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Submitted To : Dr. Masood Sabzwari

Submitted By : Arsalan (13510)

Malik Safeer (13480)

Nouman (17433 )

Course : Supply Chain Managemen

Day : Saturday

Timing : 3:00 to 6:00

SUPPLY CHAIN RISK MANAGEMENTSupply Chain Management

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TABLE OF CONTENT

S. NO. PARTICULARS PAGE NO.

1 Executive Summary 3

2 Background

Introduction and Purposes

4

3 Focus of SCRM 5

4 SCRM Benefits 6

5 Supply Chain Risks:

1. Risks outside the organization Demand Risks Supply Risks Environment Risks Business risks Physical risks

2. Risks within the organization Manufacturing Risks Planning and Control Business Risks Mitigation and contingency

7

6 The Management of the risk (Step by Step) 15

7 Supply Chain Risk Identification 16

8 Supply Chain Risk Monitoring 17

9 Supply Chain Risk Assessment 18

10 Sourcing Risk Mitigation Strategies 20

11 Crisis Communications Planning 20

12 Risk Management Programs Coordination with Partners 22

13 Configure to Reduce Risk: Supply Chain Business Rules 23

14 Configure to Reduce Risk: Supply Chain Information 23

15 Configure to Reduce Risk: Supply Chain Network 24

16 Risk Management Framework

Map Supply Network Identify Risk Assess Risk Manage Risk Implement Actions

24

17 Conclusion 25

18 References 26

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Executive Summary

Volatile. Thats perhaps the best word to describe todays global market place. Like economies

and financial markets, as supply chains have grown more global and interconnected, theyve also

increased their exposure to shocks and disruptions. Supply chain speed only exacerbates the

problem. Even minor missteps and miscalculations can have major consequences as their

impacts spread like viruses throughout complex supply chain networks. This project elaborates

all the risk that is present for the supply chain and can occur while managing it. Later the setups

to counter those risk factors with the help of rational technology of today are explained in a

systematic way.

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Background:

Modern supply-chains are very complex, with many parallel physical and information flows

occurring in order to ensure that products are delivered in the right quantities, to the right place

in a cost-effective manner. The drive towards more efficient supply networks during recent yearshas resulted in these networks becoming more vulnerable to disruption. SCRM attempts to

reduce supply chain vulnerability via a coordinated holistic approach, involving all supply chain

stakeholders, which identifies the risk of failure points. Mitigation plans to manage these risks

can involve logistics, finance and risk management disciplines; the ultimate goal being to ensure

supply chain continuity in the event of a scenario which otherwise have interrupted normal

business and thereby profitability.

Introduction and Purpose:

In todays volatile era with businesses and, more specifically, supply chains becoming

increasingly global, the industrial environment is heavily affected by uncertainty, which can

potentially turn into unexpected disruptions. Financial and political turmoil, socio-cultural

changes, highly fragmented and demanding behavior of consumers, rapid development and

changeover of products, have seriously modified the economic and industrial environment in

which companies act, bringing out new issues related to assuring the continuity of the business

against potential disruptive events.

Moreover, one of the key factors contributing to disrupting supply chains is the focus on lean

supply chains in academia and industry during the 90s. Zero-inventory and just-in-time

movement of goods became the dominant model that increased the sensitivity of supply chains.

Little issues quickly become big issues. In addition, supply chains have become more global,

increasing the order to delivery cycle times by a factor of four or five. This acts to amplify the

potential of a disruption and the impact. Outsourcing has also become the dominant model,

increasing the forces driving disruptions such as other customers competing for volume and

attention, information flow issues, mistrust, win-lose negotiations, financial stress, misalignment

of interests and goals. These have increased the likelihood of a disruption exponentially.

According to a 2006 study by Accenture Consulting, three out of four top supply chain

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executives at major U.S. enterprises say they have had a disruption in the past five years from

which it took at least a weekand sometimes several monthsto recover.

