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For Simchi-Levi, who had developed new models of supply chain resiliency and advised major companies on how to best shield themselves from supply chain woes, the signs of disruption were plain to see. Two years later, the professor of engineering systems at the
His work on 'stress tests' for critical supply chains and ways to guide global supply chain recovery were included in the 2022 Economic Report of the President presented to the
It is rare that data science research can influence policy at the highest levels, Simchi-Levi says, but his models reflect something that business needs now: a new world of continuing global crisis, without relying on historical precedent.
'What the last two years showed is that you cannot plan just based on what happened last year or the last two years,' Simchi-Levi says.
He recalled the famous quote, sometimes attributed to hockey great Wayne Gretzsky, that good players don't skate to where the puck is, but where the puck is going to be. 'We are not focusing on the state of the supply chain right now, but what may happen six weeks from now, eight weeks from now, to prepare ourselves today to prevent the problems of the future.'
Finding hidden risks
At the heart of REI is a mathematical model of the supply chain that focuses on potential failures at different supply chain nodes - a flood at a supplier's factory, or a shortage of raw materials at another factory, for instance. By calculating variables such as 'time-to-recover' (TTR), which measures how long it will take a particular node to be back at full function, and time-to-survive (TTS), which identifies the maximum duration that the supply chain can match supply with demand after a disruption, the model focuses on the impact of disruption on the supply chain, rather than the cause of disruption.
Even before the pandemic, catastrophic events such as the 2010
Using their model, Simchi-Levi and colleagues began working with
To begin with, the researchers found out that
The analysis also found that risky suppliers are everywhere across the globe. 'There is this idea that if you just move suppliers closer to market, to demand, to
Rewards of resiliency
By creating a virtual representation, or 'digital twin,' of the Ford supply chain, the researchers were able to test out strategies at each node to see what would increase supply chain resiliency. Should the company invest in more warehouses to store a key component? Should it shift production of a component to another factory?
Companies are sometimes reluctant to invest in supply chain resiliency, Simchi-Levi says, but the analysis isn't just about risk. 'It's also going to help you identify savings opportunities. The company may be building a lot of misplaced, costly inventory, for instance, and our method helps them to identify these inefficiencies and cut costs.'
Since working with Ford, Simchi-Levi and colleagues have collaborated with many other companies, including a partnership with Accenture, to scale the REI technology to a variety of industries including high-tech, industrial equipment, home improvement retailers, fashion retailers, and consumer packaged goods.
'We have used TTR and TTS to determine places where we need to develop and duplicate supplier capability, from raw materials to assembled parts. We increased inventories where our time-to-recover because of extended logistics times exceeded our time-to-survive,' Clayton adds. 'We have used TTR and TTS to prioritize our workload in supplier development, procurement and expanding our own manufacturing capacity.'
The REI approach can even be applied to an entire country's economy, as the
Simchi-Levi and colleagues have been motivated by the pandemic to enhance the REI model with new features. 'Because we have started collaborating with more companies, we have realized some interesting, company-specific business constraints,' he says, which are leading to more efficient ways of calculating hidden risk.
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