In March 2021, the container ship ‘Ever Given’ famously blocked the Suez Canal for six days, creating a significant global disruption. It was not seen as a major event at the time since the world was already grappling with supply chain challenges due to the pandemic, but the impact of the canal blockage did ripple through global trade for months.
This incident is part of a growing trend where local disruptions, such as the collapse of Baltimore’s Key Bridge or the drought that restricted the Panama Canal, have a significant effect on global supply chains and economies. These events highlight the vulnerability of the interconnected systems that underpin modern commerce.
The increasing globalisation of supply chains, combined with the widespread adoption of production models that rely on minimal inventories, such as the “Just-In-Time” (JIT) principle, has left industries exposed to delays. This system assumes that raw materials will always arrive exactly when needed, reducing costs of locally maintaining raw materials but heightening sensitivity to local disruptions.
As a result, seemingly isolated incidents can now have far-reaching consequences. Localised issues like shipping delays or infrastructure failures can cascade through supply chains, affecting industries and economies worldwide. These events demonstrate the fragility of a global economy dependent on seamless logistics and highlight the need for greater resilience in supply chain management.
The JIT principle has quietly become central to systems that support modern society, often referred to as socio-technical systems (STSs). These systems rely on carefully planned and timed interactions between human and technological components, frequently spread across locations.
STSs are critical to the healthcare, transport, communications, energy, and food supply sectors. These systems ensure the smooth coordination of goods and services that keep societies running. The JIT principle in STSs mirrors its role in global supply chains—where timely, scheduled operations are crucial for maintaining stability. For both, the essential concept is “timeliness,” ensuring all elements function as expected to prevent disruptions.
Maintaining buffers is the antithesis of the principle of timeliness
Buffers can be understood as a form of inventory. In production, keeping a certain raw material stock level reduces supply chain dependency. This inventory acts as a safeguard during disruptions, allowing production to continue for a certain period, even if the supply of raw materials stops.
A firm typically matches its production output with projected demand. If the supply chain is disrupted, the buffer provides a lead time, ensuring operations continue at the planned rate till the lead time. This concept of buffers applies across various sectors, such as healthcare and transport, where personnel and resources act as buffers to maintain service continuity.
Buffers help reduce operational delays by comparing actual performance to planned schedules. All delays can be absorbed with an infinite buffer, while a zero buffer allows even the smallest delay to cascade through the entire system.
A model of firm input-output networks reveals the existence of a nonzero critical buffer size – i.e., a nonzero threshold – that separates stable operation from breakdowns. Below this threshold, delays increase and spread uncontrollably across the system. Above it, buffers can absorb delays with minimal disruption. Operating closer to (and above) this threshold results in larger and longer-lasting delays, sometimes called “delay avalanches.”
The hidden costs of a drive for efficiency, which is how the world has got here
Maintaining buffers is often considered inefficient, with various incentives encouraging STS operators to focus on cost and time efficiency. Moreover, competitive pressures push operators to prioritise streamlining operations for optimal day-to-day performance.
For instance, train operators may aim to transport more passengers by tightening schedules. When services run smoothly, tight schedules are effective, but they rely on reducing buffers—such as the extra time or replacement crew available to manage potential delays. To cut operational costs – real or perceived – operators may reduce these buffers, risking less resilience in handling disruptions.
By choosing to prioritise efficiency in day-to-day operations, the world has forsaken operational resilience, which could have been achieved through some extra incurred costs to maintain buffers or, in effect, lead times. This choice can only be blamed on the human tendency to focus fully on saving time or money in the short term.
Recommendations
The actual cost of this choice – loss of operational resilience – manifested itself in the long term or in terms of societal impacts that are not easy to quantify, e.g., loss of productivity and missed workdays, availability and affordability of consumer goods, and sustainability of STSs. Our recommendations to system operators and governance, therefore, is also to prioritise resilience alongside efficiency for better long-term outcomes and, in doing so, engage in system-thinking and allow for all too predictable “Black Swans”; more concretely, for STSs in general, to develop:
- Quantitative metrics for societal impacts of disruptions of STSs,
- Robust data and analytical infrastructure to identify potential bottlenecks in designing logistical processes and to correspondingly design contingency measures,
And specifically for supply chains:
- Identify disruption risks due to geopolitics and trade disputes, and
- Develop an understanding of the specific details, e.g., how they depend on energy and power systems, transport, logistics, and finance, including disrupted situations.
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Journal reference
Moran, J., Romeijnders, M., Doussal, P. L., Pijpers, F. P., Weitzel, U., Panja, D., & Bouchaud, J. P. (2024). Timeliness criticality in complex systems. Nature Physics, 1-7. https://doi.org/10.1038/s41567-024-02525-w