As a common term to designate the likelihood of occurrence of such events we use the word risk:

although the concept of risk is multi-dimensional and not univocally defined, it is generally

established the fact that it is linked to uncertainties associated with events.

Managing risk in the supply chain has never been as challenging as it is today. As more

companies have outsourced production to overseas locations, supply chains have been extended,

the number of nodes increased, and the complexity of the networks have moved exponentially. In

the past, supply chain managers were mainly concerned with reducing cost, reducing purchase

price variance, and managing inventory. Today, supply continuity is the single biggest business

driver. Indeed, organizations now recognize that preservation of shareholder value is of

paramount importance in supply chain management, and it has been assessed that disruptions can

exert a tremendous impact on the companys overall performance of supply chain operations, if

there are not suitable mechanisms or tools able to prevent or smooth their negative effects, as

many real cases have showed in the past few years.

Focus of SCRM:

Due to the new relevance that the concept of risk has assumed, risk management concepts and

approaches have been studied and formalized in the past and have been around for several years,

but have generally been focused in the financial, project management or safety areas. Such

concepts and approaches are generally not immediately suitable for use in the supply chain

management arena, since they should be fitted to a completely different context than those they

have been thought to. But, before the definition of risk managing model and methods, one of the

key questions it is worth to consider is: what is the benefit of Supply Chain Risk Management

(SCRM)?

According to a recent research report from Aberdeen (Figure 1), it leads to not only cost

avoidance by reducing the probability and impact of disruptions it leads to performance

improvements.

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Figure 1: SCRM Benefits

Once the importance of managing risk has been assessed, the further step is to define suitable

models to analyze, assess, manage and communicate risk within a company as well as in a

complex, geographically dispersed supply chain composed by several, legally independent

entities.

With these issues in mind, a team of Supply Chain Council (SCC) members have conducted a

multi-year long project to incorporate the processes, practices and metrics of Supply Chain Risk

Management (SCRM) into the Supply Chain Operations Reference Model (SCOR).

The purpose of this paper is to provide an overview on the fundamental concepts of supply chain

risk management, detailed the process used by the research team and present their findings. In

addition, the risk management additions to the SCOR model are discussed and a practical

application of SCRM using SCOR is presented.

The purpose of an effective and efficient chain of supply is to make possible the availability of

the materials to the manufacturers, information to the managers and product to the customer in

the right form and right time. The practices of supply chain management have faced a continualimprovement as companies across the globe are improving their scope of operations based on the

vital facts of waste reduction and customer satisfaction. Each company, either manufacturing or

service, strives to provide maximum satisfaction to its target market. The core objective of each

firm is to minimize the cast of operation.

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The firms today are competing neck to neck for achieving their objectives. Each firm has applied

a number of techniques to improve the procedure of operations. The strategic and tactical

decision making about the management of chains of supply has got a considerable importance in

the last couple of decades. The concepts of Supply chain management got due importance in the

post 20th

century world, as the expectations from the firms increased in this period. Supply chain

management now is considered as one of the most vital and critical department of theorganization.

The objectives of managing effectively a supply chain are extremely fruitful and are inevitable to

the successful operations of modern manufacturing and services giants. The outcomes of these

efficient operations are higher return on investment, return on logistics assets and productivity

for the organization. Following are few of the desirable practices of the organization in the

modern world related to supply chain management:

Lean manufacturing Just- in- time- inventory Supplier relationship management Virtual integration Outsourcing Off shoring Optimal logistics management

All of the above mentioned tricks of the trade are worth practicing but it is seen that a majority

number of firms have burnt their hands in trying them. The primary reason of which is that all of

these practices require a dedicated and directed effort to investigate and calculate the risk and

then eliminate or at least minimize it. The decision making got considerable importance in

supply chain management as it includes the factor of calculation of associated risk and its

elimination.

