiring senior executives and supply chain leaders as a must-read regarding the mitigation and response to supply chain risk. I especially applaud Professor Sheffi for incorporating supply chain social responsibility strategies under the umbrella of risk, which it should be.
The first five chapters of this book provides various insightful case studies of companies that experienced and responded to risk events including Cisco, General Motors, Intel, Medtronic, Procter & Gamble, Western Digital and others. These case studies bring out the importance differences among business continuity planning (BCP) and business continuity response (BCR). There are examples of risk metrics such as Value-at-Risk (VaR), Time-to-Impact and Time-to-Recovery, very similar to those defined in the latest releases of the APICS Supply Chain Council’s Supply Chain Operations Process Framework model (SCOR).
Chapters 6 through 11 address the strategy, preparation, communication and supply implications of supply chain risk and resiliency. Sheffi observes: “Building a resilient enterprise involves two broad categories of options: building redundancy and building flexibility of supply chain assets and processes.” Chapter 8, Detecting Disruption, explores methods for incident monitoring, mapping the supply chain for vulnerabilities, monitoring suppliers, and a rather important section related to leveraging social media in risk detection and response. Chapter 9 is a rather important read since it explores means for securing the information supply chain and the tendencies of cyber criminals to exploit supply chain partners as targets of information security vulnerability, as was the case of the Target credit-card hack where penetration vulnerability came from the stolen login credentials of a regional store refrigeration maintenance services vendor.
Chapter 12 addresses today’s “new normal” of disruption and risk along with methods to benefit from longer-term implications. In the final two chapters, Professor Sheffi explores the growing dependency on all levels of suppliers, including those in the lower-tier of industry supply chains. Sheffi notes: “Supply chain risk management is in a race between the fragility of complex supply chains and the resilience created by better risk management.” In Chapter 13, an argument is made that systemic supply chain risk, one that can bring an entire industry to a halt, has not occurred because of the combined efforts of today’s more responsive supply chains. Sheffi opines:
“Thus, it’s hard to conclude that modern global supply chains show evidence of true systemic risks. Companies have developed efficient response mechanisms, and the same globalization trends that could create disruption risks for specific companies that use suppliers from faraway lands may also contribute to the prevention of systemic risk by spreading manufacturing capacity around the globe. Most important, global capacity for manufacturing and distribution is large, and while it is crucial for any company to prepare and respond effectively to disasters, there are always others ready to take its place if it fumbles.”
We quoted that entire passage because upon reading and contemplating the book’s case studies, we were not as sure regarding this conclusion. While many firms have been able to eventually overcome supply and services risk, the open question is scale and timing of supply continuity. Customers, consumers and activist investors are far more impatient and unforgiving today, and the clock speed of business and industry change may not tolerate forms of extended supply chain disruption. However the one conclusion that is clear is that speed, resilience and flexibility are indeed the most important capabilities of any supply chain.
From time to time Supply Chain Matters will feature book reviews which we believe would be of value to our extended global supply chain management community of readers. In this particular posting, we share our review of: Dynamic Supply Chains, 3rd Edition, How to design, build and manage people-centric value networks by John Gattorna. We especially wanted to cite this text in a review, given the many current challenges that various industry supply chain leaders are facing today.
Dr. John Gattorna is a well-known and respected author, thought leader and consultant on supply chain strategy and transformation. He has authored a number of prior texts including Living Supply Chains, published in 2006, Dynamic Supply Chain Alignment in 2009, and Dynamic Supply Chains published in 2010. In this third edition, Dr. Gottorna advocates that the supply chain has evolved to be a “network of networks.” While reluctant to introduce this new terminology in prior books, Dr. Gattorna now feels that global supply chains have moved inexorably towards the network concept model and the term now has far more significance
This author has read at least two of the former texts, and it was our intent to feature a Supply Chain Matters review of each. Unfortunately, we got so wrapped up in reading individual book chapters while keeping-up with our blog content, that we were remiss in sharing our impressions.
What interests us most concerning Dr. Gottorna’s writings are his well-articulated beliefs that supply chain transformation is driven primarily by people and organization and their interaction with processes and technology. The sub-title of his latest text was purposely chosen to connote that supply chains are evolving to be people-centric networks. Dr. Gattorna’s arguments are further anchored in design thinking principles, which have become ever more important in addressing today’s complex and fast moving business challenges.
