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Summary of the article ‘Strengthening supply chain resilience during COVID‐19’
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Summary of the article ‘Strengthening supply chain resilience during COVID‐19’
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Supply chain resilienceSamenvatting ‘Strengthening supply chain resilience during COVID‐
19’
A supply chain disruption can be defined as: A combination of an unintended and
unanticipated triggering event that occurs at a certain point in the supply chain and the
consequent scenario that presents a severe threat to the normal course of business
operations of the focal firm.
In general, disruptions in supply chains are caused by events with a low probability of
occurrence and very high impact. Examples are:
Natural disasters
Manmade accidents
Pandemics
Resilience is then the ability to rapidly and effectively recover from a disruption. There are a
few supply chain resilience principles, that increase resilience, namely:
flexibility, agility, visibility, collaboration, information sharing and culture of risk
management. There are moreover two key factors that influence supply chain resilience:
vulnerabilities and capabilities.
The theory is however different from the actual methods used for supply chain resilience. It
is reported that firms address disruptions most commonly with:
Increased safety-stock
Dual- or multi-sourcing
Improving forecasting
Although resilience strategies are closely related to the concept of resilience, the practical
strategies of firms are generally closer to risk management rather than resilience.
A difficulty with research on supply chain resilience is that studies tend to describe the
resilience of entire supply chains, whereas, in reality, supply chain nodes act in isolation. In
practice, the visibility of a supply chain extends only to a tier above and a tier below.
JD.com and Covid-19
Measures undertaken before the pandemic
We look at the case of JD.com and covid-19. We can look at the efforts of JD.com and its
improvement of the supply chain resilience undertaken before the pandemic:
1. Integrated supply chain
JD.com possesses a highly integrated retail supply chain structure, which enables it
to be highly resilient. The supply chain structure of JD.com is completely distinct
from that of other retailers, as shown in the figure below.
In the traditional retail supply chain structure (left) each stage is composed of
independent firms. Therefore, although it is critical for a firm in any stage to have
information about the other stages, it does not have access to it.
In the retail supply chain structure of JD.com all intermediate stages are integrated,
the supply chain can perform effectively and resiliently. JD.com has agreements for
long-term cooperation with self-operated online stores. Therefore, the company can
effectively control the quality of products and services.
The integrated supply chain displays the following characteristics:
o High level of collaboration
, Combining the stages simplifies the supply chain structure and enables
JD.com to influence the entire supply chain strategy
o Effective information sharing
In the integrated supply chain of JD.com, information is shared inside the
company owing to the high level of collaboration
o High level of agility
The integrated supply chain of JD.com can rapidly identify disruptions and
effec- tively adjust the operational strategies for procurement, dis- tribution,
and promotion.
2. Intelligent investment in digital technologies
JD.com uses three core intelligent platforms supporting the daily operations:
o Intelligent forecast platform
The dynamic and intelligent prediction platform operates as the basis of most
operation strategies of JD.com. The forecast works as follows:
First, data are collected from various sources and saved
Specific numerical features are extracted from the data and input into
mathematical models to derive the prediction results
Different models are adopted based on the application scenarios, and
specific models are developed for specific cases
Output and evaluation
o Smart replenishment platform
In addition to intelligent prediction, JD.com is attempting to realize
automated replenishment procedures. JD.com classifies products into four
categories based on supply stability and demand predictability. For products
with highly predictable demands and stable supplies, a smart replenishment
platform called TIBPA was developed and applied (see figure below).
o Distribution
network
optimization
system
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