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Journal of Supply Chain Management

2018, 54(1), 64–76


© 2017 Wiley Periodicals, Inc.

SUPPLY CHAIN TSUNAMIS: RESEARCH ON


LOW-PROBABILITY, HIGH-IMPACT DISRUPTIONS
HENK AKKERMANS
Tilburg University

LUK N. VAN WASSENHOVE


INSEAD Fontainebleau

This study introduces supply chain tsunamis as a major strategic supply


chain phenomenon. Like their ecological counterparts, supply chain tsu-
namis occur at relatively long intervals and are therefore easily mistaken
for unique events, rather than recurring phenomena. In contrast to ocean
tsunamis, they can in principle be prevented through timely and adequate
managerial action. However, their immediate impact is just as sudden and
disruptive, and their ability to reshape supply chains of companies and
even industries equally long lasting. They are fundamentally different
from phenomena like the bullwhip effect and black swan events. This
study further explores a preliminary typology of supply chain tsunamis by
Akkermans and Van Wassenhove (2013). Each type of tsunami focuses on
a very different part of the supply chain periphery where the first signals
of a developing tsunami can be observed. In this study, we use a detailed
example from the high-tech electronics industry to describe how a supply
chain tsunami unfolds over time. This is done both from an external and
an internal perspective. The external perspective shows the sequence of
events visible to the outside observer. The internal perspective focuses on
the managerial decision-making processes that cause and (sometimes)
resolve supply chain tsunamis. We link the notion of supply chain tsuna-
mis to the broader need to revive strategic operations and supply chain
management research. Supply chain tsunamis affect corporate strategy and
have a profound impact on business and management. Therefore, we
argue that business tsunamis deserve deeper research and suggest avenues
for future research.

Keywords: supply chain disruptions; supply chain strategy; risk management; supply
chain resilience; organizational sense-making

INTRODUCTION firm can be hit the hardest, but the tsunami may
Like black swan events, gray swans can have a mas- affect the entire supply chain. Supply chain tsunamis
sive impact (Taleb, 2007). Unlike black swans, gray may even hit an entire supply network because within
swan events have happened before, although with a an industry, supply chains are typically intercon-
low frequency. In business, gray swan events typically nected. As such, supply chain tsunamis can severely
provoke organizational crises. When these business hurt an entire industry. For instance, the high-tech
events result from a sudden eruption of tensions that electronics industry experienced a massive and sudden
have been building up for a long time, we call them downturn in 2001 that sent many companies to the
business tsunamis (Akkermans & Van Wassenhove, brink of bankruptcy.
2013). Many of these business tsunamis originate in This study picks up where our 2013 paper on gray
the supply chain which is why we call them supply swans left off. Until now, supply chain tsunamis were
chain tsunamis. They are the focus of this study. The not seen as recurrent phenomena, but rather as once-
impact of supply chain tsunamis can vary. A focal in-a-lifetime events. This is understandable since they

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occur at such long intervals that the previous occur- tsunamis. We suggest a basis for an evolving typology,
rence may be forgotten or seen as equally unique. In describing four different types of supply chain tsunamis.
the high-tech electronics industry, all but a few veter- We also unravel the anatomy of supply chain tsunamis;
ans had forgotten the lifetime event that happened in both the symptoms of how they typically behave when
2001, when an even more vicious downturn hit the viewed from an outsider perspective and the root causes
industry in 2008. Over the course of their careers, driving their evolution from an internal perspective.
most managers will experience a supply chain tsunami Third, we position supply chain tsunamis as an
more than once. Nevertheless, the long time intervals example of extended supply chain management,
between them make it difficult to see their recurrent where our discipline integrates considerations from
pattern and to remain alert. It has been said before the fields of strategy, marketing, and organizational
that “this time is different” are the four most expen- behavior. We show that supply chain tsunamis fit well
sive words in history (Reinhart & Rogoff, 2009). with the current focus on “big data” and the “Internet
In fact, supply chain tsunamis are truly recurrent of Things,” given the present-day data capture and
phenomena unfolding according to an unchanging analytical capabilities surrounding digital manufactur-
operational logic, with the same key drivers and simi- ing. We use the phenomenon to reintroduce the
lar long-term effects. We define supply chain tsunamis, notion of operations as the “missing link in strategy,”
explain their anatomy with a detailed example from as Skinner (1969) and Hayes and Wheelwright (1984)
the electronics industry, and describe the sequence of did decades ago, showing that when the core dynam-
events as they unfolded in this example. We argue that ics of this supply chain phenomenon are misunder-
this sequence occurs in every supply chain tsunami stood, the business strategy may fail dramatically.
and proceed to discuss the underlying causal structure, Fourth, we craft a preliminary research agenda to
focusing on managerial sense-making and decision- explore this complex phenomenon which may take
making. We also suggest remedies to overcome or even several decades of study to fully unravel, not unlike
prevent supply chain tsunamis from occurring. Lee et al.’s (1997) seminal work on the bullwhip
Understanding supply chain tsunamis is important effect, which still triggers publications on supply chain
for operations and supply chain management (OSCM) research after two decades.
because of their destructive short-term effects, but also
because of their long-term impact. Like its ecological
counterpart, a supply chain tsunami can fundamen- SUPPLY CHAIN TSUNAMIS
tally alter the morphology of the business or even the
Describing Supply Chain Tsunamis
industry it hits, with structural effects on the supply
We define a supply chain tsunami as a rarely occur-
chain observable many years after the original event.
ring supply chain phenomenon with a sudden and
Given their disruptive short-term impact and their
devastating impact on a focal firm, its supply network,
game-changing long-term effects, supply chain tsuna-
or even the entire industry. It is a result of an accumu-
mis must be better understood so that businesses can
lation of operational issues in the periphery of the
brace themselves—or even prevent them altogether.
supply network that were either overlooked or ignored
Supply chain tsunamis are low-probability, high-
by management for too long. When a tipping point is
impact events and as such are important to study. As
reached, a violent response in the external environ-
Hora and Klasssen (2013, p. 53) noted, “Studies in
ment unleashes destructive effects on the firm, its
operations management tend to emphasize high-fre-
products and services, and management. To the out-
quency, relatively low-impact operational losses.” In
side observer, what is actually happening below the
our earlier article, we made the claim that manage-
surface remains invisible—like an ocean tsunami.
ment must cast its net wider to catch indicators of
There are many similarities between supply chain tsu-
low-probability, high-impact events (Akkermans &
namis and ocean tsunamis. In this section, we list five,
Van Wassenhove, 2013). This study contributes to the
but we also mention one crucial difference.
broader field of supply chain management on the
topic of supply chain tsunamis. This contribution is 1 Low frequency. Some 1,000 ecological tsunamis have
fourfold. First, we introduce the phenomenon to the been recorded in history. Supply chain tsunamis are
OSCM community and argue that individual also relatively rare—hitting every ten or perhaps five
instances, while seemingly very different, share the years unlike the bullwhip effect which operates all
same underlying process. We show how the phe- the time in supply chains, or a black swan event
nomenon is structurally different from established occurring only once a century.
phenomena like the bullwhip effect and black swan 2 A long gestation period followed by a sudden release of
events. forces. Just as tectonic plate pressures build up over
Second, building on our earlier paper, we provide a prolonged periods of time, the gestation of a supply
deeper description and analysis of supply chain chain tsunami can take years, until the tipping

