Supply chain risk management strategies

Spekman and Davis (2004) stated that risk is context specific, where differentt5q)es ofrisk affect enterprises differently. From a business context, DeLoach (2000) identified risk as the level of exposure to imcertainties that the enterprise must understand and effectively manage as it executes its strategies to achieve its business objectives and create value. Within this context, the definition of risk is clear yet broad, as business risk may refer to many functions of an enterprise. To hone the definition to apply to supply chain risk, it must be refined to emphasize supply and demand. 

Risk is inherent in almost all business operations. However, supply chain risks have different characteristics, impacts, and sources. Hence, the risks need to be categorized and different strategies should be developed to manage them effectively. 

Wieland A., Wallenbur M.C., 2012, Dealing with Supply Chain Risks Linking Risk Management Practices and Strategies to Performance, International Joumcd of Physical Distribution Logistics Management, 42(10), pp. 887-905. 

Several strategies can be proposed to manage supply chain risks in a global economy, and emerging from the case study two strategies in particular can be identified for mitigating risks in the textiles and clothing sector ... 

The Principal organization sought to manage the risks in the downstream supply chain through a process of close collaboration, effective communications and the building of trust within the relationships. The development of Performance Standards was not seen by the distributors as the imposition of a risk management strategy to protect the principal but rather a collaborative approach that resolved the risks within the chain to the mutual benefit of all partners. 

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. 

The information gathered on transportation incidents has long-term value in addition to the immediate lessons learned. For example, this information may be useful for monitoring performance over time. It can be used to build up a database on transportation incidents. Finally, and most importantly, such information can provide statistical data for transportation risk assessments and improvement efforts. Trend analysis of causes of transportation incidents is vital to a management system that addresses major problems and sets priorities for risk reduction. This element should be part of each supply chain partner s transportation risk management. These risk reduction strategies are discussed in detail in Chapter 7. 

Appropriate strategies for managing security risk can vary widely depending on the individual circumstances of the chemical, transportation mode, route, carrier, threats, etc. The specific situations must be evaluated individually and managed based on the collective judgment of the supply chain partners, always balancing safety and security. 

In addition, mass customization can also improve inventory and supply chain management efficiency. As mass customization is a make-to-order process, usually products are only made when the purchase order is placed. Thus, the shift from made-to-stock to made-to-order can significantly improve the production and supply scheduling and reduce the inventory cost and the risks of investment in materials and product development that will not encounter the preference of consumers. Furthermore, mass customization can be conducted online in some cases, so that many providers even sell shoes completely online without any physical stores, such as Zappos. This strategy can further reduce the operation and rental costs by online direct channel sales and increase the profit margin rate (Tseng et al. 2003). Even for those providers still with physical stores, they no longer have to show a full inventory of selection in all stores. 

Tomlin, B. 2006. On the value of mitigation and contingency strategies for managing supply chain disruption risks. Management Science. 52(5) 639-657. 

We devote an entire chapter to managing risks in the supply chain, emphasizing risk quantification models and risk mitigation strategies, and presenting important problems that extend beyond the traditional treatment of supply chain management. 

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