MSc Supply Chain Management

A CASE STUDY OF AN OFFSHORE COMPANY

MSc Supply Chain Management

University of Groningen, Faculty of Economics & Business

E.G. JANSSENS Master Thesis – 20/06/2014

Supervisor / University of Groningen Dr. K. Scholten

Co-assessor / University of Groningen Dr. S.A. de Blok

Supervisor / COMPANY X

{MANAGER PROCUREMENT & LOGISTICS}

Jonas Daniël Meijerplein 19-hs

1011 RG Amsterdam

Student number: 1823086

E-mail: e.g.janssens@student.rug.nl

NOTE TO READER:

DUE TO THE CONFIDENTIALITY OF THIS RESEARCH, ALL NAMES OF THE COMPANIES INVESTIGATED ARE REPLACED WITH DESCRIPTIVE NAMES OR

FUNCTIONS

Acknowledgements

I would like to sincerely thank my thesis supervisor Dr. K. Scholten for her great support and commitment throughout the process of writing this thesis. The thorough discussions and very useful feedback encouraged me to finish this research. Her extensive knowledge on supply chain resilience provided me with new insights during challenging moments and her guidance and intellectual support are highly appreciated. My gratitude goes also to Dr. S.A.

de Blok for taking the time to critically review my research proposal and co-assesing this master thesis.

I would also like to show gratitude to {MANAGER PROCUREMENT & LOGISTICS}, my supervisor of COMPANY X. He gave me the opportunity to do this research at his department and provided support and some very useful insights on supply chain resilience in practice. During the six months of this research, he was always available for questions or discussing ideas and I really enjoyed working at COMPANY X throughout this period. A special thanks to all the interviewees for providing me with the necessary data for my thesis and thanks to {EDUCATIONS MANAGER} for constructive discussions about my thesis.

Thanks to Sophie, Hester and Pim for taking the time to talk with me about my thesis and

providing useful feedback and support. Finally, I would like to sincerely thank my parents for

their patience and infinite support and providing me with the opportunity to study at the

University of Groningen.

Abstract

The objective of this study is to identify the necessary tradeoffs between capabilities and vulnerabilities that supply chain managers need to consider when implementing supply chain resilience. To actually implement resilience in a supply chain, a system-level approach on the subject is used. In this system-level approach, resilience is constructed from supply chain (re-) engineering, supply chain collaboration, agility and a risk management culture. A multiple case study involving four cases (supply chains), is performed, in which semi- structured interviews as well as quantitative data was collected. The research reveals 41 capabilities and 26 vulnerabilities, which are allocated to the different constructs of supply chain resilience. A total of 32 tradeoffs between these factors are identified and the four most important tradeoffs are highlighted. The insights of the multiple case study result in a decision-support tool for implementing supply chain resilience and reveals the necessary tradeoffs that need to be considered when a company wants to build a resilient supply chain.

The results of this study achieve a deeper understanding of supply chain resilience and its

necessary capabilities and vulnerabilities per construct. Also, supply chain managers can use

these results as support in their decision-making process when implementing resilience. This

research addresses a gap between the conceptual literature on supply chain resilience and the

implementation of resilience in practice and the tradeoffs bring literature a step closer

towards a clear integration of supply chain resilience. By linking the capabilities and

vulnerabilities explicitly to the different constructs of resilience, knowledge on how

resilience is composed, is increased as well.

Table of Contents

Acknowledgements ... i

Abstract ... iii

Table of Contents ... v

1. Introduction ... 1

2. Theoretical Background ... 5  

2.1 – Setting the Scope ... 5  

2.2 – Supply Chain Resilience ... 7  

2.3 – Supply Chain Resilience Framework ... 8  

2.3.1 – Supply Chain (Re-) Engineering ... 9  

2.3.2 – Supply Chain Collaboration ... 10  

2.3.3 – Agility ... 11  

2.3.4 – Supply Chain Risk Management Culture ... 12  

2.4 – Towards a Resilient Supply Chain ... 13

3. Research Methodology ... 15  

3.1 – Introduction ... 15  

3.2 – Case Setting ... 15  

3.3 – Case Selection ... 17  

3.4 – Data Collection ... 19  

3.5 – Data Analysis ... 20

4. Findings ... 23  

4.1 – Introduction ... 23  

4.2 – Capabilities ... 23  

4.3 – Vulnerabilities ... 26  

4.4 – Capabilities & Vulnerabilities per Construct ... 27  

4.5 – Tradeoffs per Construct ... 28  

4.6 – Other Tradeoffs ... 30  

4.7 – Zone of Balanced Resilience ... 31

5. Discussion ... 33  

5.1 – Introduction ... 33  

5.2 – Partner Criteria vs. High Requirements ... 33  

5.3 – Communication vs. No Substitute ... 34  

5.4 – Visibility vs. Delays ... 34  

5.5 – Risk Consideration vs. No Process Understanding ... 34

6. Conclusions & Recommendations ... 37

References ... 41

Appendices ... 45  

1

Introduction

In today’s global business environment, both the length and complexity of supply chains have increased (Blackhurst, Dunn & Craighead, 2011), and therefore every activity that a supply chain conducts has an inherent risk for an unexpected event to occur (Ponomarov &

Holcomb, 2009). These unexpected events are defined as supply chain disruptions “that disrupt the normal flow of goods and materials within a supply chain and, as a consequence, expose firms within the supply chain to operational and financial risk” (Craighead, Blackhurst, Rungtusanatham & Handfield, 2007). Disruptions can have negative consequences with immediate detrimental impact as well as longer-term effects such as a decrease in the corporation’s ability to continue operations, get finished goods to the market or provide critical services to customers (Jüttner, 2005). To cope with this complexity, supply chain managers must balance cost pressure with the need for redundancy more than ever before. They have to take effective measures to manage demand while taking the risks of routine supply chain failures into account (Christopher & Peck, 2004).