January 2018 65
Journal of Supply Chain Management

point is passed and the forces of destruction are Positioning Supply Chain Tsunamis in the OSCM
suddenly unleashed. Literature
3 Point of origin on the periphery. Normally, the point Some clarification is to position this work in the liter-
of origin of these forces is somewhere on the ature. First, what unit of analysis are we looking at? As
periphery of the supply chain, far from the point noted by Natarajarathinam, Capar and Narayanan
of impact. Just like an ocean tsunami begins far (2009), there are different classifications of crises in the
out at sea with modest amplitude, these signs are wide-ranging supply chain literature. The source of cri-
easily overlooked. Both types are hard to observe sis can be internal or external; it can occur within a
prior to impact. Hence, the need to pay attention firm, a supply chain or network or even within an
to weak signals and actively “search for the gray entire industry. Our study takes the firm and its associ-
swans” (Akkermans & Van Wassenhove, 2013). ated supplier and customer base as the key unit of anal-
4 Massive immediate impact. The immediate impact of ysis. In other words, it focuses on the supply chain. The
a supply chain tsunami can be huge. In the cases vast majority of supply chain crises are not confined to
described in our 2013 paper (Akkermans & Van a single enterprise. A tsunami that hits a supply chain
Wassenhove, 2013), the impact ranged from senior may hit all the firms in the chain or even the entire
management stepping down to thousands of job industry—but the challenges for management remain
losses; from issuing a public apology to having to the same. This is why we take a managerial perspective.
resolve a crisis in buyer–supplier relations; from Of course, the antecedents of the organizational
massive losses to near bankruptcy. response may be different for inter- and intrafirm dis-
5 Long-term structural impact. Ocean tsunamis are very ruptions. Between firms, trust and dependence may be
low-probability, high-impact events that influence the key driving forces. Within the firm, as a recent study
the morphology of a coastline (Dawson, 1994; Mas- suggests, prior experience may be more important
tronuzzi, Br€uckner, De Martine & Regnauld, 2013). (Bode, Wagner, Petersen & Ellram, 2011).
Similarly, supply chain tsunamis can reshape supply Second, what capability (to deal with a supply chain
chains in a lasting way. This can turn out good or tsunami) are we talking about? The literature on sup-
bad. If a company learns from experience, it will be ply chains’ “adaptive capability to deal with tempo-
better prepared next time. If it can take its competi- rary disruptive events” (Juttner & Maklan, 2011) is
tors by surprise, it can ride the wave to gain a broad. Depending on the magnitude of the events,
strategic advantage. The same applies to the supply the terms “disruption” (Sheffi & Rice, 2005), “crisis,”
network as a whole or even an entire industry. For or even “disaster” are used (Natarajarathinam et al.,
example, in the semiconductor industry, huge 2009; Richey, 2009). Sources of supply chain disrup-
inventory build-ups amplified the impact of the tions can be external, such as a natural disaster, or
2001 downturn. By 2008, the morphology of the internal, such as a failure to integrate all functions
industry had changed and inventory levels were (Ponomarov & Holcomb, 2009).
kept very low, so when the global financial crisis The term “supply chain resilience” describes the
hit, orders were canceled much faster. This swift ability to cope with the consequences of unavoidable
inventory correction led to faster recovery and risk events and resume normal operations or move to
unprecedented growth rates thereafter (Financial a new, more desirable state after a disruption
Times 2010). (Christopher & Peck, 2004; Peck, 2005). Related con-
6 Foreseeable and avoidable. A fundamental difference cepts are “supply chain robustness and agility.” The
between supply chain and ocean tsunamis is that eco- former is defined as “the ability of the supply chain to
logical tsunamis remain unforeseen until the initial maintain its function despite internal or external dis-
shockwaves are released (Grotzinger & Jordan, 2014), ruptions” (Brandon-Jones, Squire, Autry & Petersen,
while supply chain tsunamis are predictable—and 2014). The latter is defined as the ability of the firm,
even avoidable. Whereas the underlying seismic activ- both internally and in conjunction with its key suppli-
ity may be unobservable to humans, in a supply ers and customers, to adapt or respond swiftly to mar-
chain setting, the mounting pressures can be spotted ketplace changes, as well as to potential and actual
and even stopped by management. While early warn- disruptions (Braunscheidel & Suresh, 2009).
ing systems for earthquakes are limited, big data and While some authors see the two as mutually exclu-
smart sensor tools and techniques can allow for sive, others regard robustness as a subset of resilience,
timely and systematic risk assessments of imminent alongside agility (Wieland & Wallenburg, 2013), or
gray swan events in supply chains. Yet in all the cases see agility as the overall construct (Braunscheidel &
we studied (Akkermans & Van Wassenhove, 2013), Suresh, 2009). In this semantic debate, we are reluc-
such systems were either not installed or their signals tant to take sides. We acknowledge different supply
were disregarded. chain capabilities—as others have done—and we refer

