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How can resilience consideration be

incorporated into the supply chain

network design

University of Groningen, Faculty of Management and Organization

Master Thesis Supply Chain Management 2012-2013

September 6, 2013

Feng Gao

Student Number: S2270161

E-mail: f.gao@student.rug.nl

Address: Plutolaan 329, 9742 GK Groningen

Supervisor: Dr. K.Scholten

Co-assessor: Dr. E.Ursavas

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TABLE OF CONTENTS

1. Introduction... 2

2. Theoretical background ... 5

2.1 Supply chain vulnerability ... 6

2.2 Supply chain resilience... 7

2.3 Supply chain network design ... 9

2.3.1 Supply chain logistical network design ... 10

2.3.2 Business process ... 10 2.4 Concept model ... 13 3. Methodology ... 14 3.1 Research methodology ... 14 3.2 Context... 15 3.3 Data collection ... 16 3.4 Data analysis ... 20 3.4.1 Within-case study ... 20 3.4.2 Cross-case study ... 21 4. Findings ... 22 4.1 Agility ... 24 4.2Robustness ... 26

4.2.1 Activities & Robustness ... 26

4.2.2 Logistical network & Robustness ... 30

5. Discussion ... 31

6. Conclusion ... 36

Reference: ... 38

Appendix A: Case description ... 48

Case 1:... 48

Case 2:... 51

Case 3:... 53

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Abstract:

As today’s business environment is becoming more global and competitive, both complexity and length of supply chain networks have increased. As a consequence, this change in terms of complexity and length has also exposed supply chain members to more natural and man- made disasters that threaten the supply chain operations and cause supply chains more vulnerable. Resilience has been proposed as a means to reduce the vulnerability of supply chain to such unexpected events. However, little empirical research has factored resilience into the supply chain network design. By investigating four supply chains in the food industry, this study provides an in-depth insight into how to build resilient supply chain networks through logistical network design and process design perspective.

Keywords: supply chain resilience, supply chain network design, logistical network

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1. Introduction

With the complexity and global reach of supply chains caused by unbundling, outsourcing, and globalization, there has been a combined threat posed by natural and man-made disasters that heightens the riskiness of supply chain operations (Bakshi & Kleindorfer, 2009). For example, in 1996, General Motors lost an estimated $900 million because of a labor strike at its supplier factory. In 1997, Boeing suffered a supplier delivery failure that resulted in a $2.6 billion loss to the company. In 2000, Ericsson lost $2.34 billion because of a fire accident in its critical supplier’s warehouse. In 2005, Robert Bosch GmbH, currently the largest supplier of auto parts worldwide, had a negative impact on its brand because of the use of defective components from one of its suppliers (Radjou, 2002; Wagner & Bode, 2006; Ratick, Meacham & Aoyama, 2008).

All these examples have shown that supply chains are vulnerable to disruptions that are “unplanned and unanticipated events that disrupt the normal flow of goods and

materials within a supply chain” (Craighead, Blackhurst, Rungtusanatham &

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later after the September 11 attacks. In order to reduce vulnerability of supply chains to these unexpected events, the supply chains must be designed to incorporate event readiness, respond efficiently and effectively, and be capable to recover to the original or even better state after the disruption (Ponomarov & Holcomb, 2009). This is the essence of supply chain resilience. Therefore, there is a need to adopt resilience research as an important issue in defining supply chain network design strategies (Carvalho, Barroso, Machado, Azevedo & Cruz-Machado, 2012). However, resilience consideration has not been specifically incorporated into the supply chain network design (Klibi & Martel, 2012). In order to fill this gap, we propose the following research question:

How can resilience consideration be incorporated into the supply chain network design?

Supply chain resilience refers to the adaptive capability of supply chain to prepare for unexpected events, respond and recover from them, then move to a new and more desirable state after being disrupted (Christopher & Peck, 2004; Peck, 2005; Ponomarov & Holcomb, 2009). The adaptive ability, thus, refers to “prevent or resist being affected by an event” (proactive strategy) and to “return to an acceptable level of performance in an acceptable period of time after being affected by an event” (reactive strategy) (ISO, 2010). Here, we follow the research of Wieland and Wallenburg (2013) which proposes the supply chain resilience can be achieved through agility and robustness. Agility as reactive strategy enables supply chains to respond to changed conditions and adapt rapidly (Khan et al., 2008; Christopher, 2004). Robustness as proactive strategy mainly refers to the ability of supply chains to continue to function well in disruptions (Vlajic, Van der Vorst, & Haijema, 2012).

