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SUPPLY CHAIN RISK

MANAGEMENT
SHAILENDRA KUMAR-79
Introduction

 A supply chain is a network of entities such as manufacturer,


suppliers and distributors working together to transform goods
from raw material to final product while moving them to the end
customer.
 Supply chain performance may be decreased by disruptive events
occurring in the supply chain system.
Definitions –Supply Chain Risk

 Zsidisin (2003, 222) The probability of an incident associated with


inbound supply from individual supplier failures or the supply
market occurring, in which its outcomes result in the inability of
the purchasing firm to meet customer demand or cause threats to
customer life and safety.
 Wagner and Bode (2006, 303) The negative deviation from the
expected value of a certain performance measure, resulting in
negative consequences for the focal firm.
Definition- Supply Chain Risk
Management
 Tang (2006a, 453) The management of supply chain
risks through coordination or collaboration among the
supply chain partners so as to ensure profitability and
continuity
 Thun and Hoenig (2011, 243) Characterised by a cross-
company orientation aiming at the identification and
reduction of risks not only at the company level, but
rather focusing on the entire supply chain.
Supply chain risk types

 Macro factors
 Natural disaster; war and terrorism
 Political environment, External legal issues; political/ economic stability
 Fire accidents;
 Sovereign risk; natural disasters

Micro factors
 Demand factors
 Manufacturing factors
 Supply factors
 Information factors
 Transportation factors
 Financial factors
SCRM methods

 Individual SCRM process


 Risk identification
 Risk assessment
 Macro risk assessment
 Micro Risk Assessment
Micro risk assessment

 Demand risk assessment


 impact of demand volatility on inventory management
 safety stock reduction
Manufacturing risk assessment

 to analyse and assess the operational risk


 different stages are affected by various operational risks
according to the differences in plants. Therefore, each
plant should be provided with a specifically conceived risk
management process
Supply risk assessment

 Supplier’s Supplier
 Suppliers
Information risk assessment

 Critical information needed in manufacturing


operations
 Retailer experiences the most uncertainty in the supply
chain
Risk mitigation

 Macro-risk mitigation
 framework for secure site location
 The framework consists of planning, mitigation, detection,
response and recovery
Demand risk mitigation

 The optimal-order placement and replenishment plan in


order to minimise the impact of demand uncertainty.
 Forecasting techniques
 risk-sharing contracts
Manufacturing risk mitigation

 Mitigation of various manufacturing risk factors,


including quality risk, lead time uncertainty,
random yield risk, non-conforming product
design, capacity inflexibility and machine
failures
Supply risk mitigation

 supply risk can be mitigated by


implementing behaviour-based
management techniques
 building strategic supplier relationships
 early supplier involvement
Transportation risk mitigation

 To determine the optimal production and


ordering quantities for the supplier and
retailer, as well as the duration for recovery
subject to transportation disruption, which
yields the minimum relevant costs of the
system.
Financial risk mitigation

 Hedging of currency and commodity price


fluctuations can reduce supply chain
vulnerability
 Loan
Information risk mitigation

 Toconstruct attribute correspondence matrices


for databases so that they can share data with
both upstream and downstream supply chain
partners without leaking information to
competitors.
 Openness, partnering, trust and particularly
sharing of information has often been cited as
one way to reduce supply chain risk.