Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

2.4 Supply Chain Risk Management

Intended learning outcomes: Produce an overview on supply chain risk management. Explain the identification of supply chain risks. Describe the assessment of supply chain risks. Disclose how supply chain risks can be handled.



For some years now, the trend in supply chain management has been fragmentation of the added value. The individual steps are placed globally, that is, placed where the needed skills are the best value for the money. This course of action is connected with an increased number of transports. A second trend has been to apply lean production and just-in-time concepts, in connection with a sustained reduction in the number of suppliers, inventory, and capacity. These two trends result in increased vulnerability of the flow of goods and information.

Owing to the continuing buyer’s market, especially for investment products, again for some years now there has been increasing fragmentation of demand for numerous product variants and new products, frequently associated with declining customer loyalty. There are also dangers connected with the increasing scarcity of critical raw materials and with unpredictable open markets, natural catastrophes, and terrorism.

These causes lead to an increase in unexpected disruptions to supply chains, such as loss of suppliers, larger fluctuations in demand, or unsuitable planning. Because at the same time demands and expectations for smooth functioning of supply chains is rising in the wealthy nations, these disruptions can result in great financial losses for companies.

Supply chain risks are potential disturbances and disruptions within the supply chain that are caused by process-inherent or external sources and that negatively impact the objectives of the supply chain.

See here also [Zieg07, [JuPe03], or [WaBo08]. The causes can be structured according to the SCOR model, at the network, main processes, and subprocesses levels. Effects are negative deviations from company goals in the areas of quality, delivery reliability, flexibility, operational costs, and investments in current assets and fixed assets. This quickly finds expression in company performance measures such as Economic Value Added (EVA) or Earnings Before Interest and Taxes (EBIT).

Supply chain risk management (SCRM) is a methodological procedure for handling supply chain risks.
[Cran03] provides a simple approach to SCRM, and [NoJa04] provides processes and tools for SCRM. Figure 2.4.0.1 shows the elements of a simple procedure suitable for SME that comprises both aspects. This and the following figures were taken from [Zieg07].

Fig. 2.4.0.1        Supply chain risk management: elements of the methodology.

The crucial element of the methodology is the procedural model, with the three phases risk identification, risk assessment, and risk handling. The following three sections present each of these phases with their techniques and results. The procedural model also includes measures for successful integration of SCRM in the organization of the company.



Course section 2.4: Subsections and their intended learning outcomes

  • 2.4 Supply Chain Risk Management

    Intended learning outcomes: Produce an overview on supply chain risk management. Explain the identification of supply chain risks. Describe the assessment of supply chain risks. Disclose how supply chain risks can be handled.

  • 2.4.1 Supply Chain Risk Identification

    Intended learning outcomes: Disclose the process for identifying supply chain risks. Present the depiction of the supply chain using the SCOR model. Describe the supply chain portfolio, suitable for risk management. Explain the supply chain risk catalog.

  • 2.4.2 Supply Chain Risk Assessment

    Intended learning outcomes: Disclose the process for assessing supply chain risks. Explain FMEA and FTA techniques for assessing the probability of occurrence qualitatively or quantitatively. Describe FMEA and business interruption values techniques for assessing the business impact qualitatively or quantitatively. Present the supply chain risk portfolio.

  • 2.4.3 Supply Chain Risk Handling

    Intended learning outcomes: Disclose the process for handling supply chain risks. Describe possible measures search fields for an example supply chain risk. Disclose how to evaluate the possibilities for action.



Course 2: Sections and their intended learning outcomes

  • Course 2 – Supply Chain Design: Business Relations and Risks

    Intended learning outcomes: Explain concepts such as the make-or-buy decision, tariff-orientation and total cost of ownership in a global supply chain. Differentiate strategic design options for the relationships with and the selection of suppliers. Disclose strategies for intensive cooperation in the supply chain. Describe identification, assessment and handling of supply chain risks.

  • 2.1 Ownership and Trade in a Global Supply Chain

    Intended learning outcomes: Present the concept of the make-or-buy decision in detail. Explain the value content requirements and tariff-orientation in a global supply chain. Describe the total cost of ownership in a global supply chain.

  • 2.2 Strategic Procurement

    Intended learning outcomes: Produce an overview on strategic procurement. Differentiate between traditional market-oriented relationship and Customer-Supplier Partnership. Describe strategic procurement portfolios. Explain strategic selection of suppliers. Present basics of supplier relationship management and e-procurement solutions.

  • 2.3 Designing a Strategic Partnership Relationship

    Intended learning outcomes: Present target area strategies for intensive cooperation. Explain the Advanced Logistics Partnership (ALP) model with concepts such as building trust, working out collaborative processes in the supply chain, avoiding the bullwhip effect. Describe the virtual enterprise and other forms of coordination among companies.

  • 2.4 Supply Chain Risk Management

    Intended learning outcomes: Produce an overview on supply chain risk management. Explain the identification of supply chain risks. Describe the assessment of supply chain risks. Disclose how supply chain risks can be handled.

  • 2.5 Summary

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