SUPPLY CHAIN RISK MANAGEMENT

Supply Chain Risk Management



Table of Content

SUPPLY CHAIN RISK MANAGEMENT3

Background of the Problem3

REFLECTION23

REFERENCE25

APPENDICES27

Supply Chain Risk Management

Background of the Problem

In industry, particularly those commerce going in the direction of longer supply chains (e.g. due to outsourcing) and opposite progressively unsure demand as well as supply, the topic of risk management and risk distributing along the supply chain is an significant topic. The leaner and more integrated supply chains get the more expected uncertainties, dynamics and misfortunes in one connection sway the other connections in the chain. Hence, the supply chain vulnerability (Svensson, 2000; Christopher, 2002) rises, and it will boost even more if businesses, by outsourcing, have become reliant on other organizations. A number of present business tendencies that boost the vulnerability to risks in supply chains are:

increased use of outsourcing of constructing and R&D to suppliers;

globalization of supply chains;

reduction of supplier base;

more intertwined and integrated processes between companies;

reduced buffers, for demonstration inventory and lead time;

increased demand for on-time deliveries in shorter time windows, and shorter lead times;

shorter merchandise life cycles and compressed time-to-market;

fast and hefty ramp-up of demand early in merchandise life cycles; and

Capacity limitation of key components.

Souter (2000) tensions that businesses should not only aim on their own risks: they should furthermore aim on risks in other connections in their supply chain. According to Lambert and Cooper (2000) and Mentzer (2001), for demonstration, a key constituent for supply chain management (SCM) is distributing both risks and pays between the constituents of the supply chain. This is often cited, but not farther elaborated on, in customary SCM literature. The aim of supply chain risk management (SCRM) is to realise, and try to bypass, the devastating ripple consequences that catastrophes or even secondary business disturbances can have in a supply chain. Some demonstrations of risk causes and such “supply chain rippling effects” from the last couple of years are:

Hurricanes. Hurricane Floyd inundated a Daimler-Chrysler vegetation making suspension components in Greenville, North Carolina (USA). As a outcome, seven of the company's other plants over North America had to be close down for seven days.

Diseases. The foot-and-mouth infection in the UK in 2001 influenced the agriculture industry more than its last outbreak 25 years ago. The cause for this was that previous local and regional supply systems had become nationwide and worldwide, and that the industry was much more consolidated (Jüttner, 2002). But numerous other commerce were furthermore affected: luxury vehicle manufacturers like Volvo and Jaguar had to halt deliveries due to need of value cowhide supply.

Fires. Toyota was compelled to close down 18 plants for nearly two weeks following a blaze in February 1997 at its brake-fluid proportioning valve supplier (Aisin Seiki). Costs initiated by the disturbance were approximated to be $195 million and sales decrease was approximated to 70,000 vehicles (~ $325 million) (Converium, 2001).

Demand. Rapidly dwindling demand connected with locked-in supply affirmations made Cisco take a $2.5 billion inventory write-off in Q2 2001.

Supply. Inaccurate supply designing directed Nike to an inventory lack of “hot” footwear forms and the ...