For this reviewer, in my many years as a practitioner, keen observer and supply chain analyst in the various aspects cross-functional supply chain management; I have come to appreciate the insights and observations brought forward in the Dynamic Supply Chain series of books.
For readers leading supply chain organizations or students aspiring to be leaders, who desire a comprehensive, timely, yet easy reading reference on supply chain strategy and design, than we certainly can recommend this book. The text provides a number of case study examples to reinforce the strategies and approaches that Dr. Gattorna advocates.
The book argues that enterprises require at least four or five supply chain configurations in order to properly service customers, and further outlines strategies of dynamic alignment within such supply chains. Supply chains are defined as:
“Any combination of processes, functions, activities, relationships and pathways along which products, services, information and financial transactions flow in and between enterprises, in both directions, end-to-end.”
The flow in both directions is the most interesting insight.
Dr. Gattorna observes that the innate complexity of supply chains has led to two critical problems, one being that executives are blind to the presence of supply chains in their organization, and further, even when complex supply chains are recognized, they attack the complexity in inappropriate ways, confronting them with the wrong solutions.
“Cost-cutting, re-engineering, benchmarking and continuous improvement might have a place in the corporate arsenal, but they are not the answer to supply chain complexity. Seldom have these activities had the customer in the frame. In short, there has been a lot of effort and activity for relatively little gain.”
In Chapter 12, there is a section: News alert! It’s time to listen to your suppliers, where the author argues that listening to suppliers and engaging them on their terms, not yours, is another manifestation of listening to customers, and often the ignored element in the human dimensions that propel supply chains.
Given many of our recent Supply Chain Matters commentaries reflecting on specific industry challenges occupying supply chain leaders today, the above arguments have special meaning.
In this latest book, Dr. Gattorna again delves in the critical importance that people will continue to play in supply chain transformation, and why in the book’s sub-title: “How to design, build and manage people-centric value networks;” people are so important.
“Supply chains are “living systems” propelled by humans, their behavior and the decisions they make day to day.”
Regarding the leveraging of technology, Dr. Gattorna observes that despite advances in technology, integration was always the mirage because some executives did not confront the real blockage, that being the functional organizational design prevalent in most organizations. On the topic of effective use of technology, the argument is that as more supply chains move toward a “network of networks” configuration, in which a source, manufacture and sell anywhere strategy evolves, end-to-end visibility becomes critical.
There are many other valuable insights brought forward in the 3rd Edition of Dynamic Supply Chains. While this author could take issue with some of the observations related to the specific role that technology can play, the book is by my observation, a valuable resource for supply chain strategy and transformation.
Readers can reference the full collection of books and publications authored by John Gattorna at this web link.
As Supply Chain Matters readers are aware, from time to time we feature book reviews which we believe would be of value to our extended global supply chain management and IT community of readers. In this particular posting, we review a new and perhaps controversial book focused on ERP and cloud technology provider SAP.
We begin this book commentary with an up-front disclosure. Vinnie Mirchandani is an independent blogger whom this author has come to know and respect for some time because of his numerous years of experience within the enterprise tech arena. Vinnie and I often run into each other at certain enterprise focused IT conferences and we sometimes think alike in terms of independent voices for the state of technology vendors. This author has also previously provided a guest commentary on Vinne’s Deal Architect blog.
Vinnie provided me a complimentary copy of his latest book: SAP Nation- Runaway Software Economy to seek my opinion with no strings or obligations.
We are sharing this review of SAP Nation because by this author’s lens, this is an absolute must-read for supply chain and B2B business network functional and IT decision-makers who exist in the SAP universe. Literally, once into the book, I had to continue, because it both grabbed my interest and resonated with some of my own observations of the SAP universe these past 15 years.
Overall, this book will be controversial because it does not paint the most flattering descriptors of SAP, particularly its ecosystem of partners. However, by our lens, the book’s observations are for the most part objective, insightful and written in a context for what SAP needs to do address to make its customers successful in their business and technology deployment goals. As Vinnie states rather clearly, readers will often not find such insights from traditional top-tier industry analyst firms or certain SAP compensated market influencers because they are too beholden on current and future revenues.
