A General Supply Chain Continuity Management Framework

(1)

Procedia Computer Science 55 ( 2015 ) 1160 – 1164

Peer-review under responsibility of the Organizing Committee of ITQM 2015 doi: 10.1016/j.procs.2015.07.087

ScienceDirect

Information Technology and Quantitative Management (ITQM 2015)

A General Supply Chain Continuity Management Framework

Maurício F. Blos

*,a

_{, Sérgio L. Hoeflich}

b

_{and Paulo E. Miyagi}

a

a_{Escola Politécnica da Universidade de São Paulo, São Paulo, 05508-030, Brazil}

b_{Escola Politécnica da Universidade de São Paulo, São Paulo, 05508-010, Brazil}

Abstract

Innovation challenges for handling supply chain risks have become one of the most important drivers in business competitiveness and differentiation. Furthermore, supply chain risk evaluation is of a great importance in emerging areas such as biomanufacturing, nanotechnology, and energy. However, with the advent of globalization and the advance of new technologies, the global and lean supply chains are more than ever at risk. In this scenario, this paper has the purpose to develop a general supply chain business continuity framework, which is an extension of the model developed by [1]. The fact that this model has already been implemented in the pharmaceutical supply chain risks in business units of Iran [2], demonstrates the potential of its replication to different field of industry all over the world. In addition, this paper shows that this framework can be extended to the financial and marketing operational constructs.

Selection and/or peer-review under responsibility of the organizers of ITQM 2015 Keywords: supply chain, risk management, business continuity, mitigation, resilience.

1. Introduction

Whether your company is small, medium or large, or whether your company manufactures low technology products or high technology products, it is not unreasonable to expect that there is a supply chain disruption looming some time in its future. Being always prepared is a concept that most of the companies (local or geographically dispersed) should keep in mind as the major strategy. Nowadays, it is not admitted that failures to plan for such risk events can lead to supply chain breakages that can disrupt a company performance, damage profitability and stock prices, and result in a negative impact to the organization that can even bring the bankruptcy. Despite the strategies to mitigate risks in supply chain, risk assessments are an important tool for ensuring product safety, efficacy, consistency, and supply. In this context, [3] has an important international standard of Business Continuity Management (BCM) to follow. The BCP specifies the requirements for a

* Corresponding author. Tel.: +55 11 94807-8588.

E-mail address: [email protected].

(2)

management system to protect against, reduce the likelihood of and ensure that any business recovers from disruptive incidents and this makes ISO 22301 a prerequisite for any firm that is serious about business continuity management. Applying BCM through the supply chain can help to identify possible internal and external threats/risks and their impact to business processes and provides a framework for organizational resilience, which provides a faster response and a quicker recovery. Therefore, a well-developed and maintained business continuity program is critical to successfully managing supply risk and maintaining a reliable supply chain. The objective of this paper is exactly this, to develop a general supply chain business continuity framework that can deal with risks of disruption for a supply chain. Moreover, the concepts of this framework have already been applied to the pharmaceutical supply chain risks in business units of Iran [2].

The paper is organized as follows: Section 2 presents the literature review. Section 3 presents the developed supply chain continuity framework. Finally, section 4 presents the conclusions.

2. Literature Review

Although the topic is being considered as increasingly important, there are only a few authors explicitly defining supply chain business continuity. Therefore, supply chain continuity management is an emerging discipline [4]. [5] consider that there is a need to use Business Continuity Planning (BCP) through supply chain in order to manage risks of disruptions in the inbound supply chain. Then, in 2005, [6] affirm that with a constant awareness and a vigilance to create robust supply chains via BCP can organizations survive unanticipated supply disruptions. It’s important to consider the whole supply chain to identify single points of failure, whether among the suppliers, subcontractors, logistic operations or warehousing, if applicable. Furthermore, all the networks and the nodes that support them must be resilient.

The interesting fact is that the famous Business Continuity Institute (BCI), the world’s leading institute for business continuity and the certifying organization for business continuity professionals’ worldwide do not provide scientific papers about business continuity through supply chain. [3] defines supply chain continuity as the combination of BCM and SCM. For better understanding of each one separately, we have:

x [7] defines BCM as a holistic management process that identifies potential impacts that threaten an organization and provides a framework for building resilience and the capability for an effective response that safeguards the interests of its key stakeholders, reputation, brand and value creating activities.

x [8] defines SCM as the streamlining of a business' supply-side activities to maximize customer value and to gain a competitive advantage in the marketplace. SCM represents an effort by suppliers to develop and implement supply chains that are as efficient and economical as possible. Supply chains cover everything from production, to product development, to the information systems needed to direct these undertakings.