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Supply chain risks:

The risks associated to the successful operation of continuous and quality assured supplies are

innumerable. In order to properly address the risk one needs to have a holistic understanding of

the risk which is followed by the step of its authentic (quantitative) calculation and it ends up

with the counter risk measures to make the operations smooth and reliable.

The above mentioned scheme considers all the necessary factors in the process of risk

management. Technically, risk constitutes the major portion of any decision making process as

ignorance of risk can cause serious problems. Below are given few of risks associated with the

modern supply chain practices. All possible efforts are done to discuss the quantitative

assessment and counter-risk measures to ensure the reliable operations.

Supply management is not about acquisition of goods and services at the best possible price. Its

also about considering the contingent factors associated with the possible disruption of the

supply chain. The core focus of any management is to take steps to mitigate the risks associated

with the transfer of materials efficiently and effectively from the manufacturers to the end

customer. The smoothness of the entire process and the steps to eliminate the dissonance is the

key objective.

RiskAnalysis

QuantitaiveAssesment

(Risk)

Counter-Risk

Measures

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The most elementary risks associated with supply chain are:

1. Risks within the organization2. Risks outside the organization

Both of the risks are discussed below in detail:

1. Risks outside the organization:This type of risk can be derived by any upstream or downstream partner. The impact of external

environment is very dominant in such risks. These risks are usually are outside the control of an

organization. Therefore, this type of risk is also identified as an external risk. It entails a number

of factors to be considered thoroughly. Following are some of the factors that are that fall under

this fold of risk.

Demand Risks Supply Risks Environment Risks Business risks Physical risks

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All of these risk factors are mentioned below:

Demand Risks:

This risk includes wrong projection of the customer demand. This misleading demand projection

may be due to misunderstood or unpredictable reasons. The implications of this risk are drastic

as it directly affects the decision of production, inventory and cost. Misleading demand

projection, might it be over/under projected, in both the cases causes discrepancies in the

efficient operation. Over-projected demand causes inventory cost and preparation of the demand

that are not required. Under-projected demand results in factors like stock out cost, unavailability

of the product and the customer dissonance.

Supply risks:

The risks associated with the flow of all material relevant to the operation of the business are

considered. The smooth flow of materials, information and funds between different tiers of the

organization has to be optimal and efficient. Otherwise, it can create enormous problems for the

company. After all themes and the primary objective of any supply chain management is to

design a continuous and uninterrupted supply system and route.

Environment risks:

This is one of the most critical risks associated with the operation of supply chain management.

This type of risk usually originates from the shocks outside the organization. Organizations while

considering this risk, holistically view the international occurring of events. The purpose is to

understand the nature of events and the ways in which these events can pose threats and

opportunities to the supply chain management practices:

Security risks Safety Risks Monetary risks Climatic risks

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Security Risks:

In the modern world securities of the country is the top most priority. Flow of materials from one

part of the world to the other has posed a considerable range of threats. The security policy post

911 incidence has been revised to make it more consistent and reliable. The companies also have

revised their policies of booking regional and international shipments. Each of the organization

wants to operate in accordance with the legal compliant regulations. The organizations that deal

internationally with the companies of the developed countries .i.e. America, United Kingdom

and Canada etc, have to face strict security and verification check. The implications of this factor

are that it has affected the business of the organizations in the following manner:

Increased ordering cost Increased safety stock Increased lead time Increased quality abnormality (Perishable goods)

The firms that are involved in the offshore logistics operation can get benefit by registering their

organization in Custom Trade Partnership Against Terrorism (CTPAT). This agreement provides

relaxation to the member organization in the fields of security check and verification of the

goods to be transferred to the foreign countries.

Safety Risks:

The offshore operation of multinational companies is also a challenging task. One of the

alarming problems in this regard is the problems associated with shipping. The oceans are highly

insecure as the pirates and the climatic issues are one of the biggest threats to the shipment. They

not only confiscate the loaded goods but also kidnap the staff of the ships for the amount of

ransom. The Somali pirates are one of the examples to be mentioned here; recently a Pakistani

group of guards were kidnapped by the Somali pirates. They were finally released after the

intervention of Government of Pakistan and the social receptive people of the country.

