Risks and Risk Management Practices in Supply Chains

Wagner, S. M. C. Bode. 2008. Dominant Risks and Risk Management Practices in Supply Chains. In Supply Chain Risk — A Handbook of Assessment, Management and Performance, eds. G. A. Zsidisin Bob Ritchie Springer. 

Chapter 17 Dominant Risks and Risk Management Practices in Supply Chains 273... 

Finally, a remark has to be made on the generalizability of the result. Since the data was collected in Germany, the results can - if at all - only be generalized to firms based in countries with very similar geographic, pohtical, and economic characteristics as Germaty. Therefore, a replication of this survey in other countries with presumably different risk profiles (e g., Japan or the United States) would be an important next step towards a better understanding of the dominant risks and risk management practices in supply chains. 

Based on the obtained sample of 760 top-level executives in logistics and supply chain management, the results of this study (1) present a detailed overview on the importance of specific supply chain risks and (2) shed light on the use and implementation of supply chain risk management practices in Germaity. 

It is this detailed level of supply chain understanding that is necessary if risk is to be mitigated and managed. For complex supply chains or where complete mapping of the entire network is not practical it would be appropriate only to look in detail at the critical paths - how these are identified is dealt with later. 

In this chapter, we present a disruption risk assessment procedure for determining the disruption risk scores of facilities and transportation links in a supply chain network. Disruption risk score is calculated from three factors hazard, vulnerability, and risk management practice. We also present the use of disruption risk scores as a risk parameter in a mathematical model. 

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. 

We believe that through this approach, vulnerability and resilience management may become a practical part of SCM, establishing a formal and conscious process of understanding, analysing and handling risks and vulnerabilities in supply chains. 

The rest of this chapter is organized as follows In Sect. 2, we firstly depict our understanding of the terms risk, risk source, as well as dismption, and secondly present the applied classification of supply chain risks and supply chain risk management practices. Section 3 presents the findings of the empirical study. Finally, Sect. 4 discusses the results, and presents implications for managerial practice. 

With one single exception, all means are below 3. This is an indication that supply chain risk management practices have not yet fiilly arrived in business practice. This finding is in line with results from other empirical studies in other countries that indicate that there is a lack of diffusion and implementation of supply chain risk management ideas and measures (Jiittner 2005). 

The objective of this research was to examine the relevance of various supply chain risks and to provide a current picture of the implementation of supply chain risk management ideas in practice. Building on a thorough examination of the various supply chain risk taxonomies and risk management practices proposed in the pertinent literature as well as on interviews with practitioners, we developed a questioimaire and empirically investigated both aspects on a large-scale basis. 

With regard to snpply chain risk management practices, om findings support the results of previorrs empirical studies which revealed a lack of implementation Jirttner (2005) corrducted a similar study in the UK (2005) and found that practitioners have little guidance on their supply ehain risk management approaehes (p. 139). Despite the numerous helpful artieles on supply chain risk management... 

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. 

An example of a practical application of the method is the independent platform Respect-Code . This traceability system helps brands to increase trust with their consumers, as well as allowing them to enhance collaboration with supphers. It offers a smart risk management tool that shows what is happening across the supply chain and identifies room for improvement (www.respect-code.org). Another practical example of traceability systems is the MADE-BY Track Trace system that follows the trail of the clothes. From the MADE-BY code in the garment, the consumer can find out where the garment was made and by whom (http //www.made-by.org/). 

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