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.

Inspired by the crucial 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 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 at Accenture. “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.”

Leveraging Accenture’s expertise in supply chain, operations and analytics, and MIT’s research and capabilities in data science, the stress test will quantify supply chain resilience in a single resilience index. With this test, organisations will be able to identify potential points of failure in their supply chain quickly, 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.

“As a company with a wide international footprint, we need to ensure an uninterrupted supply of products to our customers, no matter what disruptions occur,” said Fernando Ibarra, supply chain director for Sigma in Europe. “Managing the impact of Covid-19 required high effort on our side and, in the process, we uncovered several weaknesses in the supply chain we wished we had identified more proactively before. Working with Accenture and MIT on this ground-breaking project will be key to recognise other potential weaknesses and continue increasing our supply chain resilience.”

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, known as time to recover, and the maximum duration the supply chain can match supply with demand after a disruption, called time to survive.

This approach to supply chain risk management has been studied by MIT professor David Simchi-Levi and his PhD students.

“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. “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.”

Accenture and MIT have a long history of collaboration and recently launched the MIT and Accenture Convergence Initiative for Industry & Technology. The initiative brings together experts from Accenture and MIT to explore how the convergence of industry and technology will transform global business and society, and how organisations can uncover and better capture its opportunities.

Accenture is a Dublin-based professional services company with capabilities in digital, cloud and security. Combining experience and skills across more than 40 industries, it provides strategy, consulting, interactive, technology and operations services from a network of technology and intelligent operations centres. Its 506,000 employees serve clients in more than 120 countries.

The MIT Data Science Lab develops analytic techniques and tools for improving decision making in environments that involve uncertainty and require statistical learning. Its methods have been implemented by a large number of companies across various industries including airlines, insurance, manufacturing, retail and finance.