Monetary Risk:

The fluctuations in the international markets cause changes in the exchange rates and monetary

sector of the entire world. Moreover, majority of the countries follow a capitalistic economic

structure. The back lash of the economy of the developed countries suppresses the economic

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condition of the under developed countries. These economic factors have long lasting

implications on the performance of the organizations operating across the globe.

Climatic Risks:

The climatic conditions of the planet earth have become highly uncertain due to the pollution and

hazardous factors. These climatic catastrophes disrupt the infrastructure of the entire country,

therefore making it almost impossible to continue the routine supply. These factors are also to be

considered while deciding upon the supply network design. Following are few examples of

catastrophic climatic conditions that ruined the entire supply chain setup and constituted a

challenging situation for the supply chain managers to continue their supplies:

Tsunami in Japan (2011) Flood in Pakistan (2010) Earthquake in Pakistan (2008) Storms in USA (normally happens)

These and many other factors are responsible for high climatic uncertainty in the supply chain

management. The managers need to effectively decide the ways by which these risks can be

minimized. However, some of the primary tools are discussed below:

Insurance of the goods Properly trained staff with the shipments Assessment of the alternative routes of supply (Contingent approach) The countries must ensure security of the ships within their costal jurisdiction. Proper ownership of the inventory for security verification.

Business risks:

Business risk is associated primarily with the financial and management soundness of the

supplier. Suppliers have a very critical role in the business activities of an organization.

Traditionally, supplier was considered as competitor and all possible efforts were made to

increase the companys profit by reducing that of the supplier. This type of classical adversarial

relationship affected the business of the organization and was one of the biggest reasons of

conflicts and break-ups between the channel members.

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The modern practices of supply chain management are based on having minimum number of the

suppliers in order to have production and differentiation advantage. The Supply chain practices

advocates the consideration of total cost of ownership rather than the minimum purchase price.

The risk related to suppliers selection can be addressed by considering the following factors:

Merit based selection Financial and management soundness of supplier Flexibility of the supplier Adaptability of the supplier Reputation of the supplier Quality certified supplier

Physical Risks:

These risks are related to the physical status of the suppliers facilities. If the supplier is using

carbon emitting vehicles for transportation then it can bring bad name to the organizations

reputation. These factors are to be considered critically as they are directly chained to the

customers expectations. If the company claims to be a socially responsible and its suppliers is

indulged in employing child labor then there is no point of alignment between both the

companies. The people are increasingly moving towards the socially responsible behavior and

they appreciate this behavior from others too.

2.

Risks within the organization:

The management seems to have minimal control over the external risks, internal risks, whereas

are strictly under the control of management. These factors are based on the discretion of the

management. The most prominent factors included in the internal risk are as follows:

Manufacturing Risks Planning and Control Business Risks Mitigation and contingency

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All of the afore-mentioned risks are discussed below:

Manufacturing risks:

The decision of the manufacturing risks entails al the short term, medium term and long term

decisions regarding the production. The level of efficiency adopted by the company is considered

in this step. Companies in the competitive world try to optimally utilize their resources .i.e. Asset

utilization. The decision of manufacturing has to be done by considering the following factors, in

order to reduce risk:

Accurate demand forecast Production flexibility Labor availability Raw material availability Lean manufacturing Product life cycle

Planning and control:

The planning of the supply chain drivers and metrics needs to be done smartly. The planning

needs to have strong qualitative and quantitative base. The risk of making wrong policies can be

eliminated through the incorporation of the technical and conceptual inputs from the experts. The

supply chain performance management Key primary indicators are to be designed in alignment

with the organizational practices.

