Yossi Sheffi - The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage

Yossi Sheffi

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This book examines the ways in which companies can recover from high-impact disruptions. The focus is on the actions they should take to lower their vulnerability and increase their resilience. A notion borrowed from the materials sciences, resilience represents the ability of a material to recover its original shape following a deformation. For companies, it measures their ability to, and the speed at which they can, return to their normal performance level following a high-impact/low-probability disruption.

After 9/11, governments around the world elevated the fight against terrorism to the top of their agendas. The U.S. government reorganized its defense and intelligence agencies and adjusted its foreign policy for that mission. In contrast, the private sector quickly went back to business. The daily pressures to performworrying about yields, supplier performance, machine up-time, customer requirements, product launches and market responsequickly overtook most terror worries.

Yet in the United States, and increasingly in Europe, most of the economic infrastructure, such as transportation, energy, retail, manufacturing, and finance, is in the hands of the private sector. In early 2002, a group of researchers and several corporate members of MIT's Supply Chain Exchange program began a series of discussions to address the rising concerns about terrorist disruptions. It quickly became apparent that there are no clear management guidelines, models, or theories for corporate security and resilience. These discussions spawned a three-year research effort that culminated in this book.

As the research progressed, it became clear that the study needed to expand to include different kinds of disruptions. Many random phenomena, such as earthquakes, floods, and accidents, have just as much impact on a company as a terrorist action. Furthermore, the high frequency of general disruptions provided more data for the research.

Questions raised as part of this research effort include the following:

How should companies define and prioritize threats?

What are the common characteristics of all high-impact disruptions?

Can companies prepare without knowing the type of disruptions they may face?

How should companies maintain lean operations, which aim to reduce redundancy, without increasing vulnerability?

Are intentional disruptions fundamentally different from accidents and random phenomena?

How can disruptions be detected when so many simultaneous events are taking place in the normal course of commerce?

How can a company build in flexibility so that it can be resilient?

Should companies always prefer multiple suppliers to singlesourcing?

What new risks and rewards affect collaboration in this new world?

What is the role of corporate culture in resilience?

How can security investments support the main mission of the enterprise? Can they be cost-justified?

This book sheds light on all these questions and more. It is a call for action based on the experience of many companies-those who did well in the face of disruptions and those who faltered. Furthermore, a company is typically a citizen of its supply chain. Thus, the book answers many of these questions with emphasis on the extended enterprise-the web of suppliers, manufacturers, distributors, retailers, transportation carriers, and the other participants in the process of bringing products to markets.

This book is a product of a research project conducted between 2002 and 2005 at the Center for Transportation and Logistics (CTL) at the Massachusetts Institute of Technology (MIT). The project was funded, in part, by the U.K. government through the Cambridge-MIT Institute (CMI) to study the impacts of disruptions on supply chain operations. In addition, the following companies have contributed funds through the Integrated Supply Chain Management Program at the CTL: Avaya, Helix, Intel, Lucent, Monsanto, Proctor & Gamble, and Texas Instruments.

The project was directed by Jim Rice of the CTL. Jim contributed with leadership, vision, and able day-to-day management of the project. He also managed the interviews and the interaction with the many of the companies and executives who contributed to the research effort and to the book. In addition, he edited, commented and pushed. Without him this book would not have been written.

Dan Dolgin offered ideas, comments and editing throughout the project. Andrea and Dana Meyer organized the material, added many examples, and put on paper many of the early drafts. Scott Campbell edited various versions of the text and made invaluable suggestions. Nicole Blizek collected and checked references. Yali, my brother, was very generous with his time, providing unique access to senior Israeli executives.