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Supply Chain Tsunamis

to this capability as supply chain resilience, defined as complex. While there is much to say for the perspec-
“the adaptive capability of the supply chain to prepare tive of supply networks operating as complex adaptive
for unexpected events, respond to disruptions, and systems (Bozarth, Warsing, Flynn & Flynn, 2009;
recover from them by maintaining continuity of oper- Choi, Dooley & Rungtusanatham, 2001), we do not
ations at the desired level of connectedness and con- imply that supply chain tsunamis occur because the
trol over structure and function” (Ponomarov & supply network has become so complex that its
Holcomb, 2009, p. 131). This definition fits our pur- behavior is chaotic (Dooley & Van de Ven, 1999; Hol-
pose as it encompasses a warning capability to detect land, 1995; Kauffman, 1993). A system in chaos tends
a pending or realized disruption early on and a recov- to be like that constantly; constant chaos cannot be
ery capability to return to normal activity (Craighead, managed. In a chaotic regime, it is impossible to
Blackhurst, Rungtusanatham & Handfield, 2007). monitor every minor event that could turn into a
Next, what kind of managerial decision-making are major catastrophe, as in the well-known butterfly
we talking about? It is accepted in the OSCM research effect (Lorenz, 1963).
community that managers do not act as classical
rational agents, but more as bounded rational deci-
sion-makers. Behavioral operations management exists THE ANATOMY OF A SUPPLY CHAIN
as a field in its own right (Bendoly, Donohue & TSUNAMI
Schultz, 2006). It has also made advances in the con- In 2001, the entire high-tech electronics industry
text of supply disruption risk, where managerial sense- experienced a massive downturn that sent many com-
making has been used as theoretical lens to study and panies to the brink of bankruptcy. Back then, Cisco
understand managerial decision-making (Ellis, Shock- CEO John Chambers, reflected: “I think the lesson
ley & Henry, 2011). In behavioral operations, sense- learned is that you got to anticipate that that can
making is defined as a socio-psychological process occur, and just like the philosophy of 100-year flood,
which describes how individuals resolve equivocality you’ve got to build your house in a different location,
(Weick, 1995, 2001). Despite incorporating organiza- and you know it can happen to you, not just to
tional and individual factors into supply disruption others. . . It was a tough message for the high-tech
risk, until recently, this research was considered “only industry, but we learn quickly in Silicon Valley, and
in its incipient stages; we find few empirical studies we’ll adjust” (ABC News, 2001). Was he right? This
that draw on such variables to explain disruption risk reflection was a typical one in at least two ways. First,
phenomena” (Ellis et al., 2011). We add to this body because it illustrates how unexpected and disruptive
of research by showing that more effective managerial supply chain tsunamis are perceived to be by man-
decision-making could have mitigated and even pre- agers. Second, because it illustrates how management
vented the destruction caused by supply chain tsuna- typically sees them: As something they could not have
mis. avoided, and therefore should not be held account-
We explain what supply chain tsunamis are not. Sup- able for. One cannot be blamed for a 100-year flood.
ply chain tsunamis are not a special variation of the We challenge this perception in this section by argu-
“bullwhip effect” (Lee et al., 1997), that destabilizing ing that, unlike 100-year floods, supply chain tsuna-
phenomenon of upstream amplification in supply mis can be foreseen and often even prevented by
chains which operates all the time, like waves rolling management. For this, it is essential that management
onto the seashore. The drivers are fundamentally dif- picks up the early warning signals from the periphery
ferent, as we explain below. Supply chain tsunamis of the supply chain.
are also not black swan events as meant by Taleb
(2007), as those are by definition unforeseeable and Toward a Typology of Supply Chain Tsunamis
unique. Supply chain tsunamis have happened in the In all cases, we have studied (Akkermans, 2015;
past, in the current environment, or a related one Akkermans & Van Wassenhove, 2013) a supply chain
(Hora & Klasssen, 2013) even though those earlier tsunami originates outside the scope of managerial
occurrences may have been forgotten, ignored, or even attention, in the periphery of the supply chain. The
shoved under the table by management (Akkermans part of the supply chain periphery where shockwaves
& Van Wassenhove, 2013). first appear largely determines the type of supply
Finally, we do not suggest these phenomena are the chain tsunami to expect, as Figure 1 illustrates.
direct result of complex adaptive systems behavior. Figure 1 builds upon the case examples in our ear-
Obviously, as supply base complexity grows, “the lier paper (Akkermans & Van Wassenhove, 2013) and
degree of differentiation of the focal firm’s suppliers, illustrates a preliminary typology of supply chain tsu-
their overall number, and the degree to which they namis. The horizontal directions are “classics” to sup-
interrelate” (Choi & Krause, 2006) explodes, hence ply chain management researchers. What we call a
active monitoring of the environment becomes more demand bubble tsunami originates with the focal firm’s