The concept of supply chain resilience enables the management of these disruptions by

implementing capabilities that enhance a firm’s ability to prepare for, respond to and recover

from any unexpected event by absorbing the disruption or enabling the supply chain to return

to stable conditions faster (Blackhurst et al., 2011; Sheffi & Rice, 2005). To this date,

literature has not moved beyond frameworks to assess the resilience of a supply chain

(Blackhurst et al., 2011; Pettit, Croxton & Fiksel, 2013; Jüttner & Maklan, 2011) and

therefore there is little knowledge available on the practical implications of these definitions and frameworks. Existing literature on resilience (Christopher & Peck, 2004; Jüttner &

Maklan, 2011; Pettit et al., 2013; Ponomarov & Holcomb, 2009) shows that knowledge on this topic needs to be expanded and the implementation of resilience in practice needs further investigation. This is because building a resilient supply chain should be a strategic initiative, since the flow of goods through a supply chain is vital to a firm’s existence (Blackhurst et al., 2011). Exploring how a company can successfully build a resilient supply chain will fill this theoretical gap, which leads to the following main research question:

To efficiently implement resilience, it is first important that the necessary capabilities and vulnerabilities are identified. Pettit, Fiksel & Croxton (2010) have explored many factors that influence the resilience of a supply chain. However, a theoretical gap concerning managers’

approaches to considering and identifying these capabilities and vulnerabilities when implementing supply chain resilience is still present. This leads to the first sub question of this research: “Which capabilities and vulnerabilities are most important for supply chain resilience?”.

When the capabilities and vulnerabilities and their implications on supply chain resilience have been identified, it is important to explore their practical implications. Literature shows that the influence of these capabilities and vulnerabilities and the tradeoffs between them have not been explored yet. However, to successfully build a resilient supply chain, supply chain managers must consider these tradeoffs during their decision-making process. This leads to the second and final sub question of this research: “Which tradeoffs need to be considered when implementing supply chain resilience?”.

Providing an answer to these two sub question leads to an answer to the main research question. By doing so, the theoretical gap between the conceptual literature on supply chain resilience and its implementation in practice is addressed for the first time. This research expands supply chain resilience literature to a new and unexplored area and further research on decision criteria for implementing resilience can be based on the identified tradeoffs. Also, further research can be based on these insights to expand knowledge on resilience per construct as well as the composition of supply chain resilience.

“How can a company successfully build a resilient supply chain?”

This research combines the identified tradeoffs between capabilities and vulnerabilities with the framework of Christopher & Peck (2004), which results in the development of a decision- support tool. This tool can guide supply chain managers during the implementation of supply chain resilience in a manufacturing supply chain. By providing the necessary tradeoffs between specific capabilities and vulnerabilities, supply chain managers can base their decisions on the considerations that are presented in this research.

Because of the fact that multiple theoretical definitions and conceptual frameworks on supply

chain resilience exist, it is first important the review the current literature. An overview of the

current state of affairs is provided in the form of a literature review, after which the

methodological approach of this research is discussed. Then, the results of the multiple case

study are presented and discussed. Finally, a conclusion is provided, in which the theoretical

and practical implications of this research are discussed and limitations and suggestions for

further research are presented.

2

Theoretical Background

2.1 – Setting the Scope

The global reach of supply chains, shorter product life cycles and increasing customer requirements have made businesses aware that being vulnerable to risks increases the probability of a disruption (Ponomarov & Holcomb, 2009; Christopher, Mena, Khan & Yurt, 2011). When a disruption has a high risk, likelihood and impact, a supply chain is said to be vulnerable (Sheffi, 2005), e.g. a high dependency of one specific partner or the fact that high requirements must be met. Svensson (2000) defines vulnerability as the exposure to serious disturbances, arising from within the supply chain as well as risk external to the supply chain and as a condition that is caused by time and relationship dependencies in a company’s activities in a supply chain. This vulnerability can be reduced by designing resilient supply chains that incorporate event readiness, provide an efficient and effective response and which are capable of recovering to their original state or even better after the disruption (Ponomarov

& Holcomb, 2009). The concept of resilience is related to risk and vulnerability in so far as it

accepts that not all risks can be controlled or eliminated (Jüttner & Maklan, 2011). Whereas

risk management tries to decrease the probability of a certain risk, resilience focuses on the

ability to absorb or mitigate the impact of a disturbance (Peck, 2005). Therefore, a firm’s

ability to survive after a disruption is related to the level of resilience within their supply

chain (Blackhurst et al., 2011). To this date, a general approach on achieving resilience has

not been established yet. Table 1 provides an overview of the existing research on supply

chain resilience.

