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Strategic Supply Chain Management: Risk management - Essay Example

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SECTION 1 With the increasing focus on managing risks in the business chains, supply chain risks have a special case. It is an element of a large transformation in the focus on the subject of risks consisting a broad range of uncertainties that exist within business supply chains…
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Strategic Supply Chain Management: Risk management
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Download file to see previous pages Broadly categorizing the risks faced by supply chains globally, they include delays, disruptions, increased breakdowns, IP violations, forecasting, resourcing, procurement and inventory problems. Every risk stated above is caused due to a some particular set of drivers and has its own set of mitigation methods as well. The state and level of preparedness of a management decides how the business will fare against these risks. Comprehending the types and the link between the supply chain risks, business managers can easily plan for effective risk mitigation methods that are best suited for their management, (Chopra and Meindl, 2003). This section will study the various types of risks that are faced by supply chains around the world. Types of Supply chain risks – 1. Disruptions – the main drivers of this form of supply chain risks are natural disasters, labor problems, supplier economic failures, dependency upon a single suppliers, abilities of alternative suppliers to meet business requirements, and war / terrorism. This form of supply chain risk is mainly in the form of discontinuity of resources and material which may be unpredictable and damaging in nature. These disruptions often occur without a warning and are both external and internal in nature. Since no company is independent in nature, and its business relies upon other companies, so risks induced in one company’s supply chain may adversely affect other interlinked businesses as well. As an example, a fire at the automotive parts factory in Japan in 1997, forced the automotive giant Toyota to close down its operations for more than 4 months which resulted in huge losses for the international company apart from affecting its brand image. Similarly, in 1994, when the Kobe earthquake hit Japan, US based chip maker company Kelly micro Systems and many other small companies were forced to shut down their companies, (Chopra and Meindl, 2003). These risks due to supply chain disruptions can be countered by stocking up inventory in advance, or by maintaining an alternative set of suppliers. However piling up of inventory may not be a cost effective solution. 2. Delays – These types of risks are caused when a supply chain supplier is unable to respond to the changes in the demand due to his inflexibility to adaptation to new environment like high demand, complex requirements. Other delays caused may also be due to poor quality of products being supplied by the supplier, difficult transportation and logistics, high inspections, lack of information, poor decision making of the managers. Delay may also be caused due to the unavailability of resources like information, office building, warehouses etc. Companies can avoid the risks of delay by sizing and preplanning of capacities and requirements in advance. Preparing the production process for excess capacity or substitute options may be a solution in some cases to avoid delays. As an example, in normal circumstances, Dell holds inventory in less quantity (of high value) in the United States, and also maintains inventories in large numbers of low cost outside United States which is used in times of delay and is often airlifted due to the low cost of inventory maintenance outside US. 3. Systems – systems risks occur mainly in centralized information networks or centralized production facilities within ...Download file to see next pagesRead More
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