January 2018 67
Journal of Supply Chain Management

FIGURE 1
Supply Chain Tsunami Typology in Terms of the Supply Chain Periphery to Monitor for Early Warning Signals
[Color figure can be viewed at wileyonlinelibrary.com]

Relational /
cultural

Relation-
ship spiral
tsunami
Transactional/
contractual Demand
Schedule
pressure bubble
External- Primary Internal tsunami External-
Upstream
tsunami downstream
processes

Quality
cascade
tsunami

Tertiary
processes

customers and even with their customers, that is, far buyer–supplier settings (e.g., Van de Vijver, Vos &
downstream. Research has indicated industries where it Akkermans, 2011).
is essential to monitor the downstream supply chain
(e.g., Anderson, Fine & Parker, 2000). On the other A Demand Bubble Tsunami: The Cisco 2001 Case
end of the spectrum, what we call a schedule pressure By way of a guiding example, we zoom in on the
tsunami originates in the engineering processes and 2001 Cisco case, a well-known demand bubble tsu-
component manufacturing, which are often out- nami. Back then, like today, Cisco made equipment
sourced, that is, far upstream. Again, there is abundant that runs the Internet, notably digital information
research on how issues in complex new product switches. It also supplied equipment for the world’s
design projects can dramatically and unexpectedly telecommunications infrastructure and for teleconfer-
escalate (e.g., Van Oorschot, Akkermans, Sengupta & encing, video, and Wi-Fi networks. Its sales were
Van Wassenhove, 2013). $47.1 billion in the 2014 fiscal year, compared to
The vertical directions in Figure 1 are less common $1.2 billion in 1994, just before Mr. Chambers
but not unknown in the supply chain literature. For stepped in as CEO. For a brief period, during the dot-
example, in service supply chains, secondary and even com bubble in the late 1990s, Cisco was the world’s
tertiary processes often create havoc (e.g., Akkermans most valued company. The demand bubble tsunami
& Voss, 2013). Events that resemble what we call a we describe starts around that period. To the outside
quality cascade tsunami in service supply chains were observer, the story unfolds in five distinct steps (a–e),
described from an OM perspective some time ago as illustrated in Figure 2.
(e.g., Akkermans & Vos, 2003; Oliva & Sterman, (a) All appears well. Around the start of the new mil-
2001). These originate from down in the “boiler lennium, the high-tech sector was in a permanent
room” of service supply chains, in their internal sup- state of euphoria. The combined rise of high-speed
port processes. We also know that external buyer–sup- Internet and mobile communication led to wonderful
plier dyads can degrade into a so-called relationship prospects for companies active in these innovation-
spiral (Autry & Golicic, 2010). Here, so-called relation- driven industries. In 1999, 80 percent of the routers
ship spiral tsunamis can create major crises in external connected to the Internet were Cisco products. From

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Supply Chain Tsunamis

FIGURE 2
External and Internal Process Sequences of a Supply Chain Tsunami [Color figure can be viewed at wileyonlineli-
brary.com]

A B C Violent D E
EXTERNAL All is well Bad news reactions Long existed Long ignored

