InForMDRiSC - An Integrated Framework to Handle Disruptions in Supply Chains

Behzad Behdani Delft University of Technology, Faculty Technology, Policy and Management, the Netherlands/ b.behdani@tudelft.nl

This paper describes the "Integrated Framework for Managing Disruptions Risk in Supply Chains (InForMDRiSC)". This framework incorporates two main views on managing disruptions, namely pre- and post-disruption views, which are usually treated as separate issues in the existing frameworks in the literature.

Introduction
Several trends in the international trade, started in 90s and still part of the main paradigm in managing business like globalization, outsourcing, lean production and single sourcing-, put most of companies in a paradoxical situation; the business for supply chains is more risky nowadays, however, the access to the resources needed to manage those risks has become much more limited. The explicit consequence of this contradictory situation is higher impact on the smooth operation of supply chains. Meanwhile, despite the increasing influence of supply chain disruptions, the customers constantly demand for higher level of service (which includes higher reliability and nearinstantaneous delivery of products). To handle this challenge in managing supply chains, there is a need to develop frameworks guiding the systematically management of disruptions in supply chains. This paper aims to present such a framework. Next section describes two main views on handling supply chain disruptions. The importance of both views and the necessity of developing integrated frameworks are also discussed. After an overview of framework development process in Section 3, Section 4 presents an integrated framework (called InForMDRiSC) to handle supply chain disruptions. Finally, Section 5 gives some concluding remarks.

Handling supply chain disruptions - two common views and need for integrated framework
Handling disruptions in supply chains has been discussed from two different perspectives in the literature: firstly, what must be done before a disruption happens (Pre-disruption View) and secondly, what must be done after a
Dinalog Winterschool, January 30 February 3, 2012 1

disruption has materialized in the real world (Post-disruption View). The first process to handle disruption is broadly recognized as supply chain risk management (Finch 2004; Hallikas et al. 2004) or supply chain risk analysis (Sinha et al. 2004) and the second process is usually called supply chain disruption management (Blackhurst et al. 2005) or abnormal-situation management (Adhitya et al. 2007). For effectively managing disruptions in supply chains, both views are necessary and must be adreesed in a comprehensive process for handling supply chain disruptions; because: With investment in risk prevention, companies face less number of disruptions or less severe disruptions in their supply chains. Without plans and the necessary resources in place, the disruption management process might be very slow. However: Not all disruptions are known to the company and even for known ones, no company affords to investment to prevent all possible events. Having resources and pre-defined plans does not guarantee the success in coping with disruptions; how to use those resources and execute the plans in the real-time is also a critical issue.

Figure 1- From isolated views to integrated view in managing disruptions Therefore, in managing supply chain disruptions, what companies do before and after disruption occurrence are equally important. Moreover, these two views should not be considered as mutually exclusive alternatives (Micheli et al. 2008). Instead, both of them should be implemented and coordinated to achieve the best performance in handling disruptions in supply chains. This necessity calls for integrated frameworks to handle pre- and post-disruption activities (Figure 1). However and despite this necessity, the majority of existing frameworks in the literature solely discuss one of two aboveDinalog Winterschool, January 30 February 3, 2012 2

mentioned views and there are very few frameworks that inter-relate these two views. This gap is the main motivation for developing an integrated process to manage disruptions in supply chains as discussed in following sections.

Framework development process

The process for developing the integrated framework is presented in Figure 2. This process consists of three main steps. A careful study of available frameworks in the literature leads to an initial structure of the framework. Next, this initial framework is refined and improved by an extensive literature review of more than 200 papers into a final framework. For each of these papers, a summary sheet is prepared discussing which step(s) of framework this paper belongs to, which aspects (or methods) of that step is discussed and how the relation with other steps of the framework is presented. With this systematic way of studying literature, the final framework with detailed description for each step and also the interrelations between different steps is developed. The usability of framework developed by these two steps is finally evaluated through expert view and illustrated with a case study.

Developing the initial structure of framework based on limited literature review

Refining & improving the initial structure based on an extensive literature review

The evaluation of final framework with expert view and illustration with a case study

Figure 2-The framework development process

Dinalog Winterschool, January 30 February 3, 2012

InForMDRiSC- Integrated Framework Disruptions Risk in Supply Chains

for

Managing

In this section, the integrated framework for handling disruptions in supply chains is presented. This integrated framework -called "Integrated Framework for Managing Disruptions Risk in Supply Chains (InForMDRiSC)"- describes the necessary steps must be followed to handle disruptions in supply chains. To discuss the framework, first some introductory definitions are given. Definition 1- Supply Chain Disruption: A Supply Chain Disruption is an event that might happen in any part of a supply chain and causes undesired impacts on the (achievement of) objective and the performance of supply chain. Consequently, if an event has no adverse effect on the achievement of objectives, it is not regarded as a disruption. Definition 2- Disruption Life Cycle: For each disruption in the supply chain, the Life Cycle with two distinct phases can be considered (Figure 3). There is a period of time over which a disruption is latent and inactive; it is basically a Potential Disruption. When it happens in real world, it is an Actual Disruption. To best handle a disruption, different decisions must be made and activities must be addressed in both phases of Life Cycle. All effort of supply chain risk management (pre-disruption view) is discovering the Potential Disruptions and avoiding them to become Actual Disruptions. The main aim of supply chain disruption management (post-disruption view) is handling the Actual Disruption when it happens and using the experience of managing it to avoid, reduce or transfer the risk of similar Potential Disruptions in the future.

