Recall Toyota. For decades, the Japanese automaker’s Just-in-Time (JIT) operations management model was a much-admired efficiency-driven strategy, where materials are delivered exactly when needed, minimizing inventory costs. Countless companies operating in sectors as diverse as consumer electronics production and pharmaceutical manufacturing sought to imitate the approach in a quest to make their operations leaner. However, the 2011 Tohuku earthquake and tsunami – which unleashed massive damage to public infrastructure, severely disrupting supply chains – exposed the underlying fragility of ultra-cost-optimized supply chains. Toyota’s production dropped by 78% year-on-year in April 2011, as reported by Hirofumi Matsuo in a 2015 paper from Kobe University.
In an era where geopolitical tensions threaten to fragment the global economy, the need for more robust and efficient supply chains has never been more urgent as companies face both fluctuating demand and uncertain disruptions. While technological advancements and process optimizations dominate the discourse, a fundamental challenge remains: how can companies make their supply chains more resilient without sacrificing efficiency? One of the biggest challenges lies in quantifying the non-resilience costs, avoiding their substantial over- or underestimation.
Successfully addressing the delicate trade-off between resilience and efficiency would help companies to ensure that supply chains can withstand unexpected external disruptions while maintaining cost-effective operations. With global events such as the COVID-19 pandemic, the Suez Canal blockage, and natural disasters exposing vulnerabilities, the importance of striking a balance between these two critical components has come to the forefront.
Supply chain resilience refers to a system’s ability to absorb shocks and continue functioning, even in the presence of significant disruptions. On the other hand, supply chain efficiency focuses on optimizing resources and minimizing costs during normal operations.
Traditionally, these two goals have been seen as opposing forces – resilience requiring costly redundancies, while efficiency demands lean, streamlined operations. However, in a recent literature review, Balancing Resilience and Efficiency: A Literature Review on Overcoming Supply Chain Disruptions, we explore strategies that allow businesses to build resilience without sacrificing operational efficiency. Our analysis demonstrates that this balance can be realized via the use of so-called “dual resilience levers,” which simultaneously enhance a supply chain’s robustness and efficiency.
A key insight from the review is the classification of resilience-enhancing strategies into two categories: dual-purpose and dedicated resilience levers.
Returning to the example of Toyota, the Japanese automaker undertook a major overhaul of its supply chain following the earthquake and examined multiple supplier tiers to identify vulnerable areas. By combining JIT with volume flexibility, a dual-purpose resource, the company improved its agility, enabling it to respond more effectively to demand fluctuations and future disruptions.
Consider next the case of Procter & Gamble (P&G), a company that successfully combines the safety inventory strategy with data-driven tools for real-time monitoring of products, supplier networks, and plant equipment. By investing in a comprehensive understanding of risks associated with potential disruption, P&G builds resilience, by strategically maintaining higher inventory levels for products and components in geographically diverse locations. During the COVID-19 pandemic, the company’s pre-existing safety stock enabled it to sustain operations and meet surging consumer demand for essential items like household cleaners and personal care products. By balancing the cost of additional inventory with the need for continuity, P&G demonstrated how safety levers combined with real-time data monitoring can protect operations during times of global disruption. Even in stable times, the strategy enhances supply chain visibility while preparing for fluctuations in customer demand.
Another notable example is Apple, which maintains relationships with multiple suppliers for critical components such as semiconductors and displays. This diversification mitigates risks associated with relying on a single supplier, as demonstrated during the US-China trade tensions. By proactively managing its supplier network, Apple can shift production to alternative suppliers when disruption risk rises, ensuring operational continuity and reducing potential delays.
These examples underscore the value of dual-purpose resilience levers – strategies that enhance day-to-day efficiency and allow to continue operations during crisis times.
Interestingly, industries producing high-value goods, such as pharmaceuticals, already recognize the benefits of maintaining inventory buffers to guard against stockouts.
Interestingly, industries producing high-value goods, such as pharmaceuticals, already recognize the benefits of maintaining inventory buffers to guard against stockouts. Nevertheless, even in sectors with lower margins, leveraging dual-purpose strategies can help companies build resilience without incurring significant additional costs.
A recent example illustrating the benefit of dual-purpose resilience levers in sectors with moderate margins comes from Swatch’s MoonSwatch collection, which launched in 2022 and faced an overwhelming demand. Although Swatch had immediate visibility into the beyond successful launch performance, sourcing of specific components globally created challenges in scaling production to meet the greater-than-expected demand. Maintaining higher safety stock levels could have mitigated these issues during peak demand periods. Unable to get their hands on MoonSwatches, customers turned to the secondary market, where they were selling for four times the original price. In the aftermath, Swatch worked to stabilize the secondary market by prioritizing high service levels for future collections, emphasizing the role of resilience in maintaining customer trust while achieving operational balance.
Given the data collected during the COVID-19 pandemic and other crises such as the Suez Canal blockage and geopolitical conflicts, researchers now have a unique opportunity to explore empirical evidence on how disruptions impacted multi-echelon and multi-product supply chain
While progress has been made in understanding supply chain disruptions, significant gaps remain. There is a need for further research into the practical application of dual-purpose resilience levers, particularly in the context of multi-echelon and multi-product supply chains. Developing optimized risk-mitigation strategies that enhance supply chain effectiveness requires an integrated approach, combining empirical and theoretical studies. This includes designing contracts between suppliers and buyers to ensure better coordination across the supply chain.
Given the data collected during the COVID-19 pandemic and other crises such as the Suez Canal blockage and geopolitical conflicts, researchers now have a unique opportunity to explore empirical evidence on how disruptions impacted multi-echelon and multi-product supply chains. These disruptions revealed how the lack of dual-purpose resilience levers, such as shared safety stock, supplier redundancy, and dynamic transportation capabilities, amplified vulnerabilities in industries like automotive, pharmaceuticals, and consumer goods. By leveraging the data, future studies can evaluate the real-world effectiveness of these strategies, offering valuable insights into balancing efficiency and resilience in complex supply networks.
As businesses face mounting pressure to adapt to a volatile global market, the ability to balance resilience and efficiency will become a crucial differentiator. Those that succeed will not only protect themselves from disruptions but also gain a competitive edge. By leveraging dual-purpose resources and tailoring approaches to specific industry needs, companies can build supply chains that are both resilient and cost-effective – ready to thrive in a world of uncertainty.
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