Authors Definition Constructs Objective Framework Blackhurst,

Dunn

&

Craighead (2011)

A firm’s ability to recover from disruptive events

Enhancers:

• Physical Capital Resources

• Human Capital Resources

• Organizational & Inter-

organizational Capital Resources Reducers:

• Flows

• Flow units

• Source of Flow Units

Assessment of supply chain resilience

Resource- Based

View

Christopher

&

Peck (2004)

The ability of a system to return to its original state or move to a new, more desirable state after being disturbed

1. Supply Chain (Re-) Engineering 2. Supply Chain Collaboration 3. Agility

4. Supply Chain Risk Management Culture

Improve the resilience of a supply chain

System-level Approach

Jüttner

&

Maklan (2011)

See Ponomarov &

Holcomb (2009)

Adaptive Resilience Capabilities:

• Readiness

• Responsiveness

• Recovery

Formative Resilience Capabilities

• Flexibility

• Velocity

• Visibility

• Collaboration

Investigation of supply chain resilience in a disruptive global event

Resource- Based

View

Pettit, Croxton

&

Fiksel (2013)

The ability to survive, adapt and grow in the face of a turbulent change

Capabilities:

• Flexibility in sourcing, flexibility in order fulfillment, capacity, efficiency, visibility,

adaptability, anticipation, recovery, dispersion, collaboration, organization, market position, security &

financial strength Vulnerabilities

• Turbulence, deliberate threats, external pressures, resource limits, sensitivity, connectivity, supplier/customer disruptions

Guide a resilience improvement process

Resource- Based

View

Ponomarov

&

Holcomb (2009)

The adaptive capability of the supply chain to prepare form 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

1. Readiness 2. Response 3. Recovery

Supply chain resilience from a logistics

perspective

System-level Approach

Wieland

&

Wallenburg (2013)

The ability of a supply chain to cope with change

Robustness

• Anticipation

• Preparedness Agility

• Visibility

• Speed

Explain the effects of relational competences on resilience

System-level Approach

Table 1 - Supply Chain Resilience in existing literature

2.2 – Supply Chain Resilience

When looking at the different studies as presented in Table 1, it can be seen that different definitions of supply chain resilience exist. The scope of all definitions however is quite similar, as all definitions acknowledge resilience to be an ability of a supply chain or company to cope with disruptions (Jüttner & Maklan, 2011). Whereas most definitions only focus on the recovery after disruptions (e.g. Blackhurst et al., 2011; Christopher & Peck, 2004; Pettit et al., 2011), some authors include a preparation or detecting phase (e.g. Jüttner

& Maklan, 2011; Ponomarov & Holcomb, 2009; Wieland & Wallenburg, 2013). A supply chain is able to efficiently recover from a disruption if they also prepare for disruptions and respond quickly once a disruption occurs. Therefore, this research adopts a definition in which the three phases of managing disruptions are included. Supply chain resilience is defined 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” (Ponomarov &

Holcomb, 2009, p.131).

There are several factors that either enhance or reduce the resilience of a supply chain (Blackhurst et al., 2011; Pettit et al., 2011):

• Capabilities: attributes that increase a firm’s ability to anticipate for, quickly discover and efficiently recover from a disruptive event

• Vulnerabilities: attributes that decrease a firm’s ability to quickly and efficiently recover from a disruptive event and make it susceptible to disruptions.

To build a resilient supply chain, it is important that these capabilities and vulnerabilities are

balanced. Whereas Blackhurst et al. (2011) only state that a supply chain can be resilient,

volatile, sensitive or vulnerable, Pettit et al. (2010) add that in two of these states, a supply

chain is either eroding profits (e.g. having an full earthquake-proof factory in an area with

very low chances for earthquakes) or is exposed to risk (e.g. not having a substitute supplier

for the most critical component of a product). Therefore, supply chain managers must

consider tradeoffs between these factors to position their supply chain within the Zone of

Balanced Resilience (see Figure 1). Within this zone, a supply chain has the effective

capabilities to cope with disruptions relative to the level of vulnerabilities to which the supply

chain is subjected. Outside this zone, it is expected that no firm can be viable in the long-term

as market forces will demand drastic change or drive it out of business (Pettit et al., 2010).

Figure 1 - Zone of Balanced Resilience (Pettit et al., 2010)

To find the most important capabilities and vulnerabilities and the tradeoffs between them, it is first necessary to examine of which constructs supply chain resilience consists.

2.3 – Supply Chain Resilience Framework

Supply chain vulnerability can be decreased through specific trade-offs between different constructs that together determine the level of resilience (Sheffi & Rice, 2005). Multiple authors define two or more constructs that together form supply chain resilience. Overall, authors have either defined the constructs from a resource-based point of view (e.g.

Blackhurst et al., 2011; Jüttner & Maklan, 2011; Pettit et al., 2013) or through a system-level approach (e.g. Christopher & Peck, 2004; Ponomarov & Holcomb, 2009; Wieland &

Wallenburg, 2012).

From a resource-based view, the constructs of supply chain resilience cover a broad range of

factors that together influence the resilience of a supply chain. However, their practical

implications on how they increase or decrease the impact of a disruption are less clear, as it

remains unclear which processes build resilience and how they are related to the supply chain

resilience elements from literature (Scholten, Scott & Fynes, 2014). The impact of a

disruption determines the necessary capabilities that a company needs to possess in order to

be resilient against it. To do so, the constructs of resilience need to be explained through a

system-level approach so that supply chains can understand how to implement resilience by

considering specific tradeoffs instead of knowing which capabilities and vulnerabilities

influence the level of supply chain resilience. Because of this reason, the supply chain resilience framework (Figure 2) of Christopher & Peck (2004) will be discussed in the following sections. They state that resilience can be achieved by considering supply chain (re-) engineering, supply chain collaboration, agility and a risk management culture.