Apart from business perspective, in engineering field there are many modeling techniques to deal with risks in supply chain. There are some applications using for example Petri net technique [9], multi-agent system technique [10], holonic approach [11], optimization technique [12], fuzzy technique [13], analytic hierarchy process approach [14], genetic algorithm approach [15], bayesian network approach [16], ant colony technique [17], particle swarm approach [18], and many others. With this in mind, an engineering definition of supply chain continuity management is: the complex system that works with multiple agents in partnership, which can be geographically dispersed, with a SCM characteristics that has a BCP concepts or even the BCP standard in its core business.

(3)

3. The developed model

The developed model has in its structure a framework based on BCP process life cycle with six stages (risk mitigation management, business impact analysis, supply continuity strategy development, supply continuity plan testing and supply continuity plan maintenance) with eight supply chain operational constructs (inventory management, quality, ordering time, time to market, finance, market, flexibility and customers) with the purpose of keeping the supply chain more resilient (Figure 1). Furthermore, this model considers internal and external risks.

3.1 The Six Stages

The six stages of the developed BCP process life cycle listed below belong to the supply chain operations, as follows:

Stage 1: Risk Mitigation Management

This first stage will assess the threats of disaster, existing vulnerabilities and potential vulnerable events, and identify mitigation controls that are needed to prevent or reduce the risks of disaster related to the operational constructs (OCs).

Stage 2: Business Impact Analysis (BIA)

This stage identifies mission-critical processes of the OCs and analyses impacts to business if these processes are interrupted as a result of a disaster. The BIA is the foundation on which a comprehensive business continuity program is based. Its goal is to determine the most through to the least time-critical business functions throughout the organization. For each of these functions a related recovery time objective (RTO), the target time in which each function must be operational following a disruption, is determined. For supply management, a BIA will include a review of the operations of manufacturing, transportation, distribution services, support technology, warehouses and service centers, as well as the trade-off between them.

Stage 3: Supply Chain Continuity Strategy Development

The third stage assesses the requirements and identifies the options for recovery of critical processes and resources related to the OC in the event that they are disrupted by a disaster.

Stage 4: Supply Chain Continuity Plan Development

This stage develops a plan for maintaining business continuity based on the results of the previous stages. Stage 5: Supply Chain Continuity Plan Testing

This stage will test the supply continuity plan document to ensure it is current, viable and complete. Stage 6: Supply Continuity Plan Maintenance

The final stage will maintain the supply chain continuity plan in a constantly ready state for execution. 3.2 The Eight Operational Constructs (OCs)

The seven supply chain operational constructs are presented below

x Customer Service: Rising costs associated with customer service can result from supply disruption. x Inventory Management: Inventory Management has crucial importance for the supply chain, where the

(4)

x Flexibility: This variable is essential to ensure any process works well and is fit for market.

x Time to Market: Any supply failing when a threat strikes will promote delay of new products introduction.

x Finance: This operational construct is of great importance due to the fact that any operational risk failure is computed financially as a loss.

x Ordering Cycle Time: In the global supply chain, the total order cycle time increases because there are more potential constraints that could slow a shipment at any point in its journey.

x Quality: The supply product of good quality can provide an opportunity to eliminate incoming inspection and consequently gain customer satisfaction.

x Market: There is the need to become the market leader, resulting the searching for daily improvement.

Figure 1 – A General Supply Chain Continuity Framework

According to the above figure, the stages are demonstrated in the BCP process life cycle and the operational constructs are linked to each stage. This framework is adapted from [1], where it analyzes the external supply chain risk driver competitiveness, focusing on risk mitigation framework and business continuity plan. The developed framework in this paper has two more operational constructs, finance and market. In this way, this framework is more general than the framework developed by [1], where it is an effective crisis management operational structure.