Mitigation and Contingency:

As the famous quotation says;

What can go wrong will go wrong

The efficient supply chain management is the one that works on the practice of constant

improvement. The management has to be done skillfully through the placement of shock

absorbers in any venture to provide it the necessary support in the hard times. The company must

fully understand and decide on the following factor in a contingent basis:

Production Technique Inventory ownership Material handling

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Modes of transportation Supplier relationship management Downstream relationship management

The Managementoftherisk(StepbyStep)

Best Practices

Many companies have been starting to look at managing risk and several best practices have

emerged. Practices in the financial services, project risk management, and insurance industries

were studied. The details of these are described in the SCOR Best Practices section. Summaries

are provided below. Ten practices have been identified under 4 categories shown in below:

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Supply Chain Risk Identification

A key aspect of supply chain risk management is identification. Identification involves creating a

list of potential events that could harm any aspect of the supply chains performance. Risk

identification allows an organization to take steps to create plans to manage risks before they

occur. This is typically more cost effective then waiting to react to adverse events when they

occur.

In the Plan step of SCOR, an organization can create plans for identifying risk on an ongoing

basis. Risks can be classified into Source Risks, Make Risks, Deliver Risks, and Return risks.

Source risk identification Standardized source assessments and surveys are effective. Some

companies have already developed such assessments.

Make risk identificationInternal risks to an organization that have been extensively studied and

include: Sarbanes-Oxley Compliance; fiscal, environmental, and social responsibility; health and

labor laws; loss of manufacturing capability (due to labor loss, property loss, ...); quality

management; increases in production costs; link to source risks (interruptions and increases in

costs); capacity (over and under); intellectual property; and personnel management.

Deliver risk identification Visibility of customers improves the ability to identify Deliver

risks.

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Return risk identification Data on returns needs to be tracked to identify risks. Excessive

returns may reveal risks earlier in the process.

Supply Chain Risk Monitoring

Once areas of risk have been identified, an organization needs to monitor their internal and

external environment. This helps them to predict when risky events are becoming more likely. It

also helps to identify new risks and is tightly linked to the best practice of Supply Chain Risk

Identification.

SCORs focus on supply chain metrics enables Supply Chain Risk monitoring. Real time metrics

and periodic reports give decisions makers knowledge upcoming risks. Statistical analysis of

key metrics can reveal trends. Visibility into supplier and customer metrics increases the abilityto monitor. Reports on risk monitoring can be combined with existing management reviews and

meetings.

Monitoring can also include monitoring qualitative sources of information such as news or

weather reports to identify events that are precursors to risks.

In the Plan step, an organization can plan methods for monitoring Source, Make, Deliver, and

Return risks. These methods may include specific metrics to monitor and watch-out lists ofprecursor events. It may also include monitoring the environment external to the organizations

supply chain.

Deliver risk monitoring can be done with customer service metrics.

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Make risk monitoring can be done automatically through an organizations data systems such as

an ERP system. Source risk monitoring is enhanced with visibility into suppliers metrics.

It is important to monitor indicators that would appear early in a risk event or, better, even before

it occurs by indicating an increasing likelihood. If monitoring only reveals a risk well after its

first occurrence, it will likely be too late to adequately respond to it.

Monitoring can also be used to test the effectiveness of risk controls. If a plan to mitigate or

prevent a risk has been implemented, monitoring can check to see if the corresponding metrics

show no signs of the risk occurring.

Supply Chain Risk Assessment

Supply Chain Risk assessment provides management with an understanding of where the

greatest risks may exist in order to prioritize resources for risk mitigation and management.

Performing such assessments will involve clarifying the nature of the risk, understanding

conditions that may lead to the event, knowing how frequently such events have happened or can

be expected to happen, and the potential impact of such events. The team can then prioritize

addressing the risks.

Risk assessment is typically made up of two measures: Likelihood and Impact.

Likelihood measures the probability that the event will occur. The exact probability may be

difficult to determine unless there is historical data that can be used to find the frequency of the

event occurring. Alternatively an organization can use a subjective likelihood, or degree of

belief, based on the opinions of experts. A time horizon is necessary to define the probability in a

useful way (e.g., the likelihood that an event will occur in the next year or 50 years).

