Accenture, MIT Stress Test for Supply Chains

  • October 28, 2020
  • William Payne

Accenture and the Massachusetts Institute of Technology (MIT) are co-developing a supply chain resilience stress test for assessing operational and financial risks created by major market disruptions, disasters or other catastrophic events.

The new supply chain tests are inspired by the financial services industry stress tests that became compulsory after the 2008 financial crisis. The joint effort aims to create a global industry standard for a data-driven strategic assessment of supply chain resilience.

The new stress test will quantify supply chain resilience in a single resilience index. With this test, organisations will be able to quickly identify potential points of failure in their supply chain, assess their related financial exposure, and define appropriate mitigation strategies and actions. Because the scenarios are standardised, organisations both in the public and private sector will also be able to benchmark their resilience against peers and competitors across industries.

The test is designed to be scalable and adaptable to changing market conditions and customer expectations as supply chains continue to evolve. Global food company, Sigma, through its European subsidiary Campofrio, is among the companies working with Accenture and MIT to implement the stress test on its supply chain and provide input and use-case insights to its development.

The stress test begins with the creation of a “digital twin” of an organisation’s supply chain. This enables the subsequent modelling of various combinations of scenarios and impact that would significantly disrupt the organisation’s ability to serve customers, shareholders, employees, and society. Such scenarios could include sudden spikes or drops in demand, the shutdown of a major supplier or facility, scarcity of a critical raw material, or disruption of a key port.

The stress test can identify both the time it would take for a particular node in the supply chain to be restored to full functionality after a disruption (i.e., “time to recover”) and the maximum duration the supply chain can match supply with demand after a disruption (i.e., “time to survive”). This approach to supply chain risk management has been introduced and discussed by MIT Professor David Simchi-Levi and his PhD students in their article, From Superstorms to Factory Fires: Managing Unpredictable Supply-Chain Disruptions.

“There is a critical need for a global stress test standard to help prevent shortages of vital products and supplies from happening when the next disaster strikes,” said Simchi-Levi, who has published extensively on the need for consistent approaches for identifying and mitigating supply chain risks (see We Need a Stress Test for Critical Supply Chains, and Identifying Risks and Mitigating Disruptions in the Automotive Supply Chain). “The test will allow companies to understand the resiliency of their supply chains, recognise weak links and act quickly to balance the impact of unprecedented events on customers, operations and finances.”

“The COVID-19 pandemic exposed considerable weaknesses, resulting in severe disruptions in supply chains around the globe, shedding light on the need for intelligent supply chains that prioritise transparency, anticipate new risks and enable faster decision-making,” said Kris Timmermans, senior managing director and Accenture’s global supply chain & operations lead. “Our stress test enables companies to run more than 40 scenarios at one time, providing unprecedented visibility into where and how their supply chains will be impacted during a major disruption.”