The Supply Chain Crisis and Disaster Pyramid

Stephen DeAngelis

April 22, 2013

Back in 2009, R. Glenn Richey. Jr., a professor in the Manderson Graduate School of Business at the University of Alabama, wrote an article entitled “The supply chain crisis and disaster pyramid: A theoretical framework for understanding preparedness and recovery.” [International Journal of Physical Distribution & Logistics Management, Volume 39 Issue: 7, pp.619 – 628] In the abstract concerning that article, Richey wrote:

“The research on supply chains concerning disaster and crisis situations is in its infancy, but rapidly expanding on the backs of top researchers in the field. As with most young research streams there is very little theoretical grounding in extant studies. The purpose of this research is to integrate four prominent existing theoretical perspectives to provide a concise yet holistic framework for grounding future research.”

The “four prominent theoretical perspectives” used by Richey in his paper were: the resource-based view; communication theory; competing values framework; and relationship management theory. These four theories identified the corners of a three-sided figure he called the “Supply Chain Disaster and Crisis Pyramid.” To better understand how the pyramid interrelates these theories, let me provide a little background on each theory.

 

Resource-based view — According to Wikipedia, “The resource-based view (RBV) as a basis for a competitive advantage of a firm lies primarily in the application of the bundle of valuable interchangeable and intangible tangible resources at the firm’s disposal. To transform a short-run competitive advantage into a sustained competitive advantage requires that these resources are heterogeneous in nature and not perfectly mobile. Effectively, this translates into valuable resources that are neither perfectly imitable nor substitutable without great effort.” In other words, a company needs to identify those resources that differentiate it from its competition and provide it with a substantial competitive advantage and then figure out how to protect those assets.

 

Communication theoryWikipedia states, “Communication theory is a field of information and mathematics that studies the technical process of information and the human process of human communication.” In other words, companies need to understand how they communicate best with the stakeholders in their supply chain and then ensure that those lines of communication are going to be available during a disaster.

 

Competing values framework — A University of Twente website, provides the following explanation of this theory:

“The Competing Values Framework emerged from a series of empirical studies on the notion of organizational effectiveness (Quinn & Rohrbaugh, 1983). These efforts were an attempt to make sense of effectiveness criteria. Quinn and Rohrbaugh (1983) discovered two dimensions of effectiveness. The first dimension is related to organizational focus, from an internal emphasis on people in the organization to an external focus of the organization itself. The second dimension represents the contrast between stability and control and flexibility and change. The Competing Values Framework received its name because the criteria within the four models seem at first to carry conflicting messages. We want our organizations to be adaptable and flexible, but we also want them to be stable and controlled. [The four models are: the Internal Process Model; the Open Systems Model; the Rational Goal Model; and the Human Relations Model.] … While the models seem to be four entirely different perspectives or domains, they can be viewed as closely related and interwoven. They are four subdomains of a larger construct: organizational and managerial effectiveness. The four models in the framework represent the unseen values over which people, programs, policies, and organizations live and die.”

From a supply chain perspective, there are not only competing values within a company but between companies in the supply chain as well.

 

Relationship management theory — Relationship management theory focuses on what is commonly called public relations. According to Wikipedia, “Public relations (PR) is the practice of managing the flow of information between an individual or an organization and the public.” In simple terms, communication theory tells you how you are going to get your message to its intended audience while relationship management theory helps you craft the message itself.

 

Daniel Dumke identifies the four corners of the crisis and disaster pyramid discussed above in simpler terms: resources (resource management); collaboration (relationship management); communication; and contingency planning (competing values). [“Supply Chain Crisis and Disaster Pyramid,” Supply Chain Risk Management, 2 November 2011] Those terms are much easier terms to understand as well as being much more recognizable to most risk managers. Dumke concludes:

“All in all Richey’s framework is aimed at providing a guideline for future researchers to find new insights into supply chain disaster management and how to improve supply chain reactions at the intersection of communication, collaboration, resources and values. And these four aspects should not only be considered by researchers, but also by supply chain professionals. I especially liked the inclusion of the competing value theory, which might lead to a shift in research from the currently leading paradigm that goals of supply chain partners are always well aligned. On the other hand, this framework could also be used beyond only disaster and crisis management, the aspects could perhaps prove influential in a larger number of supply chain related research fields and applications.”

Jan Husdal was disappointed that Richey’s article was so theoretical and aimed at researchers rather than supply chain risk managers. “If you are a supply chain or logistics professional looking for a paper that discusses the intricacies of managing a supply chain in a disaster area, how to prepare and how to recover,” Husdal writes, “this is NOT it.” [“Pyramidal thoughts,” husdal.com, 10 March 2010] Despite his disappointment, Husdal concludes, “It is a framework that is well founded, based on the literature review. It will be interesting to see how many researchers pick up on this article and develop the suggested research strands.”

 

Husdal points out that planes created by the four corners of Richey’s pyramid identify specific relationships that need to be fostered and utilized during a crisis. They are:

1 – the independents
resources – competing values – communication
How do firms re(act) as disconnected and disinformed individual organizations?

2 – the proactive partnership
resources – communication – relationship management
How can firms develop communication and collaboration?

3 –
the co-opetition resource

resources – competing values – collaboration
How do firms grow their situational awareness balancing when to compete and when to collaborate?

This is how the Supply Chain Crisis and Disaster Pyramid looks in three dimensions.

 

Obviously, each “plane” of the pyramid requires different approaches for the stakeholders involved. One of the biggest challenges in determining the right approach to take is identifying who all is involved. The more complex supply chains (or value networks) become, the more difficult it is to identify all of the players and their relationships. Supply chain analyst Lora Cecere has frequently insisted that supply chain visibility must at least include your suppliers’ suppliers and your customers’ customers. One recommended approach to understanding complex networks is to map them. Daniel Dumke writes, “There are several key advantages to supply chain mapping.” [“Solution to Strategic Supply Chain Mapping,” Supply Chain Risk Management, 23 April 2012] Among those advantages are:

  1. To link corporate strategy to supply chain strategy.
  2. To catalog and distribute key information for survival in a dynamic environment (in order) to direct the focus of the managers.
  3. To offer a basis for supply chain redesign or modification.
  4. Current channel dynamics can be displayed in a supply chain map.
  5. The process of building the strategic supply chain map, in itself, will help define the perspective of the supply chain integration effort.

Even though Richey’s article didn’t provide any recommended solutions for dealing with supply chain crises and disasters, if you are a supply change risk manager, his framework is worth considering. Simply identifying who are independent, cooperative, and proactive partner stakeholders is a valuable thing to know.