Resilience through Flexibility
Regardless of how it is used, redundancy entails additional costs to any enterprise. It reduces efficiency and therefore is not congruent with management's goals and objectives. With quality processes, continuous improvements, and "six sigma" programs all aimed at reducing waste and redundancy, it is difficult to argue for more redundancy. At best, redundancy can be looked upon as a "necessary evil", an insurance against risk. But with managers motivated by competitive pressures and by short-term Wall Street expectations, the result is likely to be insufficient reserves.
Operational flexibility, on the other hand, can also increase resilience, allowing a company to respond quickly to disruptions. Such capability is more difficult to develop than simply keeping extra inventory, having more suppliers, or keeping extra capacity, since it typically involves fundamental changes to the entire company as well as its supply chain relationships. It involves close partnerships with suppliers, who can be called upon to help; flexible contracts, allowing for changes in quantities and delivery schedule; flexible manufacturing facilities that can be used to produce multiple products; a multi-skilled work force with empowered employees who can move quickly from one task to another; and strong customer relationships ensuring continuity in troubled times. The rest of this book discusses these and other aspects of such corporate flexibility.
Reprinted by permission of The MIT Press. Excerpted from The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage. Copyright 2005, by Yossi Sheffi; All Rights Reserved.