WAL-MART SUPPLY CHAIN RISK MANAGeMeNT

Wal-Mart Supply Chain Risk Management



Table of Contents

Background of the Problem3

Research Question & Objectives5

Literature Rivew6

Methodology13

Reflection14

References17

Appendices31

Ericsson Supply Chain Risk Management

Background of the Problem

This paper is based on Ericson, a leading telecom firm. In industry, especially those industries moving towards longer supply chains (e.g. due to outsourcing) and facing increasingly uncertain demand as well as supply, the issue of risk handling and risk sharing along the supply chain is an important topic. The leaner and more integrated supply chains get the more likely uncertainties, dynamics and accidents in one link affect the other links in the chain. Hence, the supply chain vulnerability (Svensson, 2000; Christopher, 2002) increases, and it will increase even more if companies, by outsourcing, have become dependent on other organizations. A number of current business trends that increase the vulnerability to risks in supply chains are:

Increased use of outsourcing of manufacturing and R&D to suppliers;

Globalization of supply chains;

Reduction of supplier base;

More intertwined and integrated processes between companies;

Reduced buffers, e.g. inventory and lead time;

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

Shorter product life cycles and compressed time-to-market;

Fast and heavy ramp-up of demand early in product life cycles; and

Capacity limitation of key components.

Souter (2000) stresses that companies should not only focus on their own risks: they must also focus on risks in other links in their supply chain. According to Lambert and Cooper (2000) and Mentzer (2001), for example, a key component for supply chain management (SCM) is sharing both risks and rewards between the members of the supply chain. This is often mentioned, but not further elaborated on, in traditional SCM literature. The focus of supply chain risk management (SCRM) is to understand, and try to avoid, the devastating ripple effects that disasters or even minor business disruptions can have in a supply chain. Some examples of risk sources and such “supply chain rippling effects” from the last few years are:

Hurricanes. Hurricane Floyd flooded a Daimler-Chrysler plant producing suspension parts in Greenville, North Carolina (USA). As a result, seven of the company's other plants across North America had to be shut down for seven days.

Diseases. The foot-and-mouth disease in the UK in 2001 affected the agriculture industry more than its last outbreak 25 years ago. The reason for this was that former local and regional supply networks had become national and international, and that the industry was much more consolidated (Jüttner, 2002). But many other industries were also affected: luxury car manufacturers like Volvo and Jaguar had to stop deliveries due to lack of quality leather supply.

Fires. Toyota was forced to shut down 18 plants for almost two weeks following a fire in February 1997 at its brake-fluid proportioning valve supplier (Aisin Seiki). Costs caused by the disruption were estimated to be $195 million and sales loss was estimated to 70,000 vehicles ($325 million) (Converium, 2001).

Demand. Rapidly weakening demand coupled with locked-in supply agreements made Cisco take a $2.5 billion inventory write-off in Q2 ...