Figure 2 - Supply Chain Resilience Framework (Christopher & Peck, 2004)

2.3.1 – Supply Chain (Re-) Engineering Supply Chain Understanding

The design of a supply chain is related to the definition of the structure of the chain, i.e. the

sequential links between the different nodes and their processes (Carvalho, Barroso,

Machado, Azevedo, Cruz-Machado, 2012), and can be observed by identifying bottlenecks

and critical paths (Christopher & Peck, 2004). Education and training of employees increases

the ability to detect, respond and recover from disruptions. Also, the understanding of the

supply chain can be increased by learning from disruptions (Blackhurst et al., 2011).

Supply Base Strategy

Supply chain designs must be carefully compared and contrasted by observing supply chain design characteristics that reflect differences (Craighead et al., 2007). Based on these characteristics, a sufficient supply base strategy must be chosen. A small supply base gives rise to the risk of supply disruption, whereas a large supply base increases the fixed cost (Sarkar & Mohapatra, 2009; Choi & Krause, 2006). Also, alternative suppliers should be available such that in case of a disruption, the supply chain can continue their processes by receiving necessary goods from that alternative supplier (Sarkar & Mohapatra, 2009).

Supply Chain Design Principles

Craighead et al. (2007) state that the severity of disruptions increases correspondingly with the density, complexity and criticality of a supply chain. Monitoring these factors throughout the entire supply chain can reveal where a supply chain is most susceptible to risks and helps firms to predict the impact of disruptions before they actually occur (Blackhurst et al., 2011).

Also, each supply chain should consider the efficiency vs. redundancy tradeoff by keeping all real options open and creating inventories if necessary (Christopher & Peck, 2004).

2.3.2 – Supply Chain Collaboration

The needs and capabilities of material suppliers, service suppliers and especially customers have to be incorporated into strategic planning in terms of supply chain interactions and strategies (Stank, Keller & Daugherty, 2001). A high level of collaborative work across supply chains can significantly help mitigating risks, but the challenge is to create the conditions in which collaborative working becomes possible (Christopher & Peck, 2004).

Collaboration allows learning from others such that the best experience available can be used and by doing so, the likelihood of a disruption is reduced (Sheffi, 2005).

Collaborative Planning

It is important to cooperate along the supply chain as exchanging information can remarkably

reduce the uncertainty, which allows the identification of risks and their sources of

uncertainty relevant to each node & link in the supply chain (Briano, Caballini, Revetria,

2009). This can be achieved by defining communication protocols and collaborative planning

throughout the whole supply chain, such that in case of a disruption, each node in the supply

chain will know who to contact and how to communicate. This eliminates confusion and can

help detect and prevent delays (Blackhurst et al., 2011; Craighead et al., 2007).

Supply Chain Intelligence

Collaboration is a process of decision-making among different partners, and involves joint ownership of decisions and collective responsibility for the outcomes (Stank et al., 2001). It provides early warnings when problems arise and it enables coordinated mitigating efforts in case the supply chain is disrupted (Sheffi, 2005). Christopher & Peck (2004) state that supply chain intelligence can aid the creation of supply chain resilience by the identification of sources of risks and uncertainty throughout supply chain. Learning from past experiences increases resilience since the ability to deal with future disruptions increases when projects and processes are evaluated (Jüttner & Maklan, 2011).

2.3.3 – Agility

Supply chain agility is defined as the ability to respond rapidly to unpredictable changes in demand or supply (Christopher & Peck, 2004). To be reliable in an uncertain and changing environment, firms must be able to respond quickly to changes (Prater, Biehl & Smith, 2001).

Firms that operate in complex environments such as international markets face challenges in the implementation of the necessary measures to increase their agility. These challenges arise due to the expensive, complex operations and management structures that are necessary to increase the agility (Prater et al., 2001).

Supply Chain Visibility

Francis (2008, p.182) defines supply chain visibility as “the identity, location and status of entities transiting the supply chain, captured in timely messages about events, along with the planned and actual dates/times of these events”. Increasing the visibility can therefore reveal where resources are located, where risk is present and how disruptions move throughout the supply chain (Blackhurst et al., 2011). Visibility also enables managers to know about changes and it is therefore the prerequisite to responding to those changes (Wieland &

Wallenburg, 2013). Visibility in a supply chain can be obscured by the presence of intervening inventories upstream and downstream of the focal firm. These intervening inventories are usually created independently of each other as a result of individual decision rules (Christopher & Peck, 2004).

Supply Chain Velocity

Being able to quickly redesign a supply chain after a disruption increases the resilience of a

supply chain significantly (Blackhurst et al., 2011), because increased lead times, lead time

variability, physical distances from sources of risk and lesser control over the supply chain increase the impact of disruptions (Manuj & Mentzer, 2008). In order to cope with this impact, supply chains must increase its velocity by setting extensive criteria on the ability of suppliers to respond rapidly to changes (Christopher & Peck, 2004). Overall, it can be stated that the quicker a supply chain disruption is detected and the quicker that information about it is communicated, the more time the supply chain has to minimize the negative effects and therefore decrease the impact of the disruption (Craighead et al., 2007).

2.3.4 – Supply Chain Risk Management Culture

To successfully become resilient, it is important that a risk management culture is created within the supply chain. Only when all nodes are aware of the fact that disruptions may occur and that the whole supply chain collaboratively is responsible for decreasing the impact of a disruption, the resilience of the supply chain can increase.

Factor Risk Considerations into Decision Making

The management of uncertainty and risk has been identified as one of the primary tasks facing management (Zsidisin, Melnyk & Ragatz, 2005), as a disruption in the supply chain can have severe negative consequences for the focal firm connected with other firms in the supply chain (Zsidisin & Wagner, 2010). Therefore, supply chain risk assessment should be a formal part of the decision making process throughout the whole supply chain.

