Due to its global nature and systemic impact on the firm’s financial performance, the supply chain arguably faces more risk than other areas of the company. Risk is a fact of life for any supply chain, whether it’s dealing with quality and safety challenges, supply shortages, legal issues, security problems, regulatory and environmental compliance, weather and natural disasters, or terrorism. There’s always some element of risk. Companies with global supply chains face additional risks, including, but not limited to, longer lead times, supply disruptions caused by global customs, foreign regulations and port congestion, political and/or economic instability in a source country, and changes in economics such as exchange rates. The scope and reach of the supply chain cries out for a formal, documented process to manage risk. But without a crisis to motivate action, risk planning often falls to the bottom of the priority list. Furthermore, the repercussions of supply chain disruptions to the financial health of a company can be far-reaching and devastating. A study by Hendricks and Singhal as cited by ( the Supply Chain Management Faculty at the University of Tennessee, 2014) emphasizes the negative consequences of supply chain disruptions (Production and Operations Management, Vol. 14, No. 1, Spring 2005). The study analyzed over 800 supply chain disruptions that took place between 1989 and 2000. Firms that experienced major supply chain disruptions saw the following
Changes within the supply chain can disrupt the normal flow of goods and services because each change hasn’t been fully scrutinized. A firm can plan and speculate that a change with have a certain effect on the supply chain, but until those processes have been measured it is impossible to know the true cause and effect of any disruption.
America is not the only country that is recovering from an economic recession. The global marketplace is experiencing the same struggles that the recession has brought to countries across the world. Many companies have been impacted in a negative way from the recession, causing them to make some difficult decisions to survive during these turbulent times. When it comes to supply chain management, “it is remarkable how rapidly many businesses have successfully scaled back their supply chain operations in order to sustain profitability during difficult times” (Article p1)
Today’s global supply chain has been shaped by the past decades of focus and strategies based on achieving the lowest operational costs coupled with a push towards market expansion and supplier outsourcing. The expansion of global supply chains combined with the increasing number of joined connections to external business partners has significantly raised the possibility for supply chain disruptions (Poirier, Quinn, & Swink, 2010). In today’s global business environment, the importance of risk management continues to grow daily.
IBM, (2008). Supply Chain Risk Management: Management A Delicate Balancing Act - IBM Global Business Services A multi-faceted view on managing risk in a global
Businesses today operate an environment that differs greatly from anytime millennia, centuries or even decades ago. The pace of businesses has increased exponentially with the continuous improvement of information technology, telecommunications and geolocation supported by satellites and progressively more efficient modes of transportation and mechanization. The ability to move products globally overnight, increasing levels of automation, and collaboration instantaneously via virtual means has forever changed and reduced traditional barriers businesses face while creating a myriad of new challenges, risks and opportunities.
(Handfield, 2007) Code C should cultivate supply chain strategies that plainly deliberate two parameters that “intensify” the negative influence of interruptions on customer and brand performance: globalization and product/process complexity. Second, Code C should plan strategies with countermeasures that diminish the impact of these things, that is: better visibility to strategic supply chain nodes that can rapidly identify disruptions. They should also have well-positioned resources that allow rapid short-range retrieval plans. They need to have in place long-range cooperative methods to remove disruptions in the future. Research also recommends that companies with a great exposure to global supply chain risk invest more in improved inventory and capacity visibility
Prepare Contingency Plans: Supply chain risks must be identified and planned for. It is important to consider supply chain disruptions such as natural disasters, terrorism, security threats, piracy, supplier’s financial collapse, and infrastructure or process failure and there are other risks that all businesses face such as demand volatility and compliance issues. (book, p.241). Developing back up processes and plans takes considerable time yet preparation can be the difference between business continuity and end.
The business environment is constantly changing; it is unpredictable, extremely volatile and complex. This makes businesses exposed to risk because of the nature of the environment. It is therefore important for businesses to make strategic decisions on how to either reduce or make the effect of the risk less severe as much as possible. Businesses have to identify and manage their risks to ensure their success and continuation. According to the Committee of Sponsoring Organizations of the Treadway Commission (COSO), “Uncertainties present both risks and opportunities, with potential to erode or enhance value. Risk management is an increasingly important business driver and stakeholders have become much more concerned about risk. The 2008–2009 global financial crisis and the rapidly deteriorating global economy has created a context in which companies now face risks that are more complex, more interconnected, and potentially more devastating than ever before. Failure to adequately acknowledge and effectively manage risks associated with decisions being made throughout the organization can and often do lead to potentially catastrophic results. Risk may be a driver of strategic decisions, it may be a cause of uncertainty in the organization or it may simply be embedded in the activities of the organization. A good Risk Management program means that the company is able, first of all to identify, then to measure risks, to project, to set limits and to keep losses
In the business world ,fiscal command frequently triumph over the values, the values of social responsibility and ethical behavior as corporations endeavor to relieve costs and reduce contingencies in future ,nowhere is that drive for certainty and cost reduction is more enthralling then in the corporate supply chain, the global market place demands that supply chains be fleet-footed and scatter ,an efficient supply chain is responsible for changing the organization priorities by keeping the cost of the company intact and giving company the room for growth and increase productivity ( Attaran,attaran,2007)
Preface A more complete view of supply chain risk? The four pillars of a resilient supply chain Resilience in action Building a resilient supply chain Ready. Set. Go.
In the era of globalisation supply chains are getting more lengthy and complex hence they are now more vulnerable to disruptions. The resilience of energy supply chain by Luca Urciuoli, Sangeeta Mohanty, Juha Hintsa and Else Gerine Boekesteijn Accepted on 24 September,2013 takes in account how various companies take preventions against supply chain disruptions or security threats and how they manage their supply chain in case a disruption occurs, it also exchanges views on European union support mechanisms and interactions with the oil and gas companies along with the improvements that can be made by the union in order to make supply chains more robust . In this essay I will discuss the reasons for which these disruption occur
In the course of the most recent decade, numerous organizations confronted compelling supply chain network challenges that extended their abilities to the limit. Both the dominance of characteristic calamities and gigantic monetary swings brought about great difficulties over the supply chain. These challenges have not diminished. Supply chains, which once worked just about on autopilot, face numerous perils today in both the worldwide and the domestic market. This paper covers the most common hazards in the worldwide supply chain network and strategies for hazard mitigation.
Supply chain risk management is an intersection of supply chain management and risk management. For this we need to understand the benefits and as well as the limitations of both the concepts. Supply chain risk is about any threat of interruption in the order of workings of the supply chain. This Risk is generated as result of risk ‘drivers’ that are internal or external to the company or the practitioner.
The article focuses on managing risk in supply chains and highlight how important this area has increasingly become over the last number of years. It highlights a number of key trends happening at present such as increased reliance on suppliers, cross border supply chains; including that of developing countries, the globalization of
Supply chain performance has never been as important as it is today. In a global economy where supply chains, and not companies, battle one another, how a supply chain performs determines who will win the battle. To achieve maximum benefit from a supply chain, a supply chain must be performing at its best or anything it has gained will be short-lived. Yet, many companies are not aware of how their supply chains are performing or even what supply chain they are in.