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defined by Christopher (1998: 15) as “the network of organizations that are involved,

through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumer.” Therefore, supply chains can be designed from two aspects: (1) logistical

network and (2) business process design. Logistical network design refers to the selection of the optimal number, location, and size of warehouses and plants (Meepetchdee & Shah, 2007). The majority of optimal logistical network design models only considers cost minimization and profit maximization as the two main logistical network design objectives (Cohen & Moon, 1990; Tsiakis, Shah & Pantelides, 2001; Gjerdrum, Shah & Papageorgiou, 2001). No or few research has taken resilience as the objective to build logistical networks. As a consequence, the first sub question to answer our research question is raised as follows:

How is a resilient logistical network built?

Moreover, to deal with changes in the supply chains, companies have to accept process-based management principles implying a new way of considering organizations based on the business processes they perform rather than as separated functional units (Trkman, Stermberger, Faklic & Groznik, 2007). A business process is a structured and measured set of activities with certain business outcomes for customers (Davenport & Beers, 1995). By considering the supply chain network as a system of business processes, supply chain vulnerability can be eliminated by a coordinated approach to the identification and correction of malfunctions and disruptions in operational supply chain processes (Neiger et al., 2009). However, no research has investigated on what supply chain processes and with what activities can reduce vulnerability through achieving resilience. Therefore, the second sub question is raised as follows:

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By investigating the design of logistical network and business processes together, we can get an overview to design a resilient supply chain network. In this paper, based on a multiple-case study including four supply chains in the food industr y, we investigate the adoption of resilience in the supply chain network design. This paper has made both theoretical and practical contributions. The theoretical contributions are twofold. First, following the importance of incorporating resilience into t he supply chain network design recommended by prior research (Ponomarov & Holcomb, 2009; Carvalho et al., 2012), this study contributes to the literature by providing a holistic view of building resilient supply chains from the logistical network and business process design. Second, unlike prior research, this paper considers resilience as the objective to design a logistical network. Moreover, owing to the fact that no research has adopted resilience into the supply chain process design, we explore to identify what process and with what related activities contributing to resilience. In practical supply chain management, our results can make managers reconsider the structure of their logistical networks and assist them to improve their preparations for disruptions in the future.

The remaining sections of this paper are organized as follows: Chapter 2 will review the literatures related to supply chain resilience, vulnerability, and supply chain network design. Chapter 3 will then introduce the research design of this paper. Chapter 4 will provide the findings. Chapter 5 and 6 will give the discussion and final conclusions, respectively.

2. Theoretical background

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setups, which exacerbate the vulnerability of supply chains to unexpected events (Wagner & Bode, 2006).

2.1 Supply chain vulnerability

When a supply chain network is facing disruption, not only the disruption itself but also the susceptibility of supply chain determines the harm to the supply chain (Wagner & Bode, 2006). This extracts the concept of vulnerability. Vulnerability is defined by Juttner, Peck, and Christopher (2003: 200) as “the propensity of risk

sources and risk drivers to outweigh risk mitigating strategies, thus causing adverse supply chain consequences.” Similarly, Christopher and Peck (2004: 3) state vulnerability is “an exposure to serious disturbance, arising from risks within the supply chain as well as risks external to the supply chain.” Based on these definitions,

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supply chain network design variables. This paper aims to reduce supply chain vulnerability from supply chain network design perspective.

Based on the fact that risks and disruptions cannot be prevented causing supply chain vulnerable (Jüttner & Maklan, 2011; Craighead et al., 2007), resilience is considered as a strategy which should be incorporated into supply chain network design to reduce supply chain vulnerability (Jüttner & Maklan, 2011; Asbjørnslett & Rausand, 1999).

2.2 Supply chain resilience

Along with the harsh reality with the emergence of natural and man- made disruptions, financial instability, and other kinds of disruptions, the concept of resilience has been put in the forefront of supply chain research in the last 10 years (Ponis & Koronis, 2012). As Sheffi (2005) states, supply chain resilience implies not only the ability to manage risks but also the ability to be better positioned than competitors or even gain advantage from the disruptions. The definition of supply

chain resilience was proposed by Ponomarov and Holcomb (2009: 131) as: The adaptive capability of the supply chain to prepare for unexpected events, respond to disruptions, and recover from them by maintaining continuity of operations at the desired level of connectedness and control over structure and function.

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Agility has been defined differently in literatures. Swafford et al. (2006 : 182) define agility as the ability to “react speedily to marketplace changes.” Similarly, Bakshi

and Kleindorfer (2009) state that agility refers to “rapid system reconfiguration in the

face of unforeseeable changes.” Vickery, Droge, Setia, and Sambamruthy (2010)

state that agility emphasizes not only the responsiveness to current and future changes but also the speed of the responses. In this paper, we adopt the definition of agility as

“the ability of a supply chain to rapidly respond to change by adapting its initial stable configuration” (Wieland & Wallenburg, 2012: 890). For example, agility can

be found in Toyota supply chains (Christopher & Peck, 2004). The system can respond rapidly and be able to recover by developing alternative distribut ion channels within a few days after fire accident (Hearnshaw, 2013). Other implementations of supply chain initiatives influencing agility are as shown in Table 1 (“+” positive influence, “−” negative influence).