Board-level Responsibility and Leadership

Often, the process-based supply chain goals and performance measures conflict with the complexity of the supply chain and their associated possibilities of disruptions (Peck, 2005).

Therefore, top-level management should implement risk considerations throughout the whole company, since no cultural change is possible without leadership from the top of the organization (Christopher & Peck, 2004). As a consequence, the higher the perception of a supply chain as a risk source is, the more they will do to mitigate such potential risks. Also, the firm will experience the effects of supply chain disruptions that are caused by a supply chains less frequently (Zsidisin & Wagner, 2010).

Supply Chain Continuity Teams

Risk management teams that are cross functional in nature are able to optimize the entire

supply chain rather than small portions of the supply chain and thus eliminate potential

bottlenecks in the system (Blackhurst et al., 2011). Because of this reason, a supply chain risk management team should be created within the business. This team is responsible for regularly updating the supply chain risk register and reports to the board through the supply chain director on at least quarterly basis (Christopher & Peck, 2004).

2.4 – Towards a Resilient Supply Chain

To become resilient, a company must carefully review which capabilities they need to possess for which vulnerabilities. There should also be a balance between these factors, such that the supply chain can be positioned within the Zone of Balanced Resilience. The four different constructs of supply chain resilience as provided by Christopher & Peck (2004) are the foundation of a resilient supply chain. The necessary capabilities and vulnerabilities have been examined. However, literature to this date emphasizes the need for further research on this subject. This research closes the theoretical gap by examining which capabilities and vulnerabilities are important in relation to the different constructs of supply chain resilience as provided by Christopher & Peck (2004). These factors are not specified beforehand, because this could diminish the objectivity and scope of the research due to the fact that literature on this subject is limited.

To find out how these four constructs can be implemented in practice and to link them to the necessary tradeoffs between capabilities and vulnerabilities per construct, a case study is performed. In this case study, the necessary capabilities and vulnerabilities per construct and the tradeoffs between these factors are examined. This results in a decision-support tool for supply chain managers in the form of specific tradeoffs per construct (similar to Figure 3) and an increased knowledge in literature on supply chain resilience.

Figure 3 - Tradeoffs per Construct within the Zone of Balanced Resilience

3

Research Methodology

3.1 – Introduction

To empirically investigate how a company can build a resilient supply chain and which trade- offs between capabilities and vulnerabilities need to be considered, a case study method is chosen for its ability to generate the type of knowledge that cannot be collected from a purely statistical analysis (Meredith, 2002). Building theories from multiple case studies is a research strategy that involves cases to create theoretical constructs, propositions and/or midrange theory from case-based, empirical evidence (Eisenhardt, 1989). Because of this, a case study research with supply chains as cases is suitable to find out which capabilites and vulnerabilities are important for the different constructs of supply chain resilience and which trade-offs between these factors need to be considered when implementing resilience. It is the best methodological fit since it offers the opportunity to study an unknown phenomenon in its own natural setting where complex links and underlying meanings can be explored, whilst also enabling the researcher to study whole supply chains (Miles & Huberman, 1984; Yin, 2009). The case study is performed at COMPANY X, which is subjected to disruptions due to the complexity of their product and high requirements that must be met.

3.2 – Case Setting

COMPANY X is a high-tech offshore company focusing on the development, construction

and lease of offshore access solutions. {DELETED DUE TO CONFIDENTIALITY}

Due to the fact that their systems are used offshore, high requirements with regard to their products and processes must be met. Also, the systems consist of many custom-made components which have a long lead time.

The unit of analysis is defined as a supply chain. The supply chains of COMPANY X are influenced by these high requirements and the custom-made products increase the amount of risks at which COMPANY X is subjected. Figure 4 provides a supply chain map of the different suppliers of COMPANY X. Overall, it is concluded that the supply chain of COMPANY X has a relatively high complexity, a high density and around ten supply chains with a high criticality. Because of the fact that the systems are rented to customers all over the world, a supply chain map of the customer-side of the supply chain would not provide additional insights. The complexity, density and criticality of all supply chains on this side of the company are low. However, due to the large distances, challenges can also arise on this side of the supply chain.

Figure 4 - Supply Chain Map {FADED DUE TO CONFIDENTIALITY}

First-Tier & Second-Tier Suppliers

Legend:

Company Supply Chain COMPANY X Supplier Steel Supplier Hydraulics Supplier Electrics Supplier Pipes

A small disruption can have a big influence on the supply chain and because of the fact that future demand cannot be forecasted, it can be stated that the company is vulnerable to disruptions. To decrease this vulnerability, COMPANY X has to monitor their supply chain actively and strategically implement measures. To find out where they must implement these measures and to select the different cases, it is first important to examine the supply chain in more depth.

3.3 – Case Selection

When looking at the supply chain map in Figure 4, it can be seen that the colored supply chains have a high complexity and/or high criticality. To get a better understanding of the whole supply chain and to identify other critical paths, the material and financial flow between the different suppliers and COMPANY X are visualized in Appendix I. The graph in Appendix I shows that ten suppliers are responsible for 95% of the costs, while the other suppliers cover the remainder 5%.

To obtain a complete overview of the necessary capabilities and vulnerabilities for each construct of supply chain resilience, three similar cases and one contrasting case have been selected. Based on the different constructs of supply chain resilience as presented by Christopher & Peck (2004), the selected cases are presented and explained in Table 2.

The high criticality cases (Case A, B and C) have similar characteristics, as all of them have a high criticality, a reasonable to high level of collaboration, a reasonable to high level of visibility and a high level of risk consideration. To find out whether or not other capabilities and vulnerabilities come forward in supply chains that score low on these characteristics, a contrasting low criticality case (Case D) is chosen as well.

