ABSTRACT
Supply Chain Crises - The Challenge Increasingly, firms and their management are coming to rely on lean supply chains to augment and enhance their own internal capabilities. These are also chains where waste and buffers in their various forms are actively identified, evaluated and attacked. The goal is to replace the traditional ‘internal’ factory (a system where the firm relied on its own capacities and capabilities to meet customer demand) with more effective and efficient supply chain systems.As can be seen in the experiences of such as firms as Dell, Wal-Mart, Mothers Working and Calyx and Corolla, this new strategy can and does create significant competitive advantages for those firms willing to embrace it. Yet, there is a ‘dark’ side to this new supply chain based strategy. As firms become more reliant on the supply chain and as they seek to identify and eliminate waste by applying the lessons and tools offered by developments, such as Total Quality Management (TQM), Six Sigma, Just-in-Time Manufacturing and Lean Thinking, they are realizing that their supply chains are become increasingly ‘fragile.’ That is, their systems are becoming less able to deal with shocks that have a very low probability of occurring but that have significant, if not catastrophic, impacts for the firm.Numerous examples of such shocks can be found in today’s newspapers. On August 14, 2003, electrical power in the American Midwest and Ontario was disrupted, with the resulting power outages lasting anywhere from minutes to days (www.macnn.com/news/20654). The effects of this disruption were felt as far away as California, where Apple Computer was preparing to launch its much-anticipated G5 computer - the first mainstream personal computer featuring 64 bit processing. This launch was affected by the power disruption since Apple relied on IBM to supply its chips. These chips were manufactured in a factory located in upstate New York - a factory affected by the power disruption. On September 21, 1999, a magnitude 7.6 tremor struck Taiwan, killing over 1,500 people. From a supply chain perspective, this earthquake hindered the supply of computer memory chips, affecting many firms’ ability to meet anticipated consumer demand for the upcoming holiday season. Finally, on Tuesday September 11, 2001, New York experienced the destruction of the World Trade Towers due to terrorism.