Impact measures the consequences on the organization if the event occurs. It can be measured

directly, for example in terms of dollars. It can also be measured on a scale, for example from

zero to one with zero being very little negative consequence and one being a very bad

consequence. Methods for measuring impact include what-if simulations, financial models,

and opinions of teams of experts. Impact may also be measured in terms of other SCOR metrics

besides financials.

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Summary risk score A summary risk score can be calculated for each risk by multiplying the

Impact times the Probability to get an expected value of the risk. Then risks can be ranked by

risk score. Also the risks can be shown on a map or graph. An example is shown below.

Other methods for assessment include:

Failure Mode Effects Analysis (FMEA)

Fault Tree Analysis (FTA)

Event Tree analysis (ETA)

A risk assessment tool in the form of qualitative and quantitative spreadsheet or other software

can be used by management teams to organize the assessment of risks to an organization. The

tool can contain also contain information on relevant causes of those risks and their assessment,

mitigation options and the impact of various mitigation plans. This helps establish standards for

the measurement, reporting, and limiting of risk.

Risk management is widely discussed, but practitioners have differing views of the categories,

significance, and how to integrate mitigation plans into the overall project or operational plan. A

frequent issue is that management focuses on the highest impact risks, overlooking more

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frequent occurrences. This practice should help standardize risk management vocabulary and

practices within an organization.

Some more sophisticated methods of risk assessment involve the use of simulations to derive

approximations for the impact of risks. Varieties of different types of supply chain simulation

software are available and may be used for this purpose.

Sourcing Risk Mitigation Strategies

For most manufacturing operations, over 70% of cost is associated with purchased goods and

services. These organizations may identify some goods or services as posing unacceptable

supply risk, in case of suppliers business rationalization, excessive demand, fire, work outage,

etc This best practice identifies some Risk Mitigation strategies. This practice fits well with

companies that have a few, significant supplier or a supplier base that is constrained or powerful.

It also is useful of the supplier base or the raw materials purchased are inherently high risk.

Source risk mitigation strategies can include:

Multiple sources of supplyhaving multiple sources of supply for a raw material reduces the

impact of one source failing to deliver materials

Strategic agreements or partnerships with suppliersstrategic agreements with suppliers can

lead to continued service in the event of capacity constraints.

Collaborative Planning Forecasting and Replenishment CPFRby sharing demand and

fulfillment data with supply chain partners, there is a reduced risk of unforeseen demand swings

or supply shortages.

Joint product design and deliverydesigning products with suppliers reduces the risk of material

non-performance or material shortages

Crisis Communications PlanningOpen communication is necessary for effective risk management, where the term open refers

to the possibility to directly reach the right person who can better handle the information about

a crisis situationswherever in the organization (i.e. refer to the Nokia-Ericssons case in Sheffi,

2005).

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Managers require direct communication channels up, down and across their business units to

help identify risks and take appropriate actions.

The communication should also be fast and reliable: suitable methods of communication (from

phone call to e-mail messages or even more advanced means) and redundant communication

capabilities should be identified.

Periodic reports shared within the partners of the supply chain can definitively help in

coordinating efforts related to risk management activities and initiatives.

Some common components of a crisis communication plan include:

Crisis definitions

Crisis roles and responsibilities

Pre-defined communication points of contact, methods of contact, etc.

Media relations procedures

Crisis response operating procedures

Test and exercise requirements for the plan

This practice aims at smoothing the problems due to lack of communication within companys

functions or within different companies among the supply chain. Establishing an open, reliable

and fast communication channel means allow people to work with the right information in the

right place at the right time, in order to ensure coordinated Risk Management activities. 26

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Risk Management Programs Coordination with Partners

The process of coordinated risk management places a strong emphasis on cooperation among

departments within a single company and among different companies of a supply chain to

effectively manage the full range of risks as a whole. A closer coordination of risk management

activities performed throughout the supply chain is intended to conserve resources and increase

effectiveness. This practice is at the basis of the shared risk approach.

