Kris Timmermans, senior managing director and global lead for supply chain operations with Accenture, and David Simchi-Levi, professor of engineering systems at MIT, discuss their joint effort in creating a stress test for assessing the risks to supply chains of major disruptions.
The effort was inspired by the stress tests applied to banks after the 2008 financial crisis. MIT began working on supply-chain resiliency after natural disasters such as the tsunami in Japan and floods in Thailand, Simchi-Levi says. The goal was to identify hidden risk, and assess the ability of supply chains to survive any number of disruptions.
The need for such a tool became even more pressing with arrival of the coronavirus pandemic. Timmermans says three out of four supply chains suffered some form of “serious breakdown” as a result. In addition, only 17% of consumer-focused supply chains were able to make the necessary pivot to online commerce, at a time when demand for agility was high. In cases of medical and certain food items, supply chains became “the lifeline for humanity,” Timmermans says. “We as a society cannot tolerate them breaking down.”
The stress test begins with creation of a digital twin, modeling a company’s physical supply chain. Without such a step, Simchi-Levi says, it’s impossible to understand the level of risk that the company in question faces in the event of disruption. The exercise also involved the running of multiple “what-if” scenarios, testing the ability of supply chains to withstand a variety of events. It reveals the time it takes for a particular node to be restored to full functionality (“time to recover”), as well as the maximum period during which a supply chain can continue to match supply with demand (“time to survive”). The ultimate goal is to provide companies with tools for mitigating the impact of future disruptions.
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