The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage

The Resilient Enterprise is the best business book I have read in the last ten years. It should be on the required reading list for Business Continuity Professionals and it should be mandatory reading for CEO's. I have shipped copies to many of my associates.

This book explains how different companies (some competitors) dealt with major disruptions in the last 2 decades, why some benefit while others are doomed. This book will not give you clear guidelines on how to become resilient/flexible, but how other companies did it and turned disruptions to their advantage. A MUST READ!!!

Companies' fortunes in the face of business shocks (eg. U.S. Pacific ports shutting down during the Christmas rush, Taiwan's earthquake that rendered many suppliers incapable of meeting commitments) depend more on choices made before the disruption than actions taken amidst it. The preceding is the key point in Sheffi's "The Resilient Enterprise." Sheffi then goes on to expound on how this accomplished, after first assessing the firm's vulnerabilities - flexibility via design, reducing the number of parts, reducing the number of products, fast reaction times, balancing the strengths and weaknesses of single-sourcing, creating distribution centers (eg. Cadillac in Florida), creating instant "history" via "test batches" at test locations (eg. Nine West) to quickly assess customer reaction to new styles, data-sharing (eg. Wal-Mart and its suppliers), risk sharing (eg. publisher buy-backs vs. bookstores), and revenue-sharing that encourages more product availability and faster breakeven (eg. Blockbuster). Other mechanisms include casinos' pooling data on card-counters and cheaters, whiskey manufacturers sharing theft data (finding an impressive commonality of problem locations), building in redundant capacity (eg. FedEx's flying two empty planes each night to Memphis from each coast, and ready to swoop down and handle any unexpected problems; setting up for about 40 half-empty planes/night --> quickly available capacity that could also make an extra stop or two, and 14 spares ready on the ground), standardized equipment (UPS, Southwest Airlines), and mass customerization (focusing on performing all the common elements "en masse," rather than each as 100% separate production from start to finish. <br /> <br />Finally, Sheffi also points out, using examples, that denying problems only makes them worse (Lexus vs. Audi recall experiences, J & J's Tylenol vs. Intel's defective chip), and that staff hiring is key (eg. UPS hires from its part-time ranks, providing it, in effect, with a very long interview process). <br /> <br />In some instances I wish Sheffi had provided more detail - eg. the Toyota Production System. But then again, that is a full book in itself, and then I would be concerned that the book was too long. Sheffi hits it just about "just right!"

Yossi Sheffi has compiled a masterful accounting of the challenges businesses face every day. His depictions of events are real-life, his advice on preventing and recovering from major disruptions is sound and he presents this all in an extremely readable fashion. This book is a must read for everyone in business, especially those who do not understand the value added proposition that corporate security teams add to the bottom line.

In this book, MIT Professor Sheffi analyzes high-impact business disruptions, their causes and consequences. Using real life examples, he illustrates how even a small disruption in one part of a tight supply chain can result in major problems elsewhere. He discusses several risk assessment methodologies for estimating probabilities and severity of various types of losses (natural, accidental, and intentional). A brief introduction to current supply chain theory and practice follows. The heart of this book is about specific strategies that a number of enterprises are using to reduce their vulnerability to disruptions and to build flexibility into the supply chain. Topics include early warning systems, collaboration, redundancy, product redesign, customer relations management and cultural change. Professor Sheffi illustrates how various companies have innovated and implemented these strategies. He argues that supply chain integrity and security should be as integral to enterprise management as is quality or safety. Supply chain management innovations such as outsourcing, just-in-time delivery and supply base consolidation require corporate risk managers to develop new loss control strategies and competencies. Business competition is now based on the capabilities of the entire supply chain, not just an individual company. Risk managers must carefully look up and down the entire length of the supply chain to identify vulnerabilities and to make sure that appropriate risk controls and/or risk transfer and financing methods (e.g., contingent business interruption insurance) are in place. The resilient enterprise recognizes that its supply chain is only as strong as its weakest link, and prepares accordingly. In today's complex business environment, disruptions somewhere along the supply chain are all but inevitable. Preparation and flexibility not only improve the odds of an enterprise's survival, but may also become a decisive competitive advantage when disruptions adversely affect rival enterprises. As a 30+ year practitioner of corporate risk management and insurance, I recommend Yossi Sheffi's The Resilient Enterprise to all risk managers striving to integrate sound risk management theory and practice into their organization's standard operating procedures.