4. Conclusion and future work

A framework was presented with the objective to promote a general supply chain continuity management framework, with an effective crisis management operational structure. The developed framework is an extension of the paper published by [1] with two new operational constructs: finance and market. The framework is formed by six stages (Risk Mitigation Management, Business Impact Analysis (BIA), Supply Chain Continuity Strategy Development, Supply Chain Continuity Plan Development, Supply Chain

(5)

Continuity Plan Testing, and Supply Continuity Plan Maintenance)) and eight operational constructs (Customer Service, Inventory Management, Flexibility, Time to Market, Finance, Ordering Cycle Time, Quality, and Market). The difference is that according to ISO 22301 standards, the eight operational constructs are not considered. However, as demonstrated by [2], the constructs fits well with the framework and can be applied to any industry. Furthermore, the developed model considers internal and external risks. For future work, it will be investigated the usage of the developed framework in cloud computing environment.

Acknowledgements

The authors would like to thank the partial financial support from the agencies: FAPESP, CNPq and CAPES.

References

[1] Maurício F. Blos, Hui-M. Wee, Chung Yuan. Analysing the external supply chain risk driver competitiveness: a risk mitigation framework and business continuity plan. Journal of Business Continuity & Emergency Planning 2010; 4:368-374.

[2] Jaberidoost M., Nikfar S., Abdollahiasl A., Dinarvand R. Pharmaceutical Supply Chain Risks: A Systematic Review. DARU Journal of

Pharmaceutical Sciences 2013; 21(69): 1-7.

[3] ISO 22301:2012. Societal security — Business continuity management systems - Requirements. Switzerland: International Organization for Standardization.

[4] Damian Walch, 2007. Planning for Supply Chain Continuity - Disaster Resource Guide. http://www.disaster-resource.com/articles/08exe_p24.shtml

[5] George A. Zsidisin, Gary L. Ragatz, Steven A. Melnyk, 2004. Business Continuity Planning in Supply Management. 89th_Annual

International Supply Management Conference.

[6] George A. Zsidisin, Steven A. Melnyk, Gary L. Ragatz. An Institutional Theory Perspective of Business Continuity Planning for Purchasing and Supply Management. International Journal of Production Research 2005; 43:3401-3420.

[7] www.thebci.org (Accessed on March 3rd_{, 2015).}

[8] www.ism.ws (Accessed on March 3rd_{, 2015).}

[9] Seyed Hessameddin Zegordi, Hoda Dovarzani. Developing a Supply Chain Disruption Analysis Model: Application of Colored Petri-Nets. Expert Systems with Applications 2012; 39:2102-2111.

[10] Mihalis Giannakis, Michalis Louis. A Multi-agent Based Framework for Supply Chain Risk Management. Journal of Purchasing &

Supply Management 2011; 17:23-31.

[11] Ummut R. Tuzkaya, Semih Önüt. A Holonic Approach based Integration Methodology for Transportation and Warehousing Functions of the Supply Networks. Computers & Industrial Engineering 2009; 56:708-723.

[12] Tadeuz Sawik. On the Fair Optimization of Cost and Customer Service Level in a Supply Chain under Disruption Risks. Omega 2015; 53:58-66.

[13] Faisal Aqlan, Sarah S. Lan. A Fuzzy-based Integrated Framework for Supply Chain Risk Assessment. International Journal of

Production Economics 2015; 161:54-63.

[14] Andra Badea, Gabriela Prastean, Gilles Goncalves, Hamid Allaoni. Assessing Risk Factors in Collaborative Supply Chain with the Analytic Hierarchy Process (AHP). Procedia Social and Behavioral Sciences 2014; 124:114-123.

[15] Salah A. Ghasimi, Rizauddin Ramli, Nizarayani Saibani. A Genetic Algorithm for Optimization Defective Goods Supply Chain Costs using JIT Logistics and Each-Cycle Lenghts. Journal of Applied Mathematical Modelling 2014; 38:1534-1547.

[16] Myles D. Garvey, Steven Carnovale, Sengun Yeniyurt. An Analytical Framework for Supply Network Risk Propagation: A Bayesian Network Approach. European Journal of Operational Research 2015; 243:618-627.

[17] Ya L. Tsai, Yao J. Yang, Chi-H. Lin. A Dynamic Decision Approach for Supplier Selection using Ant Colony System. Expert Systems

with Applications 2010; 37:8313-8321.

[18] Z.H. Che. A Particle Swarm Optimization Algorithm for Solving Unbalanced Supply Chain Planning Problems. Applied Soft