Research Implementations of initiatives Gunasekaran, Rai and Griffin

(2011)

Requires leveraging IT to integrate the activities of a network of firms (+) Blackhurst et al. (2005);

Christopher and Peck (2004); Christopher (2000)

Visibility (+)

Norrman and Jansson (2004);

Christopher (2000) Supplier/buyer communication (+) Norrman and Jansson (2004) Contingency plan (+)

Swaminathan and Lee (2003) Make-to-order/postponement (+)

Table 1: Implementations of agility

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unexpected changes (Asbjørnslett & Rausand, 1999; Asbjørnslett, 2009). Hence,

robustness endures instead of responds (Husdal, 2010). In this paper, following

Wieland and Wallenburg (2012: 890), robustness refers to “the ability of a supply

chain to resist change without adapting its initial stable configuration.” For example,

using buffer stock can reduce the impact of a disruption to avoid a production standstill (Vlajic et al., 2012). Implementations of supply chain initiatives influencing robustness are as shown in Table 2 (“+” positive influence, “−” negative influence).

Research Implementations of initiatives Vlajic et al. (2012); Tang (2006) Increase stock (+)

Mandal (2012); Tang (2006) Excess production capacity or multiple sources of supply (+)

Khan, Christopher and Burnes

(2008) Customer-required design change (-)

Meepetchdee and Shah (2007)

Logistical network design (complexity increases when robustness requirement increase) (+)

Table 2: Implementations of robustness

From Table 1 and 2, agility and robustness as reactive and proactive strategy to be resilience can be achieved through certain supply chain initiatives. However, these researches only focus on one or a few instead of exploring possible initiatives contributing to agility and robustness. Thus, by answering the second sub research question this paper can explore and identify more initiatives for being resilience.

2.3 Supply chain network design

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interactions among them. Therefore, a supply chain can be designed from two aspects: (1) logistical network and (2) business process.

2.3.1 Supply chain logistical network design

Traditionally, the supply chain network design includes logistical network strategic decisions on the location, number, capacity, and mission of the participants in the supply chain (Klibi et al., 2010). These facility location models are considered as the foundations of the supply chain network design (Klibi et al., 2010). Extensive investigations on location and capacity optimization under uncertainty in supply chain networks have been done by prior research (Camm, Chorman, Dill, Evans, Sweeney, & Wegryn, 1997; Cakravastia, Toha & Nakamura, 2002), and a review of location selection models can be found in the research of Snyder (2006). Research of specific logistical network design characteristics related to supply chain vulnerability or resilience is relatively limited. One rare exception is the research of Craighead et al. (2007). They investigate the severity of supply chain disruptions from three supply chain design characteristics in terms of (1) density, (2) complexity, and (3) node criticality and propose that the severity of supply chain disruptions within a supply chain is positively related to these three characteristics. The other one is the research of Meepetchdee and Shah (2007). When adopting robustness strategy into the logistical network design to reduce vulnerability, they find that as the robustness requirements increase, the complexity of supply network increases as well. Due to the limited research in this area, it is still not clear “how is a resilient logistical network

built”. This paper will take resilience as the objective to design logistical network.

Besides the selection of entities and their locations in the supply chains, how they cooperate with each other in business process to serve customer is another perspective which requires attention.

2.3.2 Business process

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Patel & McGaughey, 2004; Croxton, Douglas, Sebastian, Garcia-Dastugue & Dale, 2002; Gonzalez-Benito, 2007). Focusing on what has to be done in the process, Hammer and Champy (1993) propose a business process is a collection of activities that takes input and creates output for customers. From another perspective, Davenport (1993) focuses on how work is to be done by proposing that a business process is a structured set of linked procedures and activities designed to produce for customers or markets. However, he only considers the internal process within a company. Similarly, focusing on the internal process, Chen, Daugherty and Roath (2009) state that the process approach guides organizations to focus on those business processes they perform instead of individual departments within the company. However, the process approach does not only refer to the processes within single entity. Weske (2007) states that a business process consists of a set of business activities that are performed by a company and may also interact with other companies’ business processes. Therefore, business processes between supply chain members form the interaction among supply chain members within supply chains. De Toni and Nassimbeni (1995) consider processes and activities within the supply chain networks and examine less tangible supply networks’ features. They identify several significant aspects in achieving stable and effective networks : the type of relationship with suppliers, evaluation and monitoring of sources, risk-sharing practices, etc. Research related to process integration, performance, and compliance can be found in prior research (Blome, Schoenherr & Rexhausen, 2012; Elgazzar, Tipi, Hubbard & Leach, 2012; Chen et al., 2009).