Time

Decision- Implemen-
INTERNAL Sense-making Learning
making tation

1995 onward, Cisco had been growing fast, beating inventory. In this way, “Cisco was supposedly using
expectations of the financial analysts (NYT 1999, the Internet to bind together its suppliers and contract
2000). Q2 of 2000 was its 42nd consecutive quarter manufacturers into a seamless whole, pointing the
of revenue growth (NYT 2000). What could explain way to the corporation of the future. In fact, Cisco’s
this spending spree by Cisco’s customers? According network organization did little to soften the impact of
to CEO John Chambers, the world had changed for the downturn or save Cisco from the disastrous inven-
good: “Globally, business and government leaders are tory buildup” (Byrne & Elign, 2002).
beginning to dramatically transform their traditional What happened is that Cisco’s customers, in a rush
business models into Internet economy business mod- to meet the challenges from the Internet economy,
els. Business leaders are beginning to get it, and as had ordered equipment aggressively, often ordering
they get it they begin to bring the applications up and ahead and even placing double or triple orders (Byrne
spend at an accelerated rate” (NYT 2000). & Elign, 2002; Armory & Plambeck, 2005), in
(b) Bad news comes out. That not all was well became response to anticipated shortages and delivery delays.
apparent to the outside world in February 2001, when Cisco itself, in order to secure timely delivery, had
Cisco announced for the first time in eleven years that decided to place fixed orders with its supply base.
it expected revenues to decline (NYT 2001a). The “We made a conscious decision when our leadtimes
company said that for accounting purposes, it would were 12 to 13 weeks to build inventory, because we
reduce the value of inventory by $2.5 billion that were leaving a sizable amount of revenues on the
quarter, $500 million in partly completed equipment, table every quarter,” conceded Cisco’s CFO in a 2002
and $2 billion in raw materials like computer chips interview. Soon inventories were growing faster than
(NYT 2001b). Net income dropped by $0.8 billion in sales, and the supply chain collapsed. It went from
Q1 of 2001 and $2.7 billion in Q3 of that year as zero inventories to a tsunami wave of seemingly
Cisco fired 8,500 workers (Byrne & Elign, 2002). unstoppable supplies rolling in.
(c) Violent external reactions. This unexpected news (e) Bad news ignored/suppressed by management. Before
led to a massive drop in the market value of Cisco the bubble burst, Cisco management made a gamble,
Systems from $430 billion in March 2000 to or a “strategic choice,” to prefer potentially unused
$180 billion in March 2001. This drop was one of the inventory to the possibility of stock outs (Thurm,
deepest losses of shareholder wealth in history. It took 2001). They abandoned their own supply chain–
Cisco several years to recover and it survived, but based business model. In retrospect that gamble
never regained its reputation of “Internet titan” (NYT turned out to be a mistake. When the bubble burst,
2001c) from before the demand bubble burst. Cisco management first remained in denial. As men-
(d) Long-existing internal operational issues. How tioned above, Mr. Chambers put what happened out-
could this have happened? How could a company side of his own responsibility, stating that the
that was supposed to have hardly any inventory at all, economic challenges confronting the network equip-
be exposed to such huge inventory risk? After all, only ment industry were “a 100 year flood.” But was what
some 40% of what Cisco sold at the time was actually happened really so utterly unpredictable? One year
made by the company. Instead, the bulk of what later in 2001, many in the industry agreed that “Cisco
Cisco delivered was manufactured by a network of executives ignored or misread crucial warning signs
suppliers and contract manufacturers. This outsourced that their sales forecasts were too ambitious” (Thurm,
supply chain business model was supposed to keep 2001). Even Cisco’s suppliers saw that sales forecasts
fixed costs to a minimum and eliminate the need for were too good to be true and told their customer so,

January 2018 69
Journal of Supply Chain Management

according to the same article: “As long ago as last However, our terminology zooms in on fallible man-
summer, executives at Solectron, one of Cisco’s biggest agerial decision-making, which appears to be the core
contract manufacturers, had warned Cisco and other issue for supply chain tsunamis.
telecom-gear makers that they appeared to be ordering The majority of the OSCM literature on crisis man-
more parts than needed” (Thurm, 2001). agement, supply chain risk, or supply chain disrup-
Some years later, in their 2005 Management tions looks at crises that have their origins outside the
Science article on this case, Armory and Plambeck company. In most organizational crises caused by sup-
(2005, p. 1505) would concur: “Our results suggest ply chain tsunamis, the root problems are internal.
that Cisco’s write-off was caused by estimation errors Certain organizational routines allow these problems
and cannot be blamed entirely on the economic to grow, unknown at first, and then disregarded or
downturn.” Supply chain phenomena heavily inter- even denied by management, until they trigger a
act with behavioral issues, both in operations and at major strategic impact. We contend, therefore, that
managerial levels where they provoke disastrous supply chain tsunamis can be seen as a special case of
strategic impact. managerial decision traps (Russo & Schoemaker,
1989; Van Oorschot et al., 2013). The management
The Anatomy of a Supply Chain Tsunami trap is that the four-stage managerial cycle shown in
In summary, the following sequence of events can Figure 2 is too slow to allow for a timely reaction that
be observed from the outside when a business tsu- could have avoided the tsunami. How to conduct
nami “hits” a company and its supply chain: research that will help prevent supply chain tsunamis
is the topic of the next section.
a For a long time, all seems to be well.
b Suddenly and unexpectedly, bad news breaks.
c This leads to a violent reaction in the market, with
IMPLICATIONS FOR SUPPLY CHAIN
severe internal consequences.
d It then becomes clear that supply chain and opera-
STRATEGY: TOWARD A RESEARCH AGENDA
It has been noted before that the focus of supply
tional problems have long existed.
chain managers (and research) is largely on ongoing
e Finally, it becomes apparent that these problems
operational failures, on events that occur with high
were missed or systematically ignored, underesti-
frequency and in the short term (Hora & Klasssen,
mated, or even denied by management.
2013). In contrast, supply chain tsunamis are the
This sequence not only holds for a demand bubble result of a longer-term strategic failure to recognize
tsunami. In our earlier article, we described this more subtle effects that rarely occur and lead to major
sequence for each of the supply chain tsunami types organizational problems and even crises. When some-
in Figure 1. thing happens every decade, how many managers still
Meanwhile, the processes that unfold internally in have knowledge of the previous occurrence, and how
the supply chain are very different from what is many companies will have developed systems, proce-
observed from the outside. This is illustrated in dures, and routines to anticipate such rare events and
Figure 2. Again, this sequence was observed in all deal with them effectively? This is where the study of
types of supply chain tsunamis we studied. supply chain tsunamis could enrich the risk manage-
Internally, while operational problems continue to ment and supply chain resilience research streams. In
grow, management takes a long time to make sense of general, a long-term strategic failure to recognize rare
their magnitude and severity. Early warning signals events in the supply chain is a missing link in the
are sent from the periphery of the supply chain and recognition that operations and supply chain manage-
remain weak for a long time, especially for the man- ment has a key impact on business strategy (Skinner,
ager who sees them as very unwelcome news. Subse- 1969).
quently, decision-making is slow, leading to delayed While the supply chain tsunami phenomenon may
implementation of necessary counter-measures. be new to OSCM research, the research fields to study
In the years after the crisis, supply chains may well it properly and to provide guidelines are not. What is
learn the lessons from the tsunami and change their new is the way in which insights from these fields
structure and policies. Unfortunately, over time, this have to be combined. For instance, there is active use
higher understanding and awareness may decrease of behavioral decision-making and sense-making in
again, potentially facilitating another occurrence of a OSCM, and a wide array of research on supply chain
supply chain tsunami a decade later. This four-stage disruptions. What is needed to understand supply
sequence (Figure 2) is not unlike the three distinct chain tsunamis is to integrate both. This is true of
disruption phases of supply chain “readiness,” “re- other fields as well, such as information management
sponsiveness” and “recovery” for adaptive resilience and data analytics. We highlight these as we follow
(Juttner & Maklan, 2011; Sheffi & Rice, 2005). the managerial decision sequence from Figure 2 stage

