Supply chain disruption and resilience

Supply chain resilience is important — nay, critical — because supply chain disruptions have always been happening and will keep happening. Before the COVID-19 pandemic in the early 2020s, on average, companies experienced a one-to-two-month disruption every three and a half years or so. During the pandemic, it seemed that new disruptions popped up daily.

In the new normal, we can expect that disruptions will happen at least as often as they did pre-pandemic, if not more often. These increasing disruption rates can be attributed to increasingly complex global supply chains; increases in inclement weather related to climate change; geopolitical disruptions that can disrupt lengthy supply chains; and other challenges that will ultimately arise as a result of developing markets, products and technologies. Although so many of these events are out of any one company’s control, companies can regain some control by building their supply chain resilience.

Supply chain disruptions may occur due to climate change or human factors. Based on the site of the National Oceanic and Atmospheric Administration (NOAA), which keeps a record regarding the number of disasters and their associated costs in the U.S, there have been 212 disasters since 1980 resulting in approximately $1.2 trillion in damage. A typical year in the 1980s experienced, on average, 2.7 such disasters in the U.S, 4.6 in the 1990s, 5.4 in the 2000s, and 10.5 in the 2010s. The occurrence of costly disasters has mounted. The same phenomenon is observed globally based on the OFDA/CRED International Disaster Database with less than 200 disasters per year in the 1980s and over 300 in the 2010s. Natural disasters like the Thailand flood and Japan’s earthquake and tsunami in 2011 immediately affected the SCs of several products from firms such as Apple, Toshiba, General Motors, Nissan Motor and Toyota Motor causing negative results in these companies’ reputations and earnings (Chongvilaivan 2011). Statistics show that about 40–60% of small businesses never reopen following a disaster (FEMA 2015).

On the other hand, recent examples of human factor disruptions include the tariffs imposed on billions of products for US importers in 2018–19, specifically to steel and aluminum, which led to import delays due to an inability of companies to adjust their current customs clearance programs and absorb the extra cost. This left a negative impact on the relations of the US with China, whose companies have been affected the most. Moreover, the wake of Brexit at the beginning of 2020 increases production failure risks to just-in-time auto manufacturers and others with similar operations (Banker 2019). The civil war in Syria has created humanitarian logistics problems with refugees’ flows in Turkey and EU which based on the situation had to change supply chain strategies from serving populations on the move to serving dispersed but static groups of people, by supplying refugee camps, etc. (Dubey et al. 2019a, b, c). Recently, the deadly coronavirus outbreak in a major industrial and transport hub of central China has triggered lockdowns in Chinese (and many other) cities and factories which have severely restricted production and transport routes globally (Araz et al. 2020).

The issue of SC disruptions has been greatly emphasized in the literature. It is a topic that increasingly challenges the SC of products and their focal firms, as SCs have become very complex and interdependent and disruptions create a snowball effect with serious consequences to all related SC echelons. This propagation, the ripple effect as is denoted in the literature (Ivanov et al. 2014a, b) amplifies the impact of disruptions.