- Manufacturing practitioners and researchers recognize the need to develop effective supervisory controllers for automated manufacturing systems. One active area of research has been developing deadlock avoidance methods for these systems. Almost all work to date has assumed that allocated resources do not fail. In this paper, we consider deadlock and blocking problems in systems with unreliable resources. Our objective is to develop supervisory control policies that allocate resources so the failure of any given resource does not propagate through blocking to effectively stall other portions of the system. To accomplish this, the supervisory controller must enforce liveness for the original system while avoiding states that do not serve as feasible initial states for the reduced system when an unreliable resource fails. The policy must then enforce liveness for the reduced system while avoiding states that do not serve as feasible initial states for the original system so transition to normal operation is smooth when the failed resource is restored.