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Supply Chain Tsunamis

by stage. It is this decision sequence that highlights Bombs” (Wickre, 2017) of extremist and distressing
the root causes of the supply chain tsunami content (Sillars, 2017). This is a business-to-consumer
phenomenon. (B2C) example. In the business-to-business setting of
high-tech electronics, De Kok et al. (2005) describe a
Sense-Making successful collaborative planning effort for a three-
A key remedy to avoid supply chain tsunamis is to echelon supply chain of optical storage devices. Here,
develop a skill in watching out for gray swans, espe- data collection was driven by an integral mathemati-
cially in the outskirts of the extended supply chains of cal model, spanning half a dozen companies and doz-
an organization. Managing supply chain tsunamis is ens of factories and warehouses.
fundamentally about looking for early signs of disrup- In the OSCM literature, a distinction is made
tions or crises building up. Although supply chain vis- between information sharing and visibility. Informa-
ibility is commonly regarded as “a key capability in tion sharing enabling supply chains to be more trans-
reducing supply chain risk (Christopher & Lee, 2004), parent (Brandon-Jones et al., 2014) is predominantly
surprisingly, broad empirical evidence for its effects concerned with quality and relevance of information
appears largely absent from the literature” (Brandon- (Cao & Zhang, 2011), visibility with the information
Jones et al., 2014). We know that effective informa- flow in terms of inventory and demand levels (Braun-
tion sharing significantly enhances supply chain prac- scheidel & Suresh, 2009). In the current context, the
tice and that this effect grows when the supply chain need to look far and wide applies to both aspects.
becomes more dynamic (Zhou & Benton, 2007). It is clear that more IT will not necessarily prevent
In recent years, there have been renewed calls for future supply chain tsunamis. Big data may help but
information technology as an enabler for superior may not be sufficient. Companies and their supply
supply chain performance, in particular supply chain chain partners need to develop a deeper understand-
collaboration. Could superior use of IT help? It is dif- ing of the dynamics that govern the periphery, and
ficult to say. It is commonly assumed that when “ade- ultimately the center, of their supply networks. This
quate information systems exist with suppliers and will make clear what kind of data they should collect
customers,” a willingness to share information among and what key performance indicators to monitor. A
supply chain members is promoted (Fawcett, Wallin, present-day comparison can be made with the field of
Allred, Fawcett & Magnan, 2011). The example of Cis- predictive maintenance, where data analytics alone are
co’s supply chain tsunami certainly suggests that the not sufficient to make sense of the gigabytes of data
absence of visibility can create what Christopher and spat out by complex equipment on a daily basis. One
Lee (2004) term a “risk spiral.” But would IT also needs good theories on failure modes, degrada-
improvements have prevented the build-up of the cri- tion models, and the like, to guide the search (Akker-
sis? For instance, would better visibility of the total mans, Besselink, van Dongen & Scholten, 2017;
volume of upstream pipeline stocks have made the Porter & Heppelman, 2014). In short, IT helps and
total value at risk clearer to Cisco’s management? It current technology clearly opens great opportunities,
would not have shown that the real orders placed by but a deeper understanding of underlying phenomena
customers were heavily inflated—that would require is required for improved sense-making. Theory devel-
visibility on developments in the downstream market opment is therefore necessary to accelerate progress.
of Cisco’s customers’ customers. Very few vendors
boast that they have installed such systems, and few Decision-Making
OEMs admit publicly they have such visibility, even Supply chain tsunamis hurt the entire supply chain.
today. Dealing with them requires concerted decision-making
In summary, without visibility on downstream or between multiple business units and functions, as well
upstream supply chain developments, management is as different hierarchical levels. Such decision-making
partially blind and accidents will happen. With mod- is far from easy. As the Cisco case illustrates, long
erate supply chain visibility, management may not see after some parts of the supply chain realized there
far or deep enough to spot a tsunami in the making. were major problems, there was still no concerted
Even with full visibility, that extends to more than action to address them. In this respect, OSCM can
one echelon upstream or downstream, only a mindset borrow from insights on organizational inertia
that is actively on the lookout for rare events running (Dobrev, Kim & Carroll, 2003; Hannan & Freeman,
counter to conventional wisdom will catch such sig- 1984), information filters (Russo, Carlson, Meloy &
nals in time (Ellis et al., 2011; Weick, 1995; Weick, Yong 2008), decision traps (Russo & Schoemaker,
2001). This resonates with many examples of good 1989), and functional silos (Flynn, Huo & Zhao,
practice. For instance, in May 2017, Facebook 2010; Majchrzak & Wang, 1996). In particular, the
announced it would hire 3,000 additional staff to budding literature on Sales and Operations planning
constantly scan Facebook pages for emerging “Google can be leveraged (Doering & Suresh, 2016; Kaipia,

