03: Supply risk conceptual (2)

Question 1

What are the two popular theoretical perspectives on supply chain vulnerability?

Answer 1

Normal accident theory (NAT:) Pessimistic perspective

High reliability theory (HRT) Optimistic perspective

Question 2

What is the normal accident theory (NAT)?

Answer 2

Core argument: Accidents are inevitable (normal), in systems that exhibit:

• Interactive complexity and/or
• Tight coupling

Question 3

What is meant exactly with the first element of NAT: (interactive) Complexity?
1. What is a complex system?

Answer 3

A complex system is “made up of a large number of parts that interact in nonsimple way

Question 4

With what does NAT help us regarding supply chains?
(What are two complexity forms? Characteristics of interactively complex supply chains

Answer 4

NAT helps to identify characteristics of interactively complex supply chains

1.Structural complexity
- Horizontal (direct suppliers,heterogeneity of direct suppliers
- Vertical (# tiers)
- Spatial (geographic locations)

2.Product complexity
- Variability
- Life cycles

Question 5

What is meant exactly with the first element of NAT: (interactive) Complexity?
1. What does this mean in NAT?

Answer 5

NAT:

• complexitx itself is not the issue - it depends on the interaction of the elements
• Linear interactions lead to predictable and comprehensible event sequences, while
• nonlinear interactions (interactively complex) lead to unexpected event sequences.
• Interactively complex systems are
  “intellectually unmanageable”

Question 6

What are three examples of structural complexity?

Answer 6

Horizontal: many direct suppliers (Porsche)

Vertical: many tiers (Bosch)
Consequences:
- standstill of assembly lines
- Product recall
- Consequentiall costs
- Damaged brand image

Spatial: many locations and great distances

Question 7

What are the three complexity dimensions?

Answer 7

1Horizontal complexity

2.Vertical complexity

3.Spatial complexity

Question 8

What is the effect of the 3 complexity dimensions? (regarding their forms)

Answer 8

• the frequency of supply chain disruptions increases more than linearly with increasing horizontal and spatial complexity

–>The Effect size: effect of horizontal complexity on the frequency of supply chain disruptions is aboout 1/3 stringer than that of vertical and spatial complexity

Question 9

What does the second element of NAT: Tight coupling mean?

Answer 9

A system is tightly coupled, if its elements are interrelated in such a manner that there are,..

– few possible substitutions
– time-dependent processes
– rigidly orderedprocesses (e.g.job B must follow job A)
– minimal buffers

Question 10

What does slack in the context of tight coupling mean?

Answer 10

tight coupling means absence of slack

Slack takes the form of cash, people, inventory, capacity, etc. –>Slack acts as a shock absorber

Question 11

Tight coupling:
What happens without slack?

Answer 11

• A change in one tier may trigger a rapid and strong change in related tiers (domino effect)
• Disturbances may propagate rapidly and spread almost unobstructed throughout the system

Question 12

What are loosely coupled systems?

Answer 12

contrast to tightly coupled systems, they are able to absorb failures, environmental changes, or unexpeccted system behavior

Question 13

What is Just-in-time in supply chains? (tight coupliing)

Answer 13

Just-in-time (JIT):
- JIT forsees the delivery of parts in the right quality, time and quanity –>3Rs

• Delivery of standard parts (one or few variants in JIT racks to the buyer

Question 14

What is Just-in-sequence in supply chains? (tight coupliing)

Answer 14

Just-in-sequence (JIS):
- JIS tops JIT by adding the right sequence for the supplied components –>4Rs

• Delivery of parts with Large variety in JIS frames and sequenced in the buyer´s production sequence

Question 15

What are consequences of JIT and JIS?

Answer 15

• High coordination efforts(information sharing)
• The margin of error is reduced
• An adverse event that affects the supplier has direct repercussions on the focal firm

Question 16

What is the pathogen model? (Swiss cheese model”)

Answer 16

pathogen model assumes that initally security layers degrade over time

• Often, systems were originally designed for safety
• Over time, however, “holes” emerge as a result of general failure types, e.g.,
  -wrong changes in the system design
• lack of communication
• adding of incompatible processes/systems
  -incompatible goals

Question 17

What is the high reliability theory?

Answer 17

Results of their analysis:

• the implication (complexity + tight coupling) –>accidents does not hold in general
• Even in very complex and tightly coupled systems, organizational recautions can prevent normal accidents from happening

Question 18

What does HRT says about the supply chain disruption frequency?

Answer 18

• Research suggests that better performing suppliers are less often disrupted and poorly performing suppliers are more often disrupted.
• Reasons are better preconditions, by, for example, the supplier incorporating the latest technological advances in their operations and adhering to specified quality standards
• The corresponding plot indicates that the relationship between supplier performance and disruption frequency is not linear

Question 19

What is the experience-based learning perspective? (high reliability theory)
(What is organizational learning and the literature focus)

Answer 19

–>learning from rare experiences

• Organizational learning involves extracting insights from historical experiences for future actions.
• Focus of Literature: While much attention is given to learning from repetitive experiences (e.g., learning curves), the value of infrequent, hazardous experiences is crucial:
  such events may…

Question 20

What do infrequent, hazardous experiences in “experience-based learning perspective” do? (HRT theory)

Answer 20

Infrequent, hazardous experiences —> can also be a valuable source of organ. Learning

Such events may…
- expose flaws in the current routines
- erode the legitimacy of the existing state
- force an organization to question existing schemes and structures and to unlearn habitual behaviors

Question 21

What does HRT do in complex and tightly coupled systems?

Answer 21

HRT guides the prevention of accidents in complex and tightly coupled systems

Question 22

How does HRT prevent complex and tighlty coupled systems from producing accidents?

Answer 22

• through good organizational design and management accidents can be prevented
• Duplication and overlap can make a reliable system out of unreliable parts
• Decentralized decision-making is needed to permit prompt and flexible field-level responses to surprises.
• A “culture of reliability” will enhance safety by encouraging uniform and appropriate responses by field-level operators (involves also psychological safety)
  -Continuous operations,, training, and simulations can create and maintain high reliability operations
• Learning from accidents is important

Question 23

What are the hints to manage suply chain risks when linking NAT and HRT?

Answer 23

Normal accident theory:
- Complexity and tight-coupling result in vulnerable supply chains
- Hence, avoid complexity and tight couplings where possible

Hight reliability theory:
Where complexity and tight-coupling cannot be avoided,, HRT hints at ways to overcome the risk of “normal” accidents: e.g.,
− Safety culture
− Training of employees
− Preoccupation with failure
− Learning