ROI Calculator
Learn how Resilinc’s Disruption Vulnerability Index (DVI) rewards resilient suppliers and penalizes risky suppliers.
Do you know who your most risky suppliers are? They’re not your Tier-1 suppliers.
85% of supply chain disruptions occur in the indirect supply chain. When a disruption strikes in these hidden tiers, it takes a long time for the news to go up the chain. From ESG compliance to challenges like extreme weather and labor issues, these disruptions can send a ripple effect through your entire supply chain. By the time you learn about the impact—it’s often too late. To get ahead of the problem, companies must pinpoint which suppliers are the weakest link.
Unfortunately, assessing supplier risk is complex. The first hurdle is integrating historical data. This is especially challenging in industries like high-tech and life sciences that rely on thousands of suppliers, each with unique risks. Next, companies must analyze past disruptions for each supplier. During the time it takes to assess supplier risk, companies may be blindsided by supply chain disruptions, leaving them scrambling to find alternative suppliers.
To solve these problems and become antifragile, companies can turn to Resilinc’s easy-to-use rating for measuring supplier vulnerability: the Disruption Vulnerability Index (DVI). Following the latest updates, Resilinc’s new DVI has an enhanced focus on AI predictive analytics that provides companies with more robust, proactive risk management capabilities.
What is Resilinc’s Disruption Vulnerability Index (DVI)?
Resilinc’s Disruption Vulnerability Index (DVI) is a way for companies to measure a supplier’s vulnerability to disruptions. It uses predictive AI to help companies quickly assess a given supplier’s overall vulnerability with a rating from one to ten—with zero being low vulnerability and ten being high vulnerability.
This rating is based on data collected, curated, contextualized, researched, and analyzed by Resilinc’s EventWatchAI over the last 12+ years. Our database contains approximately 7.1 million historically archived supply chain alerts, gathered from 150M+ news feeds across 100 languages and 200 countries. Without Resilinc’s predictive AI that powers the DVI, it would be nearly impossible to extract and quantify meaningful insights for each supplier.
By using the DVI, companies can proactively manage hidden supplier risks seamlessly, all from one platform—turning these risks into a competitive advantage and becoming antifragile.
What risks are tracked by Resilinc’s DVI?
Resilinc measures six different DVIs for each supplier: Operational, Cyber, Environmental, Financial, Compliance, and Socio Geopolitical. By providing granular insights into the nature and impact of each risk type, DVI enables businesses to tailor their mitigation strategies accordingly. For each risk area, suppliers are given a rating ranging from zero to ten. Here’s a breakdown of each DVI:
- Operational: Earthquakes, port disruptions, power outages, etc.
- Cyber: Cyber attacks
- Environmental: Chemical spills, environmental hazards, forest fires, etc.
- Financial: Bankruptcy, Force Majeure, mergers and acquisitions, etc.
- Compliance: FDA/EMA/OSHA action, legal action, recalls, regulatory changes, etc.
- Socio Geopolitical: Geopolitical, human health violations, labor violations, etc.
How is DVI Calculated?
Several factors go into the DVI calculation. The first is the severity of the supply chain disruption, which ranges from low to severe. Next, is whether the supplier confirmed the impact of the disruption. After that, the algorithm evaluates the type of event. A factory fire may receive a lower rating than a major event like bankruptcy, for example. Finally, the DVI considers the frequency of the disruption. This helps to determine if the disruption is a reoccurring issue, like if a supplier experiences multiple factory fires every year vs. one outlier factory fire.
With the latest updates to Resilinc’s Disruption Vulnerability Index, predictive AI can now identify patterns and forecast events with a high likelihood of recurrence. These updates were born out of Resilinc’s push to harness predictive AI to unlock future insights and streamline supply chain risk management. Read more about how we’re using predictive AI in our blog: 5 Models of AI for Supply Chain Risk Management.
Let’s dive into the details of the newest version of Resilinc’s DVI.
The Latest Updates to Resilinc’s Disruption Vulnerability Index
The DVI algorithm now thoroughly examines Resilinc’s collection of historical data, identifying patterns and forecasting events with a high likelihood of recurrence using predictive AI. For example, the algorithm can look at historical data and detect seasonality. Conversely, it can also determine if an event is an outlier. The DVI then uses this data to make more accurate predictions about current supply chain disruptions—providing a complete picture of risk.