Among the various chapters, the book provides a ten year perspective on SAP, summarizing conversations, observations and case studies among the ecosystem that makes up the “SAP Nation”, including customers, partners, market observers and others. The book quantifies an astounding $1 trillion ecosystem beholden to SAP’s success. Included are 25 case studies outlining various customer strategies for balancing business support challenges within their SAP and broader IT applications landscape. Customer executives further describe certain pain, anger and frustration. One of the most powerful customer analogies is described as follows:
“You can see why many customers are pivoting away from SAP and its partners. Many have concluded they bought a shiny car, but did not realize it would also need premium fuel, deliver low mileage, need $100 oil changes and $1000 tires and more and more.”
There are observations on why other cloud-based competitors have been able to gain attraction among the existing SAP customer base because of the building business pressures and frustrations over elongated development timelines, burdensome software and ongoing support costs. The consequence is described as a ring fence of applications that more and more, are surrounding SAP applications. As the adoption of cloud computing continues to increase, Vinnie opines that SAP runs the risk of becoming even more distant in understanding its customer business needs.
Vinnie further outlines SAP’s ongoing efforts at strategic pivoting, efforts to become more nimble, more cloud-focused and more-simple for customers to do business with. Three major consequences of these efforts are described related to existing customers, ongoing R&D efforts and control over SAP’s ecosystem of partners.
Whether you totally agree with all the insights presented in SAP Nation, it provides some objective analysis of the state of SAP’s ecosystem and business strategies. The one issue that this author had with statements regarding an overall bloated systems integrator community surrounding SAP is that we have found that certain smaller, more focused integrators that concentrate solely on specific dimensions of SAP’s supply chain management, procurement and B2B applications do appear to be adding customer value because they recognize the areas where complexity, cost and more rapid time-to-value need to be buffered for customers, and where third-party applications can add significant value. These smaller integrators tend to staff more with seasoned and experienced technical specialists rather than armies of inexperienced business process consultants that the book describes.
The promotional marketing for SAP Nation declares that readers will benefit from the observations, strategies and insights described in the book. Supply Chain Matters tends to agree and we will henceforth utilize this book as a reference.
From time to time throughout the year, authors and their publishers send us new books dealing with timely content related to global supply chain management and related business management topics. Our reviews are predicated on quality of content and not on any promotional or compensation arrangement.
The subject of this Supply Chain Matters book review is the Global Tilt, Leading Your Business Through the Great Economic Power Shift (Crown Business). This book’s author is Ram Charan, a business advisor to global companies and a previous co-author with Larry Bossidy, former CEO of Honeywell, of the New York Times listed bestseller; Execution; The Discipline of Getting Things Done. The Economic Times describes Charan as building a reputation as a one-man CEO consultant that excels at reducing a complex picture down to pertinent points. Fast Company describes his passion as solving business problems with a plainspoken, broad and Socratic approach. After reading this book, we tend towards agreement with these descriptors.
Overall, we found this book to be extremely timely, thoroughly informative and insightful. It helped us to better understand the ongoing shift of economic forces underway in global markets. The author provides powerful arguments as to why economic power is shifting from North based companies (Canada, European, Japan, North America) towards South based firms (Brazil, China, India, Malaysia and others). The geographic demarcation of this split is described as the 31st parallel. Charon calls for leaders to abandon old mindsets, rules of thumb, assumptions or “gut feel” concerning relationships between North and South companies. He makes powerful arguments as to why the unleashed energies of the South are causing such global shifts. We read this book with a built-in bias toward what we observe in month to month changes occurring among global supply chain and the book literally connected many dots for us.
Part One of this book describes the changes already underway as South based companies enter and penetrate existing and new markets. It describes a far wider lens on risk and reward, how South based companies move beyond the near-term quarterly performance goals of North based companies. Charon provides examples of global contenders such as AB InBev of Brazil, Bharti Airtel and GMR of India, Lenovo and Haier in China. Some of our Supply Chain Matters commentaries have and will continue to feature the supply chain strategies and efforts surrounding some of these emerging leaders.
