Proactive Supply Chain Risk Management

In a proactive strategy, potential risks are identified at the supply chain design stage, their probability and impact are assessed and they are r ed in terms of importance. The focus of this exercise is to target the identified risks in order to avoid them. This may not be possible in all cases and hence there is a need to develop and implement contingency plans to minimise the impact if and when the risk occurs. 

One of the most important enablers for a proactive risk management strategy is the presence of a culture and attitude that provides resources and motivates employees to develop risk contingency plans. Smeltzer and Siferd (1998) suggested that the formation of a risk management culture to encompass proactive risk management is extremely necessary as  

Employees may feel that no steps are taken towards managing risks identified and reported, but more is done after the impact, 

Employees feel that top management would look upon them negatively if they are involved in proactively identifying risks, 

Depicting risks to shareholders may have an adverse effect on the value of the firm. 

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Nortmann, Andreas Ulf Jansson. 2004. Ericsson s proactive supply chain risk management after a serious sub-supplier accident. International Journal of Physical Distribution Logistics Management 34(5) 434- 56. 

Fig. 4.1 The predictive-proactive supply chain risk management methodology Samir Dani, 2007...

Smeltzer L.R., Siferd S.P., 1998, Proactive Supply Chain Management The Management of Risk, ICFAI Journal of Supply Chain Management, 34(1), pp. 38-45. 

Many companies, both within the chemical industry and in other sectors, have recognized benefits from involving their suppliers and customers in various aspects of their business. The area of supply chain management (SCM) has become a critical element in the overall business strategy of improved productivity, reduced costs, and better control of the quality and potential risks associated with raw materials and intermediates. Proactive management of supplier environmental performance, as practiced by Hewlett Packard, can lead to product and process simplification, improved resource efficiency, product quality enhancement, reduced liability, and customer perception of the company as an industry leader. 

This chapter presented a disruption risk assessment method for managing the supply disruptions in a global supply chain. The assessment can help practitioners to quantify risks in their supply chains based on hazards, vulnerability, and risk management practices. The disruption risk scores of suppliers facilities and transportation links can lead a company to proactively manage its suppliers. They then can use the disruption risk matrix to visualize the relative risk of all idenfified hazards. We presented a case study of a global distribution company to illustrate the application of this framework in assessing disruption risks for facilities and transportation links. This framework can be used to develop a company disruption risk profile, which in turn can be used to identify the critical network components that are prone to disruptions and to prioritize the risk mitigation activities. 

A process-oriented approach deals primarily with the combination of individual tasks to a logical chain of activities (Labbe and Langen 2004, p. 720). Therefore, the process model of Supply Risk Management needs to proactively influence the (potential) supply risks after formulating and rewoiking the supply risk strategy in the next process phases ... 

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