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planning, demand forecast, and improve performance of the whole supply chain (Selen & Soliman, 2002; Vereecke & Muylle, 2006). Furthermore, information sharing promotes the opportunity for supply chain members to implement best practices for identifying and managing disruption risks (Wakolbinger & Cruz, 2011). To compete more effectively in the global market, organizations need to enhance process efficiency through investment and implementation of information technology and in turn enhance the whole performance of supply chains (Bill ington et al., 2004; Lee et al., 2000; Sambamurthy et al., 2003; Barua et al., 1996). Supply chain information technology can facilitate data capture and transformation across both functional areas and firm boundaries. IT implementation can effectively connect activities and processes as well as enable decision makers to better allocate resources internally and cooperate with external partners to better fulfill customers’ demands (Kudyba, 2006; Vickery et al., 2010).

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is manifested in the Supply Chain Council’s Supply Chain Operations Reference (SCOR) model, which suggests that a business can be managed based on five key processes: (1) plan, (2) source, (3) make, (4) deliver, and (5) return (Stewart, 1997). A more specific category of eight processes within the global supply chain is explained in the research of Croxton et al. (2001): (1) customer relationship management, (2) customer service management, (3) demand management, (4) order fulfillment, (5) manufacturing flow management, (6) procurement, (7) product development and commercialization, and (8) returns. However, none of these researches has taken resilience consideration into the business process design. As a consequence, question “What supply chain processes and with what activities can contribute to resilience?” remains unanswered.

2.4 Concept model

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Figure 1: Concept model

With this concept model, this paper can contribute to current research in two aspects: 1) different from prior research, we take resilience rather than financial consideration as objective to design logistical network; 2) since no research has investigated the linkage between business process and resilience, this paper will explore and identify the category of business process with activities contributing to resilience.

3. Methodology

3.1 Research methodology

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Therefore, there is a theory building undertone in this paper. Moreover, case study is also recommended especially when research questions contain explanatory components such as in this research (i.e. how can resilience consideration be

incorporated into the supply chain network design) (Yin, 1994). Furthermore, by

using multiple-case study to confirm findings from among all cases, the outcome will be more robust, generalizable, and testable than a single-case study as a stronger base for theory building research (Yin, 1994). Therefore, we believe multiple-case study is the most suitable methodology to answers our research question.

Supply chain including one focal company and one supplier was chosen as unit of analysis in this research since we focus on the design of resilient supply chains. Although multiple-case study allows researchers to investigate multiple cases, considering the need to gain in-depth knowledge and avoid too general findings the number of cases still should be limited (Voss, Tsikriktsis & Mark, 2002). In total, one logistic chain and three product supply chains are investigated including four procurement managers of the focal company and four representatives from first-tier suppliers. More detailed case descriptions can be found in Appendix A.

3.2 Context

As stated in Chapter 1, the aim of this research is to provide insight into how resilience consideration can be incorporated into supply chain network design. To answer our research question, an influential company and its four suppliers in the food processing industry were chosen for such a case study. Our focal company is a leader in this market with more than 30 years history in the food processing industry which is also an attractive area to investigate our project.

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raw materials and the location of suppliers are in areas such as Malaysia, Indonesia, Latin America, etc. Products are delivered through different means of transportation, such as ships, trucks, trains, and even airplanes in urgent situations. Mor eover, since the aim of taking resilience into supply chain network design is to reduce vulnerability, the food industry with several sources of vulnerability identified by prior research of Bourlakis and Weightman (2004), Jongen and Meulenberg (2005), and Vlajic et al. (2012) is thus an appropriate field for our research. First, food processing companies rely on the harvest therefore easily suffer from the variability and seasonality of raw materials. Second, companies have to keep strict quality management for raw materials, intermediates, and finished goods, resulting in rigid time constraints for all the items. Third, a high requirement for conditioned delivery and storage requires dedicated trucks and tanks. Lastly, food products have to comply with the rules in food safety of a specific country. Any violations of these strict requirements can cause undesirable consequence to the whole supply chains. Besides these, according to the qualitative data, our focal company also suffered from disruptions such as labor strike, lack of materials because of low harvest, etc. To reduce the impact of similar disruptions in case they happen again, our sample companies all have adopted measures to prepare for these unexpected events. Therefore, by investigating these measures, we can achieve the aim of this paper through an in-depth investigation on our cases.

3.3 Data collection

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procedure and data analysis, facilitates the replication of our research and thus improves the reliability of the research (Yin, 2003; Ellram, 1996).