This combination of theoretical replication and literal replication is chosen for possible

differences in results, which are needed to provide a complete list of considerations that

supply chain managers need to make when implementing resilience. By keeping the context

similar, the results are used to draw conclusions on how to implement resilience in a supply

chain with respect to the tradeoffs between capabilities and vulnerabilities.

C as e D (S u p p li er P ip es ) Low C ri ti cal ity

Re as on ab le C ol lab or ati on

Low V is ib il ity/ R eas on ab le Le ad Ti me s

H igh R is k C on si d er ati on

C as e C (S u p p li er H yd rau li cs ) H igh C ri ti cal ity

In te n se C ol lab or ati on

H igh V is ib il ity/ Lon g Le ad Ti me s

H igh R is k C on si d er ati on

C as e B (S u p p li er El ec tr ic s) H igh C ri ti cal ity

In te n se C ol lab or ati on

R eas on ab le V is ib il ity

H igh R is k C on si d er ati on

C as e A (S u p p li er S te el ) H igh C ri ti cal ity

R eas on ab ly I n te n se C ol lab or ati on

R eas on ab le V is ib il ity/ Lon g Le ad Ti me s

H igh R is k C on si d er ati on

Suppl y Chai n (R e- ) E ngi ne er ing Suppl y Chai n Col labor at ion A gi li ty R is k Manage m ent Cul tur e P er ce nt age of T ot al Cos ts Col or on Suppl y Chai n Map

Table 2 - Case Description

3.4 – Data Collection

Both qualitative and quantitative data is collected in order to answer the research questions.

Due to the fact that the results are unknown, qualitative open-ended information for interpretation is collected (Edmonson & McManus, 2007). Quantitative data is collected to examine what the influence of the financial impact of a disruption is on the decision-making process of supply chain managers during the selection of the cases. Also, the costs per supply chain are taken into account because this will have an influence on the decision-making process of supply chain managers as well. Table 3 shows the different types of data that are collected during the case study.

Type of Data

Qualitative Data • Semi-Structured Interviews:

o Suppliers o COMPANY X o Customers

• Documents: Protocols, Near-miss Analyses

• Supply Chain Maps

Quantitative Data • Financial reports

• Vendor Ratings Table 3 - Data Collection

The main data collection method is through in-depth semi-structured interviews, which provide a flexible instrument to obtain information from the field (Yin, 2009). An interview protocol (Appendix II) is established after the literature review, and has been reviewed by several people with experience in the field of supply chain resilience and/or the offshore industry in which the supply chain is positioned.

The interview protocol is used as guidance throughout all the interviews and includes questions on a general description of the interviewee, the different constructs of supply chain resilience, possible improvements and an example of a disruption that has happened in the past. All questions are open-ended to ensure that detailed answers can be provided, such that all necessary capabilities and vulnerabilities can be identified and analyzed.

To perform a thorough analysis, ten interviewees are selected (see Figure 5). All of the

interviewees are managers of their company or department and/or project manager of the

COMPANY X-projects. To obtain multiple viewpoints from within COMPANY X, four

employees of different departments are selected.

(*QHSE: Quality, Health, Safety & Environment)

Figure 5 – Interviewees

The interviews are held face to face, except for the interviews with the customers since they were abroad during the data collection phase of this research. Each interview is transcribed and the transcriptions are peer-reviewed by the interviewees to guarantee a correct interpretation of the data. Table 4 provides an overview of the interviews that were held.

Table 4 – Interviews

3.5 – Data Analysis

Given the exploratory nature of this research, the cases are used to examine emerging patterns in order to inductively develop theory (Eisenhardt & Graebner, 2007). First, the collected data from the interviews is reduced by splitting the data into individual sentences or paragraphs. All sentences with no direct influence on supply chain resilience are removed, after which the data is organized for descriptive coding (Miles & Hubermann, 1994). During the descriptive coding capabilities and vulnerabilities are identified, after which they are assigned to a second order category, i.e. the different constructs of supply chain resilience as stated by Christopher & Peck (2004). Appendix III shows the coding schemes that resulted from the ten different interviews and the specific capabilties and vulnerabilities that are allocated to the different constructs of supply chain resilience. After the second order categories, the capabilities and vulnerabilities are quantified by counting how many times they are mentioned in an answer during the interview. Capabilities or vulnerabilities that are

Interview Supply Chain Partner Interviewee Location Length Case

Interview 1 Supplier Steel CEO Suppliers’ office 60 min A

Interview 2 Supplier Electrics Project Manager Suppliers’ office 45 min B Interview 3 Supplier Hydraulics Managing Director Suppliers’ office 60 min C

Interview 4 Supplier Pipes Project Manager Suppliers’ office 50 min D

Interview 5 COMPANY X Manager Production COMPANY X 60 min A/B/C/D

Interview 6 COMPANY X Manager P&L COMPANY X 75 min A/B/C/D

Interview 7 COMPANY X CEO COMPANY X 45 min A/B/C/D

Interview 8 COMPANY X Manager QHSE COMPANY X 60 min A/B/C/D

Interview 9 Customer Transportation Project Manager Telephone 50 min A/B/C/D

Interview 10 Customer Wind Project Manager Telephone 45 min A/B/C/D

*

mentioned more than three times within the same answer of one specific question are filtered out to prevent skewed results due to the fact that one interviewee repeated a specific capability or vulnerability many times. This results in the pie-charts as visualized in Appendix IV, which shows the five most mentioned capabilities and vulnerabilities per construct of supply chain resilience. After the quantification of the capabilities and vulnerabilities, the capabilities and vulnerabilities are assigned to a third order theme, i.e. a specific tradeoff per construct of supply chain resilience. As a final step, the results are compared with financial reports and vendor ratings to find possible explanations for the results as well (e.g. long lead times, low vendor rating, high turnover). For each case, an individual report is written after which several people involved in the case study have reviewed these reports to test if the results reflect reality.

