An Analysis of Supply Risk Assessment Techniques - Research Paper Example

? Sustainability and Risk Management in the Supply Chain Executive Summary The paper discusses sustainability in the supply chain and risk analysis. Sustainability in the supply chain is one of the concepts studied in Supply Chain Management. The reason for this is that for a business to carry out legitimate practices that help it in sustainability in this competitive market, sustaining the supply chain through risk management comes in rather vitally. Supply Chain Management is a practice that incorporates various management traits in an effort to identify and interconnect the processes involved in the provision of goods and at times services. Introduction It is important to understand the various concepts of a supply chain in order to comprehend sustainability in a business even further. The chain flows from the initial generator of the raw materials to the final person to benefit from the product, that is, the customer. In any business practice, risks are some of the most important aspects to recognize and the management of these threats helps in making the flow of work better and that of the products faster and thus the importance of carrying out research on how to best manage them. The research identifies three aspects of risk management ought to receive a high amount of attention. One of these is risk identification the other aspect to consider is that of risk assessment and then there is risk management. Problem Statement Occurrence of risks is one of the leading causes of business failure over the past few years. This is happens because of the poor management of the risks by the responsible teams. Managing risk in supply chain management is very vital for the success of any company from the fact that in the unfortunate case of one of the risks occurring, all levels of the supply chain are affected, regardless of the point at which the product was during the risk occurrence (Conroe, 2008, 63). It is thus the duty of every player in the chain to ensure that recognition and evaluation of all risks takes place in an effort to put into place the important strategies to evade the risk. The research aims at showing the different levels of a supply chain and indulge deeply in the risks that each of the level managers go through. Moreover, there ought to be the identification of the two key classes of supply chain risks for the purpose of risk assessment. I chose management of risks in supply chain because I have had various experiences where companies languish from the amount of ignorance portrayed by their administration. An example of this is the BP case where there was the loss of a lot of the company’s credit from the oil spill that happened having the company in a recession for a few months (Adams, 2011, 473). The ignorance is mostly in terms of recognizing the source of the risks. Many are cases when companies fail due to the fact that the management thinks that the problem is a minor one and does not have much weight. However, I seek to change this notion in an effort to make people understand that each part of the chain has a role to play in either the success or the failure of the commodity they seek to establish. It all depends on the type of risk management. The issue at hand has had people always take risk management classes in an effort to solve the various arising matters that may have the company in a position to have a risk occurring. Research has shown that companies that do not take the steps end up regretting and consequently having a poor reputation due to customer dissatisfaction. Gaps in the research are in that it has been impossible to find cases that show immediate resolution of a risk taking place unlike the many present cases of risk occurrence. Risk Identification and Analysis Over the years, supply chain management has had its fair share of changes providing the need of every business to stay keen on its goals in this highly competitive 21st century. The study shows how the external and internal risks are vital for identification in any company seeking to succeed (Wagner & Bode, 2009, 138). This is due to fact that risks not only present themselves from outside an organization but also from the interior. The research portrays deeply the various risks that a company has from the outside, which are the demand of the products, the environmental risks that the products have, the physical issues and the supply issues. Internal risks are other factors that the research portrays for the precise recognition of all the risks involved. This brings to attention the fact that many of the contemporary business people tend to ignore the fact that interior risks are more dangerous than exterior ones and thus this acts as a major cause of failure. Identification of the various internal practices that a company takes is important, and the review and scrutiny of each is vital in that it acknowledges internal risks associated with the planning of the product flow from the producer, control and mitigation that may pose as negligible but very crucial. Risk Assessment After clear identification of the various existing risks, the following step is the risk assessment stage. There are two major types of risk assessment, and these include the quantitative and the qualitative risk management procedures. Indulgence in these key properties is very important in Supply Chain Risk Management research. Both of the procedures have