Focal company Supplier

Case 1

Date 2nd May 24th May

Duration 1.5 hours (interview) 1.5 hours (interview & plant observation)

Informant’s role

Informant Ⅰ:Category group procurement manager

Informant Ⅱ:Planning & Service department manager

Case 2

Date 16th May 6th May

Duration 1.5 hours (interview) 1.5 hours (interview & PPT introducing company)

Informant’s role

Informant Ⅲ:Category

procurement manager Informant Ⅳ:Account manager

Case 3

Date 2nd May 2nd June

Duration 1.5 hours (interview &

document of contingency plan) 50 min(interview)

Informant’s role

Informant Ⅴ:Category procurement manager

Informant Ⅵ:Key commercial manager

Case 4

Date 23rd May 5th June

Duration 75min(interview) 60min(interview) Informant’s

role Informant Ⅶ:Logistic manager Informant Ⅷ:Chief

Table 3: Summary of interviews

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disruptions focus on the reactive strategy (agility). By asking theses questions we tried to find out how resilience is linked with logistical network and business process, separately. Under the open-ended interviews, interviewees expressed their opinions freely. To enhance the internal reliability, interviews were transcribed and summarized immediately by one researcher and subsequently checked by the other. Interviews were the most important source of case study information. In addition, during several interviews, the informants also shared their files, which helped researchers confirm and supplement the interview findings. More information about the company’s development was gained from the files shared by the informants. Another document was the contingency plan that the focal company was working on with suppliers. By checking the contents of the contingency plan, we obtained further insight into how the companies prepare for disruptions and what procedure they will follow when a disruption hits. Direct observation, as another data source, also provided additional information about the internal and operational processes of the company. At one supplier’s site, the informant guided us to see how the raw materials were delivered to their factory, stored, then used to produce products to deliver to their customers. Therefore, by triangulating data from multiple sources and using review of informants to validate the accuracy of the answers to the questionnaire construct validity is increased (Seuring, 2008; Ellram, 1996). Given that this paper includes four supply chain cases, the external validity is increased as well.

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3.4 Data analysis

Perry (1998: 796) indicates that “prior theory from the literature review and

convergent interviews are linked to the cases through practices of data collection and analysis”. Following the recommendation of Saunders et al. (2007), data was

analyzed by adopting the strategy of using the transcripts, categorizing key dimensions of associations, and summarizing these. We analyzed the data of interviews and divided them into pattern codes, then abstract themes related to resilience and supply chain network design. Two steps, within-case and cross-case study analyses, were adopted, as Miles and Huberman (1994) recommend.

3.4.1 Within-case study

To conduct a within-case study analysis, we took three steps with the support of the coding software QDA Miner 4 Lite. First, while reading the transcription carefully, descriptive codes were used to extract the main content of the raw qualitative data. For example, one informant said “…but after this incident some of our suppliers

really made investments to increase their stocks again”. This sentence was coded as

“supplier invests to increase stock level at their site”. After first-order coding phase, the second-order coding was conducted to categorize the first-order codes into similar groups. In this step, second-ordering codes focused on the two supply chain design variables regarding to research question namely, logistical network and business process. The last step is linking the second-order codes with resilience strategy based on the definition of agility and robustness by analyzing why company performed these certain activities. For example, the first-order code “supplier invests to increase

stock level at their site” was coded with other similar sentences as “Increasing stock level at supplier’s site” in the second coding step. Once a disruption hits the supply

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To investigate how to build resilient logistical networks, factors which determine the logistical networks being resilience were identified after coding. S ince business process is a collection of linked procedures and activities which produce for customers, category of business processes can be summarized by analyzing the common patterns of these activities. The process of within-case study is as Figure 2 shows.

Figure 2: Within-case study process

3.4.2 Cross-case study

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network and category of business process with related activities contributing to resilience.

4. Findings

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4.1 Agility

IT integration. Information systems, for example, that enable customers to track

shipping vessels or trucks can be found in most cases. These systems visualize logistical information and assist supply chain members to track and trace the logistical flow and adjust their production in time. Following the information shared on these systems, once they find that a certain raw material cannot arrive as planned, the company will renew its production plan quickly to produce other products instead. In this way, much time and efforts can be saved to gain information compared with traditional way, thus, enabling managers to make a quick decision. At this moment, various production systems exist among different plants of the focal company, which causes problems for suppliers to integrate with them. Now the focal company is working on integrating systems internally, then with suppliers, by recognizing the importance of IT integration. Once integrated, as in case 4, managers believe more and better timely information will be visualized along the whole supply chain, such as stock level, historical data, order balance, etc., leading to the reduction of operational tasks of supply chain members, improvement of business process, and hence support resilience.

Making a contingency plan. In four cases, we find that all the companies have made

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disruptions. Informant Ⅳ states, “I am working ten years in this position. I have never

seen same kind of incident.” Hence, how to respond to an unexpected disruption

effectively is the most important thing to consider.

