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

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.



Figure 2.4.3.1 shows the process of handling supply chain risks.

Fig. 2.4.3.1        Process for handling supply chain risks.

Possible measures for handling the risk are dependent on where the risk is positioned in the supply chain risk portfolio.

  • A high probability of occurrence requires cause-related measures to re­duce the risk, such as more robust planning and more flexible design of the supply chain, inclu­ding postponement and cooperative processeswithin the company and with suppliers.
  • A high business impact requires effects-related measures to reduce or shift the risk, such as emergency plans (keyword business continuity and resilience planning (BCRP), a concept that shows the threats for the company as well as measures to prevent these and to restore operating performance), flexibility through supply chain event management (SCEM) or through risk pooling by manufacturers and retailers by pooling together inventory of product families with high demand variety, or redundancy (that is, through alternative suppliers, or higher capacity, or inventory).

Practical experience has shown that the concepts mentioned above are only useful when they are given content in concrete cases. Figure 2.4.3.2 therefore shows possible search fields and measures in the case of supply chain risk K1 from Figure 2.4.2.6, namely, inaccurate planning owing to fluctuating demand for variants.

Fig. 2.4.3.2        Measures search fields for an example supply chain risk.

As the probability of occurrence of K1 is very high, cause-related measures stand in the foreground. In the concrete case, these are planning measures.[note 207] As K1 also has medium business impact, effect-related mea­sures also come into play, such as flexibility and redundancy measures.

The analysis of possibilities for action includes a cost-benefit analysis. This can be done through a reassessment of all risks using the supply chain FMEA or also with a utility analysis or capital budgeting. Practical experience shows here that planning measures are generally less costly than measures to increase flexibility, which in turn are less costly than measures to increase redundancy. On the other hand, redundancy measures can often be put into effect quickly.

Decision, implementation, and monitoring comprise a listing of the selected measures with an implementation plan for each. Both the position of the risks in the risk catalogue and the selection of the supply chains to be examined must then be updated on a rolling basis.




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.