their importance and exclusion of any of them might have excessive repercussions on a company (Berman & Putu, 2012, 843). This is based on the fact that each one of them has its major points that work towards achieving a fully functioning risk assessment process. Quantitative risk management is the type of management whereby the manager or the responsible personnel identifies various aspects of the risk through calculations and the use of diagrams to assist in the process of resolution (George & Lisa, 2004, 400). The research gets deep into this type of management with the use of various examples and analysis charts for further understanding of risk management. The study also focuses on the qualitative aspect of risk management that involves the review of the various theoretical notions that often bring about the occurrence of risks and consequently try to analyze an example of a company that undergoes this with its provided supply chain. The study also seeks to identify the given five major steps involved in the risk assessment process. This is because for the success of any given policy in an institution, the management team of the company has to ensure that it is free from any previous risk, thus ensuring a smooth flow of workload. The first step that a company should take towards risk assessment is identifying the hazard (Martin & Hau, 2004, 391). In risk identification mentioned earlier, a general understanding of the risk is performed; however, the risk assessment stage breaks down the hazard further through Hazard Identification. After a deeper exploration of the hazard, the paper discusses the second step, which involves the understanding of the various people that are directly involved with the risk and thus in the way of trouble. The third step towards quality risk assessment involves evaluation of the particular risks and understanding of the precautions that the people at various stages of the chain or the company as a whole should take. The paper introduces the forth step of risk assessment, which involves the recording of the various findings that the initial three steps brought to attention. This step is carried out with the use of tables from the example given previously. The final step that the paper covers is the review of the assessment done and updating various stages of the assessment that the company may find to require changing. Risk Management The study seeks to explain the concept of risk management fully in this last part of the triangle that forms basic Risk Management in the Supply Chain. For effective risk management, it is important to comprehend the six major principles of risk management (Manuj & Mentzer, 2008, 219). Understanding these principles is important in that it places the company evaluating the risks at a higher point in terms of chances of successful risk elimination. The study explores the principles deeply and analysis each of them in a rather extended manner. Highlighting the various principles in risk management, there is the first one that states that risk management is important for the creation and the protection of value (Marks, 2011). The second principle recognizes risk management as a fundamental part of the activities that take place in an organization. There is the principle that states that risk management of all stages of the supply chain is an influential aspect of the decision making process in any successful organization. Another principle that the paper seeks to analyze is one stating that risk management is integral for the resolution of uncertainty issues with regard to the goals of an organization. Understanding that risk management is dynamic and interactive depending on the stage of the chain also comes in as a principle that the research indulges in explaining. Risk communication and business continuity are two major aspects considered important in the process of risk management. The paper seeks to identify the relation between these two and other sub-branches of risk management while giving clear examples in an effort to comprehend the concepts further. Having a standard company to analyze is important in that it assists in showing the reality of the matter at hand that can act as a source of inspiration and other companies can understand the importance of risk management. Literature Review One of the most popular cases to relate to when discussing the issue of supply chain management is that of Nokia and Ericsson. It is normal for large mobile companies to outsource some of their departments in an effort to get quality products. Mobile phone chips are some of the major components in a device and most of the contemporary mobile phones do not operate as efficiently as with that chip installed. It is thus important to go through the case study involving these two mobile network providers in an effort to gain understanding of the efficiency of supply chain management. Both Nokia and Ericsson have outsourced the production of chips in an effort to have quality products that is effective as a way to attract more customers. The companies have Philips as their outsourced company responsible for the manufacture of chips for the mobile phones. Ten years ago, an explosive fire attacked the company’s headquarters razing all the machines responsible for the creation of the chips. This was a major setback as it affected the manufacture of effective phones by the two companies. The manner in which the two companies, Nokia and Ericsson, reacted