Quick-response procedure. When there is a disruption, a quick response to the

situation is the first and most important thing to be done, as Informant 3 states, “We

have to react immediately.” No time can be wasted during the disruptions, and

decision should be made at the very first time. Informant Ⅴ even states that “the

first 48 hours are most critical in terms of lack of supply.” Every possibility needs to

be checked immediately to avoid the production standstill. The first reaction of suppliers is always trying to keep the impact of disruptions internally without disturbing the rest of the supply chain members. News of the disruption is spread throughout the company to make every stakeholder informed. Activities such as requiring information about the scope of disruption, ordering information of customers, checking inventory level, impact to customers and options in the contingency plan, and renewing the production plan are needed to be executed quickly to check whether the problem can be solved internally or not. If the problem can be fixed by the company, there is no need to bother the customer, as informant Ⅱ says, “something is really stupid to say.” However, when the impact is beyond the control of suppliers, they will communicate with customers immediately to make the information transparent and try to solve the problem with customers together.

Timely information sharing. The customer needs to be informed immediately as soon

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the customer and supplier, which is daily or even hourly. By getting a clear understanding of what is happening through information sharing during the disruption, both the customer and supplier will gain the flexibility to minimize the impact of the disruption at the early stage.

4.2Robustness

4.2.1 Activities & Robustness

Signing contract. Signing contract is an important activity to be done by supply

chain members to achieve robustness. Besides being a legal binding between supplier and customer, a contract is seen by customers as a safeguard to obtain s upply from suppliers and to assure suppliers’ behaviors to fulfill demand. Suppliers will face the risk of being fined by customers according to the contract if they fail to meet the demand. Therefore, a contract is an effective measure to stabilize the supply chain by motivating suppliers to complete their obligations and assure mutual cooperation. To make the obligation specific, information such as volume, delivery requirement, lead time, prices, etc., are all included in the contract. Supply chain members will get a clear understanding of what they have agreed with each other, reducing the chance of opportunistic behaviors.

Increasing stock level at supplier’s site. In the past, due to the high inventory costs,

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expected to decrease significantly by creating this kind of redundancy (increasing safety stock), which also enhances the ability of the supply chain to remain functional during disruptions within a certain period. The positive effect is, as informant Ⅰ believes, that it “will prevent, eh, the likeliness that this will happen again.”

Approvement of alternative facilities and materials. In our cases, all the operating

facilities of suppliers have to be approved by customers before production and delivery. Production capability should be checked by both the supplier and customer to see whether the supplier’s plant has the ability to meet the specifications of production. Only the approved facilities can produce for the focal company. In this way, the amount and quality of the product produced by the plant in a certain period can be guaranteed based on the agreement between the supplier and customer. By knowing the capability of the supplier, the customer can release a proper production plan to them. In case of any disruptions happen, our focal company usually approves at least two facilities for each product or plant as backup capacities. If an unexpected event happens, the focal company can switch from the affected one to othe rs to in a short time. Similar with approving facilities, both the focal company and suppliers have realized the importance of more alternative materials as well, but this is not always feasible for every product. A product without any alternative suppliers or materials is the weakest point of the whole supply chain, and any disruption can cause a potential production standstill. To prepare for unexpected disruptions in the future, the focal company and its suppliers are now working on approving more facilities. As Informant Ⅳ states, “So we are constantly in contact with them to help them get new

production approved and new location approved.”

Evaluation of suppliers. In contrast to approving alternative suppliers, the customer

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sources of risk and weak points of the supply chain. Any unqualified supplier is a potential threaten to the whole supply chain. To avoid future risk, company needs to end business relationships with these unqualified suppliers.

Internal cooperation. According to the disruptions recalled by informants, the lack of

internal cooperation can be the source of vulnerability or worsen the consequence of disruptions. In one case, the production planning department did not consider the low inventory and lack of materials in the supply market when they made a new production plan. In another disruption, the procurement department was not involved in the new product development process. As a result, no new product could be produced due to the quantity of demand was not signed in the contract with the supplier. To avoid the risk caused by lack of cooperation between internal departments, better internal cooperation across functional departments is needed to make the information more transparent, thus, enhance the success of supply chains.

Internal learning within entity. This activity usually takes place within the company

after disruptions caused by their own opportunistic behaviors or lack of internal cooperation. By reviewing the causes of disruptions, companies noticed that their internal processes were flawed and their contingency plan was insufficient, which can be improved to prevent the same kind of problem happening again. During the learning process, an open and honest communication between stakeholders is needed instead of blaming others. Informant 3 says, “I think that is very important to

communicate openly all together and not to blame certain people that they did something wrong … with people, if you blame someone, then they will maybe not cooperate very well in the future.”

Storage of digital data. Although there is no linked ERP or SAP system between our

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entity’s plants or the entity wants to switch production from one facility to another, there is always a backup for the all of the information. With the backup data, any plants can continue to produce for customer without any delay caused by lack of necessary production information. As informant Ⅵ describes, if there is a disruption, the “supplier has all the data, so they produce within one day at least and new set of

materials.”