The adoption of a common process framework within the supply chain can foster the share of

information in order to improve existing initiatives and removal duplicated or ineffective

activities. Moreover, sharing business continuity programs with supply-side and customer-side

partners can help in identifying overlapping areas or uncovered issues.

Risk Management coordination could be achieved by the establishment of a Risk Management

Coordination Committee, whose purpose is advises and coordinates the identification and

inclusion of risk management treatments within the overall risk management process.

Coordinated risk management is essential in situations where a significant amount of potential

risk lies outside of the subject organizations control, e.g., in other business units, upstream in

supplier supply chains, or downstream in customer supply chains. In these cases, risk is best

mitigated through close coordination with partners that can directly act on the potential risks.

One important pre-requisite of coordinated risk management is that supply-side partners should

be seen from a collaborative rather than a competitive viewpoint. This in order to share best

practices, recovery objectives, strategy information, expectations and mutual aid options.

In order to identify critical suppliers, it is possible to send them surveys regarding their business

continuity programs. Recurring meetings (some face-to-face) can lead to decreased availability

risk and far-greater levels of business continuity program maturityfor both organizations.

Another important pre-requisite is an appropriate visibility into customer events (i.e. inventory

level, sales volume, demand forecasts). This is intended to allow for early detection of risky

situations or conditions.

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Configure to Reduce Risk: Supply Chain Business Rules

This practice involves establishing business rules (e.g., customer priority, supplier priority,

production routing, transportation routing, etc.) based on minimizing the risk to the supply chain.

Under this practice, business rules are established or configured in response to the corporate risk

management plan with a goal of reducing either the likelihood of a disruption occurring or theimpact to the supply chain should a disruption occur.

Business rule reconfiguration typically includes an assessment of the impact of each rule change

on the overall supply chain before actual implementation.

Examples of risk management business rules include

Sharing orders across multiple suppliers to keep supplier base warm

Predefined order re-routing procedures in the event of a node failureCustomer prioritization to allocate scarce resources during an emergency

This practice is useful in organizations where the cost of supply chain disruptions is high, either

from a profit or brand image perspective. Using a risk mitigation configuration will reduce the

potential for a disruption and reduce the recovery time after a disruption occurs.

Configure to Reduce Risk: Supply Chain Information

This practice involves managing supply chain information networks to minimize the risk to the

supply chain. This includes information sharing with partners as well as internal locations. This

helps all parties to be quickly informed of a real or potential disruption and respond quickly and

appropriately to minimize the disruption impact.

To be effective, this practice needs to include clear identification of what information each

supply chain partner needs in order to reduce the overall risk in the supply chain and agreement

on information sharing details:

Formatsformat that information will be shared in (e.g., e-mail, web portal, phone

communications, etc.)

Frequencieshow frequently communications are expected to occur (e.g., daily, hourly, weekly,

etc.)

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Technologieswhat technologies will be used to communicate (e.g., electronic communications,

SMS, telephone, etc.)

Processes the processes for communication across partners (e.g., points of contact,

mobilization, etc.)

Configure to Reduce Risk: Supply Chain Network

This practice relies on a risk evaluation of the supply chain to guide the design of the supply

chain network. Node locations, transportation routes, capacity size and location, number of

suppliers, number of production locations, etc. are all determined in a fashion that mitigates

potential disruptions to the ability to deliver product and service to the end customer.

This practice relies on the information collected through risk identification and risk assessment

processes to identify nodes that are at a high risk of disruption due to the location of the node.

Location specific risks can include tactical strike risks, natural disaster risks, single point of

failure risks, etc.

Risk Management Framework

Map Supply Network

Build a structure of various participants in supply chain. Identify relationships, key measures and

ownership.

