Going nature’s way can add resilience to business: study
Researchers says companies can draw blueprint of network ‘fitness’ to gauge ‘robustness to disruption’
A new research indicates that logistics companies should focus on identifying "weak links" in their supply chain as opposed to the strong ones to ensure their network remains less susceptible to disruption.
Professor Michael Bell of the University of Sydney Business School’s Institute of Transport and Logistics Studies says businesses can "then determine ways of avoiding these weak or less fit links while ensuring that they remain within the network in a way that provides redundancies which make the overall network more robust".
The University of Sydney’s multi-faculty research was initiated by the food supply networks found in the natural world.
"Foraging networks established by bees, ants and even slime moulds tend to be surprisingly complex and include higher and lower quality food sources," Faculty of Agriculture and Environment senior research fellow Dr Tanya Latty says.
"Although they prefer higher quality foods, they still maintain trails to lower quality foods in order to increase the network’s resilience and its ability to respond to a crisis."
ITLS research Supun Perera says while globalisation, specialisation and lean supply chain procedures improve efficiency in supply chain management, they also add disruption risks related to natural disasters, war, terrorist attacks and labour disputes.
The research found that "complex networks that include connections to both strong and weak product and service providers allow for redundancies and are therefore more resilient than those deemed lean and cost effective".
The study urges businesses to "build resilience into their operations by creating redundancies throughout the supply chain, but to do so in a way that avoids weak links".
"Redundancy at first seems counterproductive to a company’s efforts to maintain a lean operation by driving out waste," Perera says.
"In fact, redundancy is one of the best ways to ensure lean operations as they avoid the significant waste of time, effort and money involved in a system’s breakdown."
The researchers highlight the example of a fire in a Philips microchip factory in Albuquerque, New Mexico that "severely disrupted" product supplies to its key customers.
"Thanks to its robust supply chain with its complex web of redundant pathways, Nokia, a customer of the Albuquerque plant, was able to immediately switch to alternative chip suppliers across the United States and Japan," Perera says.
"In contrast, production at Ericsson, another Albuquerque customer, which had pursued a lean single-source supply policy, was disrupted for months at a cost of $ 400 million in lost sales."
"In this research we have found that, the avoidance of weakest links, rather than the selection of strongest links, leads to the so-called scale-free networks, which are very resilient against random failures and indiscriminate attacks," Faculty of Engineering & Information Technologies researcher Dr Mahendra Piraveenan says.
The research was funded by the Australian Research Council.