Review of Perspective on Risk Management in Supply Chains

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.

An organization needs to focus on how it can gain more market share and beat out its competition. This may mean outsourcing work offshore which can be a complex task (Parnell, 2014). Wal-Mart’s low prices go beyond the customers, but also applies to the suppliers (DaCosta, 2013). In China, Wal-Mart outsourced most of its labor, the company pays low wages to its workers; however suppliers find it difficult to succeed due to the small profit margins(DaCosta, 2013). Some companies low-cost strategy approach can be temporary, yet Wal-Mart has been successful in their efforts with the low-cost strategy (Parnell,

A supply chain is a series of integrated processes within and across a company that produce a product or service to meet the demands of a consumer (Krajewski, et. al., 2013). Every company has a specific supply chain design and this design is implemented to meet the company’s competitive priorities. Supply chain management refers to the coordination of the company’s processes with those of customers and suppliers to match the flow of services, materials, and information with customer demand. In today’s global market companies are choosing to outsource many of their processes in order to save time and money. While outsourcing and decentralizing many supply processes may seem to be more cost effective,

Supply chain management is a complex undertaking that must involve more than one organization’s efforts to succeed. A tremendous amount of skill, time, and money must be present to build and develop relationships, discover and implement a strategy, and use the capabilities of the chain to build quality at an efficient financial rate. Allowing for these requirements, it leaves one to wonder whether supply chain management is a viable option. The answer is yes, because an organization needs a strong supply chain to compete and be profitable in the marketplace. The key points for supply chain management should be to meet customer demand, produce excellent customer value, enhance responsiveness to change, build a network that can resist risk, and develop financial success.

The purpose of this report is to explain in brief to the Senior Management of a hypothetical supply chain

The larger a company’s supply chain, the more vulnerable the company becomes. When the company’s suppliers spread further and further away from the company, the company becomes even more vulnerable to political and currency risk, cyber attacks, missed inventory goals, and failed communication with the supply chain. For a company to overcome those potential vulnerabilities, a company must build safeguards into their operations. Those safeguards include a strong corporate backing in supply chain management, solid relationships with suppliers, more attention to forecasting, and a holistic approach to sustainability.

In the supply chain, supplier and manufacturer could meet such as supply risk, strategic risks and operational risk. The main risk comes from the manufacture and purchasing merchandise, the inventory risk and alternative possibilities. According to Steele and Court (1996) supply risk occurs mainly caused by the imbalance between supply and demand.

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

Supply chains management (SCM) is one of popular concept in business administration both in practical areas and academic discipline. Supply chains management can be seen as a response to the changing of global market conditions. Level of uncertainty in almost every aspect of our life from political to economy, from natural disaster to advance technology has lead massive changes in global and local market. SCM then is one of the concepts used by both scholar and company to overcome the challenge of recent drastic market change (paconsulting.com n.d.).

Companies tend to outsource in logistics area. This includes complete cycle of material flow; from the purchase and internal control of production materials to the planning and control of work-in-process; to the purchasing, shipping, and distribution of the finished product. Pepe Jeans outsourced in logistics area. Even though the company was successful and profitable doing so, this resulted in inefficient delivery time and unhappy retailers due to the restrictions of the outsourced company asking for six month lead time in ordering products. Now company faced with changing the way the production flow works in order to respond the retailers and independent agents’ complaints. As it indicates at themanager.org companies that rush overseas in search of low production costs may be walking into a strategic trap. It's easy to underestimate the hidden costs in long supply chains and their impact on profitability. Customers in outsourcing transactions face both direct and indirect risks. If your outsourcing vendor fails to perform, you may suffer direct damages in the form of out-of-pocket expenses incurred to perform the function yourself or hire another vendor, and lowered profits caused by lost business and harm to your reputation. Strategically, a main goal of outsourcing has always been to shift risk from the customer to the vendor. But while the risks arising from implementing new technologies and labor markets can be shifted in this way, CIOs know that not

Simangunsong, E., Hendry, L. & Stevenson, M., 2012 Supply-Chain Uncertainty: A Review and Theoretical Foundation for Future Research, International Journal Of Production Research 50 (16) pp. 4493-4523 Available through EBSCO Database at:

A supply chain (SC) consists of a set of organizations that work together to take in raw materials, convert the raw materials into higher value products, and sell the products to the end customer (Kelly 2005). The management of these flows to generate profit is known as supply chain management (Sodhi and Tang 2012). Supply chain risk management (SCRM) is defined, very broadly, as the identification, analysis and evaluation of events that can have a negative effect on supply chain performance. SCRM also includes the implementation of mitigation strategies through a concerted effort between SC partners to reduce the consequence and/or likelihood of such events (Khan and Burnes 2007). Generally the events of

Although it is a clever and efficient way to manage the supply chain, what kind of risks will be faced in extended supply chain? There are two categories of risk affecting extended supply chain: one is the risk emerging from the problem of coordinating supply and demand, and the second risk is came from disruption. (Kleindorfer and Saad, 2004) Disruption risks include operational risks, which basically refer to equipment malfunctions, unforeseen discontinuities in supply, and human-centered issues from strikes to fraud, and as well as Natural hazards risks. And coordination risk is exposed in process of procurement, production and

Fundamental to any business organisation is the need to have an effective supply chain strategy (Aronsson, Hakan & Maria, 2006). This is achieved mainly by how an organisation can develop and implement its supply chain strategy. Development and implementation of these strategies may differ from one institution to another, but the general idea is the same across all organisations (Brewer, & Thomas, 2001). This article, therefore, shows the general importance of supply chain strategy to any organisation.

Involvement of many companies makes supply chain management very complex. Proper care has to be taken to deal with all the parties involved because failure to implement the same is visible to all trading partners.