January 2018 71
Journal of Supply Chain Management

Holmstr€ om, Sm aros & Rajala, 2017; Oliva & Watson, more attractive to document and discuss. As Hora and
2011; Thome, Scavarda, Fernandez & Scavarda, 2012) Klasssen (2013) point out, “the routines and processes
to yield insights on how to share data and decisions of a successful firm also can represent a benchmark or
faster and better across a supply chain, business func- aspirational model. In contrast, for operational losses,
tions, and hierarchical levels. observational learning involves avoidance or anticipa-
Formal decision models, especially when developed tion of triggers initiating such losses.”
with and for management, can considerably improve What the OSCM community can learn from other
and speed up the decision-making process. For disciplines, or by reverse design, is that airline pilots,
instance, at Fluor, an engineering company, a formal marines, and other professionals, including humani-
system dynamics model of project dynamics is rou- tarian logisticians, who have to deal with low-
tinely used to prevent schedule pressure tsunamis likelihood high-impact events use simulations. A flight
from occurring (Cooper & Lee, 2009). In general, sys- simulator is cheaper than an actual plane and just as
tem dynamics seems well-suited for modeling these sophisticated. It allows intensive training in rare
types of business processes, since supply chain tsuna- events and how to handle them. Similarly, complex
mis thrive in a nonlinear world with tipping points, natural and man-made disasters are increasingly simu-
delays, and exponential growth, which is where SD lated for training purposes of response actors like
models excel. Supply chain tsunamis are also rooted humanitarian logisticians or medical teams. These
in operational processes. Sterman, Oliva, Bendoly and true-to-real-life exercises are still rare in the business
Linderman (2015) point out that system dynamics world. One reason may be the challenge of bringing
fosters “the development of process-based theories together the multiple actors in the supply chain or the
that explicitly incorporate the physical and institu- larger ecosystem for these types of trainings. Neverthe-
tional structure of operational systems and the behav- less, the beer game (Sterman, 1989), a board game
ioral decision rules of the actors in those systems” depicting dynamics in a four-echelon supply chain,
(Sterman et al., 2015, p. 4). Finally, system dynamics was used successfully to train hundreds of thousands
has also developed good practices for developing of students and practitioners in complex supply chain
models together with management and staff of the dynamics. System dynamics-based “managerial micro-
companies involved, to secure ownership and com- worlds” (Senge, 1990) may just be what the OSCM
mitment to the policy recommendations following field needs to better understand and teach the dynam-
from the model (Akkermans, Bogerd & Van Dore- ics governing supply chain tsunamis.
malen, 2004; Akkermans & Van Oorschot, 2016). While simulated environments are extremely useful
for training purposes, the question is also how to use
Implementation them for research. Obviously, the behavior and deci-
The trade-offs between robustness and flexibility sion-making of trainees can be monitored, and natu-
constitute an interesting avenue for further research ral experiments can be used to test hypotheses.
since ample literature is available in the field of Sengupta, Abdel-Hamid and Van Wassenhove (2008)
OSCM. What is the impact of the trade-off between conducted experiments with highly experienced execu-
tight and closely knit supply chain relations with tives in simulated project settings and showed that
strategic supply chain partners and a more loosely they performed surprisingly poorly. Van Oorschot
coupled collaboration mode on the ability to deal et al. (2013) observed weekly meetings of a manage-
with supply chain tsunamis? This may go back all the ment team for a major new product development pro-
way to the trade-off between tightly and loosely cou- ject for over a year and documented the decision trap
pled systems as developed in normal accident theory they fell into when the project failed.
(Orton & Weick, 1990; Perrow, 1984). This paper
supports the call of Ellis et al. (2011) to develop more Toward a Research Agenda
research that takes a managerial sense-making and Summarizing the above comments, research into
enactment perspective on supply chain disruptions. supply chain tsunamis requires a broad external per-
spective to understand complex supply chains or even
Learning networks and pick up weak signals at the periphery.
When organizations fail to learn from a tsunami One needs to analyze how seemingly innocent events
experience they may well go under with the next one at the periphery can spin to the center of the network
hitting them. Partly, this is an issue of organizational and create havoc. How does that differ by industry or
inertia (Dobrev et al., 2003) and the need to develop a by the structure and operation of the supply chain?
systems capability to learn from failures and mistakes Research also needs to study nonlinearities to predict
(Madsen & Desai, 2010; Senge, 1990). One problem when events reach a tipping point that requires
with crises resulting in operational losses is that one prompt action in order to prevent the tsunami from
needs to learn from failures, while successes are much hitting the company or the sector. All of the above

