Beware the ‘black swans’ in your supply chain

Enterprises know that merely having a supply chain involves a certain amount of risk, but few do enough to protect against the one-off, extreme incidents that can disrupt them.

That’s according to Yossi Sheffi, an MIT professor who is director of its Center for Transportation & Logistics.

Such events — sometimes referred to as “black swans” — include unanticipated catastrophes such as Hurricane Katrina, the BP Horizon oil rig explosion, the 9/11 terrorist attack, the tsunami that hit Japan in 2011, and even the Volkswagen emissions scandal.

While most risk-planning processes focus on events that happen relatively often, such as routine weather emergencies, they often ignore the extreme ones that are considered too unlikely to worry about, Sheffi argues.

While such events are unlikely, the probability that they’ll happen isn’t zero — as history has proven again and again.

“Black swans are never expected,” Sheffi said in an interview. “There are many examples of low-probability, high-impact disruptions. People don’t believe they can happen, but they do — and there will be more.”

Vendors such as Resilinc and Elementum along with IBM, SAP and Cisco are increasingly coming out with software to help companies protect themselves, he noted.

Read more at Beware the ‘black swans’ in your supply chain

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