Identify Risk

Evaluate whether significant risk exists within the network, and whether existing risk

management practices are identifying and managing it. This involves building a Cross functional

team of subject matter experts. The team brainstorms and defines Enterprise risk related to

Financial, Strategic, Hazard and operational areas. Out of the various risks identified Filter down

risks that are relevant to manufacturing and supply chain operations

Assess Risk

Build a Risk map based upon probability of occurrence and loss severity (Subjective

assessment). Build a list of Top 10 risks

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Manage Risk

Build an integrated supply chain process map. For each repeatable risk, build a Impact map

indicating where risk is causing primary disruption. Build models to estimate probability of risk

and number of events expected. Build models to assess monetary loss at impact points. Prioritize

high impact points. Develop various scenarios

Implement Actions

Build risk mitigation plan for repeatable risks at the high impact points. Set up early warning

signals. Prepare contingency plan for non repeatable risk. Put a Regular Risk review mechanism

in place. Have some Risk awareness campaign.

Conclusion

Supply Chain is substantially becoming one of the most essential aspect for the survival and

operations of any organization of today. As far as risk management is concerned, it is vital to

anticipate and counter all kind of disruptions and hazards that could possibly occur at any point

of the supply chain. Each element present in the chain is dependent on each other, it is not only

the investment and financial exposure to the threat but one partner with in a chain can hinder the

overall activities of other partners.

The SCOR model can play a substantial role in pursuing the overall objective of a real collaborative

process within and between companies, aiming at maximizing the overall performances of the supply

chain. Having a supply chain reference model that allows the definition of individual as well as

collaborative risk management processes seems to be just a preliminary condition to pave the way for

the design of a shared risk management process for the whole supply chain network.

Obviously, this offers further theoretical and practical issues: how can a collaborative risk

management process be implemented? Which companies are responsible for the definition, the

implementation and the management of the process? Which are the partners?

In our opinion, future studies have to provide some valuable answers to these issues, contributing in

particular to the definition of a systematic model in order to understand the relationships between

individual risk management processes and a collaborative risk management process, and the

definition of a risk management reference model encompassing the entire supply chain network.

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References

Chopra, S., and Meindl, P., Supply Chain Management: Strategy, Planning, & Operation, 2ndedition, Upper Saddle River, NJ: Prentice-Hall, Inc.,

Ailwadi S.C, and Singh, R.,Logistics Management, Prentice Hall of India, 2005 http://www.husdal.com/2009/08/03/supply-chain-risk-management-in-six-steps/ http://www.husdal.com/2009/04/13/supply-chain-risk-the-forgotten-discipline/ http://www.husdal.com/2009/04/13/supply-chain-risk-the-forgotten-discipline/ http://www.decisioncraft.com/dmdirect/supplychainrisk.htm http://scrm.nist.gov/ http://supply-chain.org/scor http://en.wikipedia.org/wiki/Supply-Chain_Operations_Reference

http://www.husdal.com/2009/08/03/supply-chain-risk-management-in-six-steps/http://www.husdal.com/2009/04/13/supply-chain-risk-the-forgotten-discipline/http://www.husdal.com/2009/04/13/supply-chain-risk-the-forgotten-discipline/http://www.decisioncraft.com/dmdirect/supplychainrisk.htmhttp://scrm.nist.gov/http://supply-chain.org/scorhttp://en.wikipedia.org/wiki/Supply-Chain_Operations_Referencehttp://en.wikipedia.org/wiki/Supply-Chain_Operations_Referencehttp://supply-chain.org/scorhttp://scrm.nist.gov/http://www.decisioncraft.com/dmdirect/supplychainrisk.htmhttp://www.husdal.com/2009/04/13/supply-chain-risk-the-forgotten-discipline/http://www.husdal.com/2009/04/13/supply-chain-risk-the-forgotten-discipline/http://www.husdal.com/2009/08/03/supply-chain-risk-management-in-six-steps/