Part Two of the book describes how to succeed in the environment of the current global tilt, including the need for an outside-in and future-back leadership perspective and mastering multiple contexts. Unlearning old lessons is indeed a rather difficult task in corporate cultures that dwell on the world that was. Consider what happened with Kodak, Research-In-Motion and others as their markets were taken-away. A passage that especially resonated was the following: “With as much as 80 percent of their annual compensation at stake, business leaders vigilantly protect margins, even if it means passing up markets that would put them on a path to faster growth.” Charon further notes: “Many Southern companies, especially those backed by their governments, drive for market share and scale, for which they’ll willingly accept lower price points, lower absolute margins, and in many cases lower percentage margins.”
Think of the previous multiple years of relentless pressures by companies on reducing overall supply chain costs that ultimately affected market responsiveness, customer service or responsiveness. Meanwhile, emerging market companies have begun to penetrate supply chains and end products involving high growth potential markets such as alternative energy, high technology, medical devices and others with an overriding perspective of how the supply chain supports the desired longer-term horizon business outcome. As a community, we often describe the growing shortage of skilled supply chain management leaders. After reading this book, you will probably have a better understanding of why this is so important from a business competitive dimension, and why firms need to insure that training includes multi-cultural and multi-geography perspectives.
This month, both the Wall Street Journal and Fortune have featured articles on the effects of a risk-averse vs. risk embrace business culture. The WSJ article ponders whether U.S. based risk-taking spirit has faded permanently with the new dominance of larger corporations in many industries. The premise is that a general cultural decline of risk-taking, in favor of short-term results, both on the part of companies and individuals, has coincided with a broader slowing of the U.S. economy, longer recessionary recovery and for growth as a whole. Fortune describes how the aggressive and outside-in business perspectives of Lenovo, coupled with efforts to understand global market shifts, has made a dramatic impact on the PC and soon, mobile and tablet industry. The evidence of global tilt seems to surround, and some leaders cannot or our unwilling to connect the dots.
We recommend that supply chain leaders read this book to understand what is at-stake, and what actions can be taken to help your organization gain a broader global perspective.
From time to time throughout the year, authors send us various new books dealing with timely content related to global supply chain management. One this author’s 2013 New Year’s resolutions is to be more timely on providing our Supply Chain Matters readers with some select reviews and/or recommendations regarding books written on timely and important topics.
The subject of this review is the book: Supply Chain Network Design, Applying Optimization and Analytics to the Global Supply Chain. This book is authored by Michael Watson, Sara Lewis, Peter Cacioppi and Jay Jayaraman, and reflects the author’s collective practical experiences working with supply chain network design software. The authors gained their experiences while part of the former LogicTools, which was subsequently acquired by IBM. This author has followed the adoption of supply chain network design technology since its market inception in 2000, and thus was pleased to receive a copy of this book from Michael Watson, whom we have known for several years.
If any organization is still considering the deployment and use of supply chain network design technology, or wants to gain broader benefits from an existing deployment, this is a book you should definitely consider. As the authors point out, strategic network design is about selecting an optimized number, location and size of supply chain wide facilities, as well as supporting supply chain wide decisions by quantifying supply chain wide facility investment options. Many global supply chain teams have gained positive and quantified business benefits from leveraged use of this technology, either by continuous or periodic use. So much so that some organizations that relied on outside consultants to perform this type of analysis have since transferred this capability to in-house expertise.
The book itself is educational in approach, while providing sufficient detail on how to build multi-echelon and multi-objective supply chain models. It addresses what can be very technical in an easy to understand tutorial on leveraged use of this technology. I managed to get through the book in just a week or two of periodic reading. Many practical examples for building supply chain models are provided along with some rather important insights.
The book begins by providing the basics of proper modeling, and builds toward building complex models with multiple objective optimization. What I appreciated was that the book is written in clear, rather easy to understand language vs. one that is anchored in academic formulae. In Chapter 13, the authors focus on the critical importance and yet challenging aspects of network design, that being data aggregation and proper grouping of key data. That chapter, in my view, is one of the more important and valuable portions of the book. Again, the authors provide easy to understand examples of what, and what not to do in either aggregating customer, site or product data needs. Chapter 14 provides practical advice for creating a design team and running a successful network design project.
If your work or inspirations lead toward the ability to build and deploy supply chain network design decision support models, or teaching teams to successfully deploy these methods, consider reading this text.