Many students participated in the project and the fruits of their labor show up in many parts of the book. They include Abby Benson of the 2005 class of the Master of Engineering in Logistics (MLOG) at MIT, Deena Disraelly (MLOG 2004), Chris Picket (MLOG 2003), Reshma Lensing (MLOG 2003), Chris Hamel (MLOG 2003), Sophi Pochard of the 2004 Technology and Policy Program at MIT, and David Opolon of Ecole Nationale Superieure des Mines de Paris and Federico Caniato of the Politecnico di Milano, who were visiting students at MIT at the time.

The interactions with Dr. Helen Peck and Professor Martin Christopher of Cranfield University were informative and useful.

Several of my colleagues at MIT participated in the various conferences conducted as part of this study. They include Professors Richard DeNeufville, John Deutch, Dan Hastings, Dan Roos, Joe Sussman, and Steve van Evera.

Many corporate executives have contributed significant time and ideas to the research effort. In particular, Steve Lund of Intel, Dr. Debra Elkins of General Motors and Phil Spayd of the U.S. Customs and Border Protection were actively involved in various stages of the project. Additionally, many members of the UPS organization shared their experience with the research team generously and willingly.

Other executives, researchers and government officials devoted time and provided insights. They include Dave Grubb and Mike Princi of Accenture, Bob Scholtz of Agilent Technologies, Steve Anderson of Anderson Risk Analysis, Earl Agron and Chris Corrado of APL, Dean Harper of Avaya, Paul Tagliamonte of Bose, Phil Licari of Boston Scientific, Tim Boden, Ian Hamilton, Dennis Luckett, and Frank Stone of BT, Robert Gecielewski of C. H. Robinson Worldwide, Jamie MacIntosh of the Civil Contingencies Secretariat in the U.K. Cabinet Office, David Lacey of Consignia, Steve Potter of CSX, Con O'Sullivan of Cummins, Bruce Riggs, and Stuart Smith of Dell, Ofer Lichevski of Egged, Nissim Malki of El Al Airlines, Shlomo Sherf of Electra, Dave Hempen of Energizer, Douglas Witt of FedEx, Mark Everson of Ford Motor, John Dinsmore of GE Aircraft Engines, Rick Dufour, and Datta Kulkarni of General Motors, Tom Cummings, Jim Hutton and Don Patch of Gillette, Rob Fantini of Hasbro, Charles Chappel and Janet Rosa of Helix Technology, Tony Gentilucci, Patrick Scholler and Fred Smith of Hewlett Packard, Glen Gracia of Hill and Knowlton, Bob Byrne of IBM, Jay Hopman, Jim Kellso, Mary Murphy-Hoye, and Dan Purtell of Intel, Mike DiLorenzo of Jabil Circuit, Peter Gartman of Limited Brands, Vince Freeman of the London Metropolitan Police, Joe Belle- feuille, Kapil Barisal, Rob Draver, Dan Fischer, Hector Lozano, Sita Nathan, and Steve Sherman of Lucent Technologies, Tim Cracknell of Marsh McLennan, Cleo Pointer of Masterfoods, Steve Wooley of Nike, Mike Wolfe of North River Consulting Group, Rich Widup of Pfizer, Larry Curran of Pinkerton Consulting and Investigations, Bill Castle of Procter and Gamble, Joe DeLuca and Rob Shepard of Reebok, Scott Dedic of Seagate Technology, Mike Lech of Shaw's Supermarkets, Alan Fletcher and Bill Tenney of Target Stores, Amit Wohl of Taro Pharmaceutical Industries, Keith Hodnett, Ann Lister, Rod McPherson and Tom Shields of Texas Instruments, Bob Bergman, Jordan Colletta, Tom Flynn, Daniel Franz, Dick Germer, Chris Holt, Joe Liana, Dan McMackin, Debbie Meisel, Dan Silva, Dan Silvernale, Marty Stamps, Ken Sternad and Albert Wright of United Parcel Service, Vice Admiral Vivien S. Crea of the U.S. Coast Guard, Charlie McCarthy of Volpe National Transportation Center (U.S. Department of Transportation), and Dee Biggs of Welch's.