The peer-reviewed individual case reports are compared to each other during the cross-case analysis. The cross-case analysis includes the interviews of the suppliers, the interviews from the different employees of COMPANY X and the interviews from the customers. The data of COMPANY X and the customers was purposely included in each case, to make it possible to find different emerging patterns within the same context. The final step is to combine the results into different trade-offs per construct of supply chain resilience. The research process is visualized in Figure 6.

Figure 6 – Research Model (adapted from Yin, 2009)

Primary Process Secondary, Iterative Process

4

Findings

4.1 – Introduction

The insights of the data analysis result in the five most mentioned capabilities and vulnerabilities per construct of supply chain resilience and the four most important tradeoffs that need to be considered when building a resilient supply chain. The findings together are used to create a decision-support tool that can guide supply chain managers in their process of building a resilient supply chain. The findings are presented by first providing an overview of the most mentioned capabilities and vulnerabilities that have been identified, after which other capabilities and vulnerabilities are visualized in Figure 7. Then, the four most important tradeoffs and 28 other tradeoffs (summarized in Table 5) are presented. Finally, the findings are combined in a decision-support tool as visualized in Figure 8. The individual case results for the capabilities and vulnerabilities per construct of supply chain resilience are presented in Appendix IV.

4.2 – Capabilities

During the analyses of the different cases, multiple capabilities have come forward that either

prepare a company for a specific disruption, increase the ability to quickly react after a

disruption has occurred or enables a company to quickly recover after a disruption. The five

most mentioned capabilities per case are visualized in Appendix IV. To find emerging

patterns throughout the different cases, it is important to examine the most mentioned

capabilities.

Supply Chain (Re-) Engineering – Partner Criteria

Because of the fact that the supply chains operate in the offshore industry, they are subjected to strict regulations. To meet the requirements of these regulations, it is important that all partners within the supply chain can deliver all components with the right certificates:

To find sufficient partners, it is concluded from the data that clear partner criteria need to be set up:

These criteria should also be followed to make sure that all of these criteria can be met:

(Manager P&L).

There is no difference between the high criticality cases and the low criticality case. This is also explained by the fact that regulations are strict. However, in the high criticality cases, more thorough partner criteria were mentioned than the low criticality-case:

“At the moment we’re making agreements with all supply chain partners on delivery times, prices and expectations in collaboration.” (Supplier Pipes).

The data shows that the more critical a specific component is, the more extensive criteria are set up to minimize the impact of a disruption.

Supply Chain Collaboration – Communication

The level of collaboration between different supply chain partners in the high criticality cases

is intense to reasonably intense. Data shows that in order to collaborate in an efficient way, it

is important that supply chain partners keep communicating with each other:

Early and honest communication

increases the ability to quickly discover disruptions, solve the disruption efficiently and

recover from it afterwards:

Several interviewees state that without clear communication

channels, a disruption is bound to happen

This is due to the

fact that with the complex processes and high requirements, all knowledge available needs to

be shared. The data of the low criticality case stresses these findings. In this supply chain,

collaboration is reasonable and communication is mentioned more often as a critical part of

collaboration:

It is concluded that

communication needs to be present between all supply chain nodes and that it should provide

all necessary information.

Agility – Visibility

The supply chains operate in a challenging environment due to the international aspect of the customer-side of the supply chain. All interviewees stressed the need for high visibility throughout the whole supply chain:

Only when the state of the supply chain is known at all supply chain partners, the supply chain is able to detect and respond quickly to disruptions:

High visibility can be achieved when expectations and agreements are clear for all supply chain partners:

At the Supplier Steel and Hydraulics, the impact of a disruption is increased by the long lead times. In these types of supply chains, it is seen that visibility throughout the whole supply chain is even more important:

In the Supplier Pipes case, high visibility is considered to be equally important as it is within the high criticality cases: “

(Supplier Pipes)

. This can be explained by the fact that lead times are reasonably long as well.

Therefore, the impact of a disruption is also high and to minimize the impact, it is important that disruptions are discovered as early as possible.

Risk Management Culture – Risk Consideration

All cases are characterized by a high level of risk consideration throughout the whole supply

chain. This is because of the fact that the environment in which the supply chain operates is

complex, high requirements must be met and that all components are used offshore:

. Because of this, each

interviewee stated that they are aware of the risks, which possible disruptions can happen

(

), and what measures they can or should take in order to decrease this level

of risk:

. Also, all interviewees stressed that it is important to always consider risks, even when

a project has not even started yet.

With this high level of risk consideration, the whole supply chain is

able to quickly discover disruptions, efficiently solve the disruption and evaluate the

disruption afterwards.

4.3 – Vulnerabilities

The five most mentioned vulnerabilities per case are visualized in Appendix IV. Similar to the capabilities, it is important to examine the most mentioned vulnerabilities to find emerging patterns throughout the different cases.