Analysis of product quality. The quality of raw materials is directly related to semi

products, such as integrity in the downstream direction of supply chains. As a consequence, product quality is vital to the performance of supply chains, especially in our cases because it is related to food safety. The practice of analyzing product quality can be found in all cases before delivery to and after arriving at the customer’s plant to avoid using the defective raw material, which may bring risk to the downstream customer. The result of the analysis of product quality is usually sent to the focal company for confirmation before delivery. If defects are identified by the customer, then no delivery is allowed from this batch of the product. Furthermore, to assure quality, suppliers even adopt a quality system to track and trace where and when the quality problem happens. As informant Ⅳ states, with the support of a quality system, they can “go back for every ingredient, even to the crop, and the farm.

So we can track and trace every wheat coming from that crop.”

Learning across supply chain members. Once the disruptions caused by upstream supply chain members influence the customers in the downstream direction, the learning activity across supply chain members is either forced by customers or proactively held by suppliers. Informant Ⅰ states, “We had live meetings indeed

with our suppliers to discuss what happened and what can we do to prevent such a thing in the future.” Neither customers nor suppliers want the same kind of disruption

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blaming someone is needed. Furthermore, the involvement of senior management level of both the customer and supplier is another positive factor which enhances the effect of the learning activity.

Building good relationships with supply chain members. Although the signed contract

can assure the supply from supplier to customer, the power of the binding contract is seriously weakened when facing a lack of raw materials in the supply market. Under this circumstance, suppliers will prefer to prioritize the relatively important customers and cancel the deal with the less important customers based on the business relationship. In this way, which is different from signing legal contracts, building a good relationship with suppliers is an informal and effective means to get the demand fulfillment during the disruption. In our cases, we find that most suppliers balance the importance of customers based on the financial profits they can get from customers. 4.2.2 Logistical network & Robustness

In our cases, we find that companies only change their logistical networks by removing unqualified suppliers because of their unstable performance or according to customers’ blacklists. Then new suppliers are approved to replace the unqualified suppliers. Nothing else related to changing logistical networks can be found to respond to disruptions. Therefore, factors of logistical network design are only linked to robustness by preventing risks.

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same disruption because of the close distance between them. Besides the sources of disruptions caused by the long distance between supply chain members within the logistical network, the environment of the companies’ locations is another source of disruption. Disruptions in our cases—such as low harvest, a labor strike in France, and an earthquake in Italy—are all related to stability of the environment. The unstable environment with a higher chance of disruptions happening is more likely to increase supply chain vulnerability and reduce robustness.

5. Discussion

Since risks cannot be avoided (Mandal, 2012), this research supports a conclusion made by a previous research about the importance of resilience (Ponomarov & Holcomb, 2009) and the necessity to adopt resilience into the supply chain network design (Carvalho et al., 2012). Based on our empirical data, agility and robustness are confirmed as the strategies to achieve resilience, as Wieland and Wallenburg (2013) indicate. However, the research question “How can resilience consideration be

incorporated into the supply chain network design?” still remains unanswered. Since

a supply chain network can be designed from two aspects: (1) logistical network and (2) business process design, two sub questions have been proposed in the first chapter to answer our research question: (1) How is a resilient logistical network built? and (2)

What supply chain processes and with what activities can contribute to resilience?

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more serious than the ones with a longer distance. This is because more supply chain members will be influenced because of the short distance when one disruption hits this area. Moreover, besides confirming the research of Craighead et al. (2007), we also furthered their research by identifying that a shorter distance can lead to a low frequency of disruptions. As a consequence, it seems like there is a balance in how a short distance can make supply chains more vulnerable to disruption. On the other hand, a short distance can make supply chains less vulnerable by reducing the chance of risks from happening. Our findings suggest that the determinant of the balance is the stability of the environment in which the logistical networks are. Several sources of disruptions in supply chains caused by environmental factors can be found in our cases, as Klibi et al. (2010) and Wagner and Neshat (2010) state. An unstable environment is more likely to induce disruption, which makes the short distance increase vulnerability. In contrast, a short distance in a stable environment can reduce the vulnerability. Therefore, the answer to the first sub question is when trying to design a robust logistical network, both the distance between supply chain members and environment of company’s location should be considered.