Figure 3: Disruption Life Cycle

Dinalog Winterschool, January 30 February 3, 2012 4

Therefore, a comprehensive definition for Supply Chain Disruption Management can be presented as follows. Definition 3- Supply Chain Disruption Management: Supply Chain Disruption Management is a structured and continuous process to analyze the impact of disruptions across supply chain on the predefined objectives and to handle them in their whole Life Cycle.

Figure 4- Integrated framework to manage disruptions in supply chains With this definition for supply chain disruption management, an integrated framework to manage disruptions in supply chains is presented in Figure 4. In this framework, managing disruptions is not a project; it is an ongoing process with two main cycles. The first cycle that is called Risk Management Cycle- is about Potential Disruptions. Firstly, the Potential Disruptions in the supply chain (or a subset of supply chain that is chosen to study) must be identified (R1: Scope Definition & Risk Identification). Next, For the Potential Disruptions identified the expected impact on the objectives and the performance of the system must be evaluated (R2: Risk Quantification). This evaluation is basically around two main questions; firstly, how likely a disruption is (Disruption Likelihood) and secondly, how bad it can be if it occurs (Disruption Impact) (Sheffi 2005). Having the risk level, the next step is to determine which Potential Disruptions need treatment and how they must be treated (R3: Risk Evaluation & Treatment). If (after treatment) the risks level seems acceptable, supply chain operations proceed. However, the level of risk must be continuously
Dinalog Winterschool, January 30 February 3, 2012 5

monitored (R4: Risk Monitoring). Due to changes in the system (e.g., change in customer needs or partner strategies) or in business environment (e.g., new regulations or new competitors), the likelihood and expected impact of Potential Disruptions keep changing. Moreover, the system boundaries and structure may change in different ways. A new supplier might be added to the supply base; a new warehouse might be launched or a new product might be introduced by company. With changes in the system, it is necessary to start the Risk Management Cycle by a new definition for the system and identifying the new disruptions. The second cycle is Disruption Management Cycle. Despite enough safeguards, at a specific point, an Actual Disruption may happen. To handle such a disruption, the first step is detecting the location of disruption, its profile and the expected consequences on the system as quickly as possible (D1: Disruption Detection). As the Actual Disruption is detected in a part of supply chain, a company must react quickly to manage the impact of disruption and return the supply chain to the normal and planned operation. The primary response will be on the basis of pre-defined response plans that are formerly defined in Risk Evaluation and Treatment step (D2: Disruption Reaction). If the pre-defined response plan is found inadequate to control the impact of disruption on supply chain or if no response plan has been defined for a specific disruption, the firms must quickly find alternative solutions and implement them to restore the normal supply network operations (D3: Disruption Recovery). After a company would manage the Actual Disruption in its supply chain and gets back to the normal operation, it might review the process and learn some lessons to use in handling similar disruption in the future (D4: Disruption Learning). The response plans might be revised or the supply chain might be restructured to reduce the probability or severity of similar disruptions in future. For instance, a new warehouse might be added to the current supply network or a new contract might be signed with a local supplier. Of course, these modifications in a supply chain imply changes in the system structure and its boundaries and accordingly, it will be a necessity to repeat the Risk Management Cycle by a new system definition and identifying new Potential Disruptions.

Concluding remarks
In this paper an integrated framework for handling disruption in supply chain - InForMDRiSC - has been presented. In general, the existing frameworks for managing supply chin disruptions focus on one of "Prevention (predisruption)" and "Response (post-disruption)" processes and there are very few frameworks that incorporate both views in a comprehensive process. InForMDRiSC aims to fill the gap and present all relevant steps in handling
Dinalog Winterschool, January 30 February 3, 2012 6

disruptions in supply chains in one framework. InForMDRiSC is developed based on an extensive review of literature on supply chain risk/disruption management and its applicability and usefulness is evaluated with expert view and an industrial case study. However, the next step in the future works can be conducting other case studies to evaluate the applicability of framework with more real cases.

References
Adhitya, A., Srinivasan, R., Karimi, I.A. (2007) A model-based rescheduling framework for managing abnormal supply chain events. Computers and Chemical Engineering 31 (5-6), pp. 496-518. Blackhurst, J., Craighead, C.W., Elkins, D., Handfield, R.B. (2005) An empirically derived agenda of critical research issues for managing supplychain disruptions. International Journal of Production Research 43 (19), pp. 4067-4081. Finch, P. (2004) Supply chain risk management. Supply Chain Management: An International Journal 9 (2), pp. 183-196. Hallikas, J., Karvonen, I., Pulkkinen, U., Virolainen, V.M. and Tuominen, M. (2004) Risk management processes in supplier networks. International Journal of Production Economics 90 (1), pp. 47-58. Micheli, G.J.L., Cagno, E. and Zorzini, M. (2008) Supply risk management vs. supplier selection to manage the supply risk in the EPC supply chain. Management Research News 31 (11), pp. 846-866. Sheffi, Y. (2005) Preparing for the big one. Manufacturing Engineer 84 (5), pp. 12-15. Sinha, P. R., Whitman, L. E. and Malzahn, D. (2004) Methodology to mitigate supplier risk in an aerospace supply chain. Supply Chain Management: An International Journal 9 (2), pp. 154-168.

Dinalog Winterschool, January 30 February 3, 2012