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Understanding Supply Chain Resilience

Resilience is at the heart of current supply chain management thinking. Understanding the concept, and where to invest in resilience, can lead to supply chains that quickly respond to and recover from costly disruptions.

By ·

When Boeing announced plans to assemble the 787 Dreamliner in late 2003, it introduced a new concept to the assembly of a commercial aircraft. Instead of building the plane from the ground up, subcontractors from around the globe would deliver completed subassemblies to Boeing’s factory in Everett, Wash. for final assembly. While the approach was intended to create a leaner manufacturing process, development of the new aircraft was beset by numerous supply chain related disruptions—events that interrupt the flow of products and information between raw materials, production, and the end customer.

One of those disruptions occurred just last January 2013, when the Dreamliner was grounded by the FAA due to overheating of its new lithium-ion battery. As a result, Boeing needed to slow production of this innovative aircraft until it determined the source of the overheating—a source that appeared to lie within in its supply chain, according to news reports. The question for Boeing was how quickly it could identify the source of the overheating and recover from the disruption.

At bottom, that was a question of how resilient the Dreamliner supply chain was. Boeing is not alone. In today’s increasingly dynamic and turbulent world, one where the supply chain plays an increasingly more important role, numerous events occur each day that threaten to disrupt operations and jeopardize the ability to perform effectively and efficiently. These events include natural and man-made disasters such as equipment failures, fires, labor disputes, supplier defaults, political instability, and terrorist attacks. Each can have devastating effects on a firm. Such disruptions reinforce the insights that not only can supply chain disruptions affect operations; they often result in financial damage well beyond the immediate operational impacts.

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When Boeing announced plans to assemble the 787 Dreamliner in late 2003, it introduced a new concept to the assembly of a commercial aircraft. Instead of building the plane from the ground up, subcontractors from around the globe would deliver completed subassemblies to Boeing’s factory in Everett, Wash. for final assembly. While the approach was intended to create a leaner manufacturing process, development of the new aircraft was beset by numerous supply chain related disruptions—events that interrupt the flow of products and information between raw materials, production, and the end customer.

One of those disruptions occurred just last January 2013, when the Dreamliner was grounded by the FAA due to overheating of its new lithium-ion battery. As a result, Boeing needed to slow production of this innovative aircraft until it determined the source of the overheating—a source that appeared to lie within in its supply chain, according to news reports. The question for Boeing was how quickly it could identify the source of the overheating and recover from the disruption.

At bottom, that was a question of how resilient the Dreamliner supply chain was. Boeing is not alone. In today’s increasingly dynamic and turbulent world, one where the supply chain plays an increasingly more important role, numerous events occur each day that threaten to disrupt operations and jeopardize the ability to perform effectively and efficiently. These events include natural and man-made disasters such as equipment failures, fires, labor disputes, supplier defaults, political instability, and terrorist attacks. Each can have devastating effects on a firm. Such disruptions reinforce the insights that not only can supply chain disruptions affect operations; they often result in financial damage well beyond the immediate operational impacts.

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January-February 2014 · All Topics
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