to the unexpected shortage of supply is a force to reckon with as it assists one understand the measures to take in case of a cut in the supply chain. Nokia reacted by re-engineering its phones in a manner that they could accept other foreign chips from Japan in an effort to bridge the gap created and continue with customer satisfaction. This worked effectively in that the customers continued using Nokia products and there was not any decline in sales. This step has had investors acknowledge the management of the company and thus the widespread positive reputation. On the other hand, Ericsson did not react as rapidly as Nokia did. The company sort to remain calm and not seek assistance from other companies. This was not an effective plan as it slowed down the progress of the organization and the sales reduced significantly. The credibility of the company was in question from then because the quality of products that it offered did not reach up to the expectations of the clients. It is important to note that at the time of the disaster, the company was going through changes in the management and the new top directors had the blame on the issues at hand. The company’s initial directors had decided to lay low and not seek external help in terms of chip production. After the entrance of new directors and the notion that they had something to do with the changes in product quality, they sought to improve the production by looking for other suppliers for the chips. However, the company did not have enough resources and money to have other providers. Moreover, the shareholders of the company did not support the idea and insisted that they wait for Philips to rebuild their company and thus have supply back in progress. This was not a wise decision as there was a gap in the supply chain for a couple of months as Philips continued re-establishing itself. This led to decreased sales as Ericsson reduced the number of phones that it produced in an effort to have quality products. This is from the fact that mass production of products that were not of standard would lead to decreased customer trustworthiness. Research has shown that a company that is of proper reputation as Ericsson does not lose a lot of credit once it produces in low amounts. This is from the fact that decreased production has faithful customers seeking the products despite the quality. This however did not work as efficiently for Ericsson as the reduced sales had people think that the company had become bankrupt consequently having reduced customers. The case above has assisted in understanding the effect that the management of the supply chain has on a product and the customers in general. Managing the supply chain and having a backup plan just in case the given plan does not go as expected is an imperative task to take. This is shown by the manner in which Nokia maintained its sales from risk management and customers unlike Ericsson that did not take any action. Methodology The manner went around in carrying out research in this field involves paying attention to the progress that the companies have had over the past ten years. This is important in that one is able to identify the changes that the company has experienced after the risk unfortunately gets to it. Moreover, comparing the strides that the company has taken in the various sectors against other companies has assisted in that there is an understanding of the steps that one should take or not with regard to risk management in the supply chain. Conclusion Risk management is a concept that has existed in the corporate world over the years. However, few companies or, rather, few people fully understand the importance of this activity. Risk management is tied to different aspects of a product supply chain and the organization as a whole and thus determines the fate of the company. A deep analysis of the three key pillars of risk management is not only important for the understanding of the field of study, but also for decision-making procedures that companies take. Having all these in mind, the end result is a sustainable and well thriving business. References Martin, C., & Hau, L. (2004). Mitigating Supply Chain Risk through Improved Confidence. International Journal of Physical Distribution & Logistics Management, 34(5), 388 – 396. Manuj, J., & Mentzer, T. (2008). Global Supply Chain Risk Management Strategies. International Journal of Physical Distribution & Logistics Management, 38(3), 192 – 223. Berman, K., & Putu, D. (2012). SCRIS: A Knowledge-Based System Tool for Assisting Manufacturing Organizations in Identifying Supply Chain Risks. Journal of Manufacturing Technology Management, 23(7), 834 – 852. George, A., & Lisa, M. (2004). An Analysis of Supply Risk Assessment Techniques. International Journal of Physical Distribution & Logistics Management, 34(5), 397 – 413. Wagner, S., & Bode, C. (2009). Managing Risks and Security: The Safeguard of Long Term Success for Businesses. New York: McGFraw Hill Publishers. Conrow, E. (2008). Effective Risk Management. London: Oxford University Press. Hansen, J. (2011). Managing Supply Chain: The Nokia and Ericsson Case Study. Retrieved on 4th November 2013 from http://procureinsights.wordpress.com/2011/05/18/managing-supply-chain-risk-the-nokia-and-ericsson-case-study/ Adams, R. (2010). Oil Extraction, Journal of Environmental Psychology. 8 (73), 467-481. Conrow, E. (2008). Effective Risk Management. London: Oxford University Press. Read More