Supply Chain (Re-) Engineering – High Requirements

All supply chain partners must meet high requirements due to the fact that they operates in the offshore industry. All interviewees stressed that these high requirements complicate daily operations:

. Because of these high requirements, it can be very difficult to find a sufficient supply chain partner (

), and when a disruption occurs, the strict regulations decrease the amount of measures that can be performed to minimize the impact of a disruption:

. The results of the high criticality cases emphasize that the constant pressure of meeting quality and safety regulations make the supply chain more susceptible to disruptions:

Even though criticality is low in the low criticality case, the high requirements still influence the decision-making process with regard to the design of the supply chain.

Supply Chain Collaboration – No Substitute

Many components are custom-made or can only be made by a couple of suppliers. This

increases the dependency between the different supply chain partners:

. Due to the fact that a substitute

cannot be found easily or is not available at all, the ability to quickly respond to a disruption

is decreased:

.

As stated by the interviewees of the high criticality cases, the collaboration can be improved

or be more efficient, but it is always possible that the capabilities of one of the supply chain

partners are not sufficient. Therefore, when there is no substitute available, it is even more

important to ensure an efficient collaboration:

. The Supplier Pipes case showed the same

results, which can be explained by the fact that with a low level of collaboration, it can

become very difficult to quickly discover a disruption or efficiently solve the disruption.

Agility – Delays

The long lead times to which the Supplier Steel and Supplier Hydraulics case are subjected, decrease the ability to quickly respond in case a disruptions occurs. The high criticality cases show that, because of these long lead times, a disruption can have a huge influence on the promised delivery date:

. If a disruption occurs in a critical path, it takes time to recover from it, even when an alternative plan can be executed. The low criticality case shows that, even with reasonable lead times, a disruption can have a high impact on delivery dates:

. An alternative plan can be executed:

“This is to prevent it from happening that we can’t meet delivery requirements due to some missing components.” (Supplier Hydraulics)

, but due to circumstances, this cannot always be executed right away:

,

.

Risk Management Culture – No Process Understanding

The level of risk consideration is high throughout all cases. All interviewees emphasized the need for process understanding during the decision-making process

,

. The first three cases showed that there can be a conflict between the performance objectives (

:

) and what impact this can have for all the supply chain partners:

. This can lead to situations in which everybody involved has to do everything within their capability to make sure that all processes are performed correctly and within the given time frame. The data from the low criticality case differs on this subject, which is explained by the fact that their product requires less complex production processes and therefore, the impact of specific decisions is less high:

.

4.4 – Capabilities & Vulnerabilities per Construct

It turns out that because of the complex environment, the high requirements and the high

amount of critical components, the supply chains can be vulnerable to disruptions. This is

especially the case if they do not actively implement specific capabilities to decrease the

impact of specific vulnerabilities. The most mentioned capabilities and vulnerabilities per construct are identified in the previous sections. The five most mentioned capabilities and vulnerabilities per construct are visualized in Figure 7.

Supply Chain (Re-) Engineering

Supply Chain Collaboration

Agility

Risk Management Culture

Figure 7 – Capabilities & Vulnerabilities per Construct

4.5 – Tradeoffs per Construct

With the identification of the most mentioned capabilities and vulnerabilities per construct of

supply chain resilience, it is possible to identify tradeoffs between these factors as well. The

insights of the data analysis lead to four tradeoffs that are most important to consider.

Partner Criteria vs. High Requirements

When sufficient partners are selected who are able to meet the partner criteria, it is less likely that a disruption with a high impact occurs (

)

When the partner criteria do not only cover the product requirements, but also agreements on disruptions and expectations in collaboration (

), data shows that the supply chain is more resilient against disruptions. The financial reports show that because of the high requirements, expenses increase. The most complex components of the suppliers in the high criticality cases are the most expensive. However, these expenses are justified by the fact that the breakdowns in these complex components would even be more expensive.

Communication vs. No Substitute

When a substitute is not available, neither on short notice nor long-term, all supply chain partners must make sure that communication is maintained throughout the whole period that they are collaborating together (

. This decreases the impact of a disruption because the disruption can be noticed early on when all partners communicate with each other (

)

The vendor rating shows that the Supplier Hydraulics and COMPANY X maintain a high level of communication while their components cannot be substituted easily. Therefore, a higher score is given to this supplier, which influences the collaboration positively as well.

Visibility vs. Delays

When risks are identified and all supply chain partners know how the supply chain is

designed, the impact of disruptions can be identified (

) When the objectives for a

period of time are discussed with the supply chain partners as well, all parties involved

increase their reaction speed and then the whole supply chain is able to manage disruptions

efficiently (

). The financial

reports show that the Supplier Electrics delivers a high amount of different items that cover

18% of the total costs per year of COMPANY X. To guarantee that all of these items are delivered on time, visibility needs to be high.

Risk Consideration vs. No Process Understanding

When all risks accompanied with a decision are considered, the possibility for or the impact of a disruption is decreased (

). This is because of the fact that when risks are taken into account when making a decision, it influences the impact of the decision. With the identification of these consequences, it becomes clear which processes need extra attention (

).

4.6 – Other Tradeoffs

Applying the insights from the analysis of all data from both the literature review and the case study resulted in four critical tradeoffs that have to be considered when a company wants to build a resilient supply chain. Next to the four tradeoffs, data shows that other tradeoffs between capabilities and vulnerabilities have to be considered as well when implementing resilience in a supply chain. These tradeoffs are presented in Table 5. And should be taken into consideration as well to make sure that the possibility for and impact of a disruption are decreased and that they do not invest in excessive capabilities.

( Data shows that a tradeoff between this capability and vulnerability is present) Table 5 - Tradeoffs between Capabilities & Vulnerabilities