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highlight their importance from another perspective by explaining how they are linked with resilience. To answer the second sub question “what supply chain processes and

with what activities can contribute to resilience”, we generalize these activities into

three categories of business process. Different from processes categorized by previous research which are mainly based on the functions of processes such as order fulfillment, production, shipment, etc. (Huang et al., 2003; Muffatto & Payaro, 2004; Hewitt, 1992), our findings suggest that supply chain processes can also be categorized based on the activities performed by whom--company itself or with supply chain members-- and how they are performed by supply chain members, formally or informally. Therefore, three processes—namely, (1) the internal process of company and (2) the formal and (3) informal processes between supply chain members—with related activities are identified in this paper to contribute to resilience. In line with literatures, a process approach can be found both within a single company and between supply chain members (Chen et al., 2009; De Toni & Nassimbeni, 1995). Along with the research of Hammer and Champy (1993), our findings provide more insights into what is to be done in business processes.

The formal process between supply chain members in this paper is formed either based on a formal contract or a long-term agreement to achieve common interests. Activities related to resilience in a formal process aims not only to stabilize the logistical and information flow in normal situations without disruptions but also to provide more options in case any disruptions happen. Activities contributing to robustness and agility are as Table 4 shown.

Agility Robustness

Resilience Category

of Process

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supply chain members  IT integration

 Signing contract with information sharing

 Increasing stock level at supplier’s site

 Approvement of alternative facilities and materials

Table 4: Formal process between supply chain members & Resilience

The internal process of the company in this paper refers to the set of activities within a company providing products or services to the customers. Multiple functional departments within a company are involved in the internal process. The departments and their functions in the internal process affect organizational efficiency and effectiveness, which influences resilience indirectly. Based on the empirical data, activities contributing to robustness and agility are as Table 5 shown.

Agility Robustness Internal process of company  Making contingency plan  Quick response procedure  Analysis of product quality  Evaluation of suppliers  Internal cooperation  Internal learning within

entity

 Storage of digital data

Table 5: Internal process of company & Resilience

In contrast to the formal process, the informal process between supply chain members occurs independently of written contracts or agreements. An informal process is

Resilience Category

of Process

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mainly based on knowledge sharing or trus t between supply chain members. According to our data as Table 6 shows, we identify activities of an informal process that can increase supply chain capability to better respond to and prepare for disruptions.

Agility Robustness

Informal process between supply chain members

 Timely information sharing

 Building good relationship with supply chain members  Learning across

supply chain members

Table 6: Informal process between supply chain members & Resilience

Furthermore, differences from prior research are also found in this paper. Recommended by literature, MTO is an effective way to increase the response speed to disruptions with short lead time. However, empirical data in this paper indicates that MTO with a low inventory level of products makes the whole supply chain rely heavily on the raw materials and suppliers’ production ability, making the supply chain more vulnerable. Any disruptions happening to one or both of the two factors will force the focal company to put more effort searching for other sources to avoid a potential standstill in production.

Another difference is the lack of advanced IT integration, such as EDI and ERP, between supply chain members. Most information is transferred within the supply chain by e-mail, telephone, the Internet, and highly frequent communication between the supplier and consumer. Therefore, the conclusion made by Gunasekaran et al. (2011) that resilience is positively influenced by advanced IT systems is not represented in our research, which can be considered as a limitation of this paper.

Resilience Category

of Process

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Future research can focus on how advanced IT systems, such EDI and ERP, contribute to resilience by sharing information and reducing operational tasks compared with other supply chains without advanced IT integration. The second limitation is that this paper only represents one example in a buyer and seller relationship. In our cases, the buyer is more powerful than the seller, hence always being prioritized by the suppliers. The determinant of this relationship is that suppliers can get more sales and profits from the focal company compared with other customers. However, it is not always the case for most companies in the buyer and seller relationship. Future research can investigate the opposite case, in which the customer is less powerful than the suppliers and how then the focal company can operate internally and cooperate with suppliers to achieve resilience. Lastly, we investigated how to build resilient supply chains by including only one customer and one first-tier supplier. Our findings indicate that companies tried to search for sources from other suppliers or even competitors when disruptions happened. Therefore, we believe different activities of processes and factors influencing logistical network can be identified by including more supply chain members, such as second-tier suppliers.

6. Conclusion

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theoretical contribution of this paper is that we address the gap between resilience and supply chain network design research. Based on the concept of supply chain proposed by Christopher (1998), this research indicates that resilience consideration can be adopted into logistical network and business process design.

Second, since no or few research considers resilience as objective into logistical network and process design, our findings provide new insights on supply chain network design. Distance and environment are identified which should be considered in building robustness logistical network. Stability of environment as the determinant decides whether short distance between supply chain members increase or decrease supply chain vulnerability. Furthermore, different from previous research which classify supply chain processes mainly according to their func tions, our findings identify three processes, namely internal process within entity, formal and informal process between supply chain members, based on they are performed by whom (company itself or with other members) and how with supply chain members (formally or informally). Since a process is a collection of activities (Hammer & Champy, 1993), activities contributing to resilience are also identified in each process. Our results provides foundations as well for further research on building resilient supply chain network from these two aspects in a different industry or by including more supply chain members.

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