#1 Enhances predictive accuracy
The previous version of DVI used a simple moving average to analyze the impact of past events. This version did not prioritize disruptions by severity. Now, the new DVI algorithm emphasizes how past performance can be used as an indicator of future behavior for suppliers. It does this by ranking performance across various parameters—such as recency and frequency—within the risk-scoring model.
Example—Old Model: Imagine a supplier experiences a bankruptcy in January, which also results in a profit warning. Using the old model, the supplier’s risk rating would have been six. Bankruptcies receive the highest risk rating of ten, while profit warnings are categorized as two in our system. The average of these two numbers is six.
Example—New Model: Now, the DVI intellectually recognizes that the impact of bankruptcy will last a long time and warrants a higher risk rating. Using the new DVI model, the risk will be a ten. The weight of the impact will gradually be reduced over time. If the supplier does not repeat the problem, the rating will improve. However, if disruption continues, the number will remain high.
#2 Identifies seasonality using predictive AI
Previously, the DVI did not look for the cyclical nature of recurring and seasonal events. Now, the predictive AI prioritizes current events while intelligently managing the impact of past occurrences. It ensures that Resilinc customers receive real-time insights into supply chain disruptions, allowing for proactive decision-making to mitigate risks effectively.
Capturing the cyclic nature of recurring events ensures that customers can anticipate and address seasonal fluctuations, ultimately optimizing procurement strategies and enhancing overall supply chain resilience. Here are two examples.
Example 1—Outlier Events: Imagine a supplier is hit by a factory fire in 2022. The DVI penalizes them for this disruption. However, over the next two years this supplier doesn’t experience any other factory fires or disruptions. Now, since the supplier hasn’t had a disruption in two years, they will be rewarded with points to lower the DVI.
Example 2—Recurring Events: Imagine a supplier consistently deals with disruptions like floods, factory fires, and labor strikes. The predictive AI will notice this pattern in the historical data and the supplier DVI rating will increase highlighting the escalation of disruption likelihood.
#3 Rewards and celebrates resilience
In a dynamic environment, the Disruption Vulnerability Index (DVI) stands out as a beacon of proactive supplier management. Just as a credit score incentivizes responsible financial behavior, the DVI rewards suppliers who have diligently navigated past disruptions by implementing strategic changes to their internal processes and operations.
Learning from the Past
Much like a wise mentor, the DVI takes cues from past experiences. Suppliers who have embraced the lessons of previous disruptions and made tangible adjustments are recognized and applauded by the algorithm. This recognition is not just a pat on the back; it’s a strategic move towards fostering resilience in the face of future uncertainties.
Penalizing Disruptions, Rewarding Resilience
The DVI doesn’t just penalize for disruptions; it actively seeks out and celebrates resilience. By attributing positive points to suppliers who have successfully internalized past learnings, the algorithm not only acknowledges their efforts but also encourages a culture of continuous improvement and adaptability.
By rewarding good behavior and promoting a proactive approach to supplier management, the DVI paves the way for a future where disruptions are not just weathered but turned into strategic advantages.
Long-term benefits of using the DVI
Leveraging Resilinc’s Disruption Vulnerability Index (DVI) can help organizations move closer to antifragility. Using the DVI, organizations can:
- Uncover hidden insights from Resilinc’s breadth of historical data
- Classify supply chain vulnerabilities
- Improve operational efficiency
- Strengthen supply chain resilience
- Minimize and mitigate impacts to operations from disruptions
These benefits combined can help organizations become antifragile—a state where businesses thrive in uncertainty. By turning uncertainty into a competitive advantage, organizations not only protect against the risks of today, but also the risks of the future.
Unlock hidden insights in your historical data
Ready to start using your historical supply chain data for better decision-making and supplier risk scoring? If you’re a Resilinc customer, speak with your customer service manager to learn more. If you’re interested in the DVI, but not currently a Resilinc customer, reach out and schedule a demo to see how the DVI can help your company minimize risks, improve operational efficiency, and strengthen supply chain resilience.
