The Robustness of Global Supply Chains and the Disasters in Japan

The New York Times has some very timely coverage of the immediate and more speculative impact on global supply chains post the earthquake-tsunami-nuclear set of disasters in Japan. The article, "Stress Test for the Global Supply Chain," begins with a very vivid account of an H.P. VP of Operations, Tony Prophet, being awaken at 3:30AM and then proceeding to triage, as in an emergency room, the potential impacts of this triple disaster on H.P.'s global supply chain. Mr. Prophet oversees all hardware purchasing for H.P.’s $65-billion-a-year global supply chain, which feeds its huge manufacturing engine. Its factories produce two personal computers a second, two printers a second and one data-center computer every 15 seconds.

Japan, as the world's third largest economy, is a key supplier of automobile components (as well as automobiles), high tech products, including integrated chips, and even raw materials such as resins that are used in integrated circuit packaging. Factories that were affected by the triple disaster are shut down in Japan creating cascading failures across the globe with GM even closing one of its manufacturing plants in Louisiana. Not only has manufacturing been disrupted but with so many of the roads impassable, not to mention ports being damaged, the transportation of goods has come to a standstill in parts of Japan. Areas where there is radiation danger with radii of 20 miles to as far as 50 miles have taken on a moon landscape of inactivity since those who have not evacuated have been told to stay indoors.

In 2009, we contributed the chapter, Modeling of Supply Chain Risk Under Disruptions with Performance Measurement and Robustness Analysis, co-authored with Professors Qiang Qiang and June Dong, to the book, Managing Supply Chain Risk and Vulnerability: Tools and Methods for Supply Chain Decision Makers, T. Wu and J. Blackhurst, Editors, Springer, Berlin, Germany (2009) pp 91-111. This study shows how to assess, a priori, a supply chain's vulnerability from a system and robustness perspective.The model formulation captures supply-side risk as well as demand-side risk, along with uncertainty in transportation and other costs. The model also incorporates the individual attitudes towards disruption risks among the manufacturers and the retailers, with the demands for the product associated with the retailers being random. We also proposed a weighted supply chain performance and robustness measure based on our recently derived network performance / efficiency measure and provide supply chain examples along with the robustness analyses. This work extends previous supply chain research by capturing supply-side disruption risks, transportation and other cost risks, and demand-side uncertainty within an integrated modeling and robustness analysis framework.

Of course, it is not only complex corporate supply chains that are now being impacted but humanitarian ones have also been deeply affected since the radiation from the Fukushima nuclear power plant has limited the arrival of necessary supplies to those in need who have not been able to evacuate. Japan has a large elderly population and their suffering is horrific. Humanitarian supply chains are different from corporate ones, since the underlying objectives in managing each of them are clearly distinct. One cannot engage in profit-maximization in the case of humanitarian operations and time is often of the essence. Hence, to assess the performance of humanitarian supply chains, Professor Qiang and I have constructed, A Bi-Criteria Measure to Assess Supply Chain Network Performance for Critical Needs Under Capacity and Demand Disruptions.

As researchers and scholars, we hope that we can assist, in a small but concrete way, through our work.