72 Volume 54, Number 1


Supply Chain Tsunamis

strongly suggest an extended perspective of OSCM. sectors, have severe short-term impact on supply
Table 1 contains a set of example questions along the chains, companies, and sometimes entire industries,
managerial decision cycle we have laid out and across as well as long-term formative effects on industry
our tentative typology of SC tsunami types. structure.
Sources of inspiration are numerous, but they all start We have given a basis for an evolving typology of
with becoming aware that supply chain tsunamis exist. business tsunamis containing four different types. We
They are important strategic supply chain phenomena have described the anatomy of supply chain tsunamis
in their own right whose study has been neglected. Only both in terms of the typical symptoms the outside
then can we start to analyze, model, and detect them world observes and in terms of the internal managerial
early on. It is essential to recognize a phenomenon, processes that form the root causes for the problems.
unravel its underlying behavior, and identify a basic To an external observer, a five-stage sequence is typical.
typology. This is the essence of our contribution. First, all is well. Then, the bad news breaks and violent
reactions erupt. Next, it surfaces that the problems were
long-existing and long-standing management ignorance
CONCLUSIONS and even denial is exposed. To an attentive internal
This paper has introduced supply chain tsunamis as observer, the root cause process steps management goes
an important OSCM phenomenon. It has shown that through involve sense-making, decision-making, imple-
supply chain tsunamis are different from known mentation, and learning. When supply chain tsunamis
dynamic phenomena like the bullwhip or black swan occur, subsequent analysis invariably shows that the
effects. It has also shown that supply chain tsunamis managerial decision sequence was way too slow to spot
are important because they are pervasive across many and address the growing issues before they manifested.

TABLE 1
Example Questions for a Research Agenda on Supply Chain Tsunamis

Decision
Process Stage Promising Research Questions
Sense-making What are good early warning indicators to detect a pending tsunami in
new product development (for a schedule pressure tsunami), in downstream
supply chains (for a demand bubble tsunami), in order rework in service
supply chains (for a quality cascade tsunami), or in buyer–supplier
relationships (for a relationship spiral tsunami)?
What cognitive, behavioral, and organizational decision filters are
complicating detection? What are sound policies to eliminate these
decision filters?
Decision-making How does the number and cohesion of functional managers involved in
dealing with a tsunami affect the speed and quality of the policies devised?
How is the trade-off between a strongly structured, tightly integrated
decision-making process and a more loosely coupled mode of
decision-making impacting supply chain disruptions?
How is the impact of the number of hierarchical levels and organizational
complexity affecting speed and quality of decision-making and the
resulting policies?
What is the impact of organizational culture (e.g., a culture of high-reliability)
on transparency and trust in decision-making teams and hence on decision
speed and quality?
Implementation How is the trade-off between tight and closely knit supply chain relations
with strategic supply chain partners and a more loosely coupled collaboration
mode impacting the ability to deal with business tsunamis?
Learning What determines how much and how quickly an organization/supply
network/industry learns from a business tsunami experience?
What are the long-term effects of a business tsunami on reshaping
organizational culture, information systems, supply chain relationships,
inventory strategy, sourcing strategy, etc.?

January 2018 73
Journal of Supply Chain Management

We have positioned the supply chain tsunami phe- Akkermans, H. A., & Vos, B. (2003). Amplification in
nomenon within “Extended SCM,” and have specified service supply chains: An exploratory case study
broadly how and where OSCM needs to expand its from the telecom industry. Production and Opera-
perspective, not just to big data, although arguably IT tions Management, 12, 204–223.
development takes away the management excuse “they Akkermans, H. A., & Voss, C. (2013). The service bull-
whip effect. International Journal of Operations and
just couldn’t get us timely data.” We have also
Production Management, 33, 765–788.
pointed to behavioral studies, to marketing, and to
Anderson, E., Fine, C. H., & Parker, G. G. (2000).
business strategy, so that OSCM regains its place as Upstream volatility in the supply chain: The
“the missing link” in corporate strategy (Skinner, machine tool industry as a case study. Production
1969). Unless OSCM picks up this challenge, the field and Operations Management, 9, 239–261.
is at serious risk of being marginalized, as these phe- Armory, M., & Plambeck, E. (2005). The impact of
nomena are here to stay and other fields may be duplicate orders on demand estimation and capac-
happy to pick up what is essentially an OSCM topic ity investment. Management Science, 51, 1505–1518.
with a strong extended supply chain component. Autry, C. W., & Golicic, S. L. (2010). Evaluating
Supply chain tsunamis, although interdisciplinary in buyer-supplier relationship–performance spirals: A
nature, are first and foremost supply chain phenom- longitudinal study. Journal of Operations Manage-
ment, 28, 87–100.
ena, and we believe the OSCM community has much
Bendoly, E., Donohue, K., & Schultz, K. (2006).
to offer to society by studying them, understanding Behavioral operations management: Assessing
their origins and behaviors, and providing guidelines recent findings and revisiting old assumptions.
for containing their harmful effects. We are fully Journal of Operations Management, 24, 737–752.
equipped for this. This paper is a call to researchers to Bode, C., Wagner, S. M., Petersen, K. J., & Ellram, L.
pick up this challenge and ensure that supply chain M. (2011). Understanding responses to supply
tsunamis will not become an ever-greater plague of chain disruptions: Insights from information pro-
our present-day society. That it will not become our cessing and resource dependence perspectives.
“new normal” (Wickre, 2017), but rather a phe- Academy of Management Journal, 54, 833–856.
nomenon we know, understand, can manage, and Bozarth, C. C., Warsing, D. P., Flynn, B. B., & Flynn,
have under control. E. J. (2009). The impact of supply chain complex-
ity on manufacturing plant performance. Journal
of Operations Management, 27, 78–93.
Brandon-Jones, E., Squire, B., Autry, C., & Petersen, K.
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