Supply chain risk profile

At the same time the vulnerability of supply chains to disturbance or disruption has increased. It is not only the effect of external events such as natural disasters, strikes or terrorist attacks but also the impact of changes in business strategy. Many companies have experienced a change in their supply chain risk profile as a result of changes in their business models. For example, the adoption of lean practices, the move to outsourcing and a general tendency to reduce the size of the supplier base potentially increase supply chain vulnerability. 

Finally, supply chain resilience requires a recognition that when strategic decisions are taken, such as relocating facilities or changing sources of supply, then the impact of those decisions on the supply chain risk profile must be fully understood. Based upon that analysis it may be necessary to re-engineer the supply chain, or parts of it, to ensure the mitigation or removal of that risk. Figure 10.4 attempts to summarise the different requirements that need to be in place if supply chain resilience is to be improved. 

The supply chain risk profiles identified by the researchers have been validated in a workshop with the case company representatives. In addition, the requirements for the methodology have been derived. All four partners agree that any practical and useful approach to managing risks in their supply chains must be designed to meet their specific needs. These risk requirements can be classified into those related to the scope of the approach, its objectives and implementation. Table 13.2 summarises the complete list of requirements. 

Once all risks have been assessed, a supply chain risk portfolio as well as a table ranking all risks according to their overall risk prioritisation index are eomposed (see Fig. 13.6 for the portfolio). Analysing the entire supply chain risk profile is an important first step for deriving mitigation measures. For example, the analysis can reveal that most of the risks are either within the internal or, alternatively, within the external supply chain processes. Similarly, a supply chain risk profile can be characterized by a predominance of risks on the supply side or, alternatively, on the demand side. Agreed interpretations of the supply chain risk profile are an important means of the SMEs commitment to ehanges. 

These two examples clearly demonstrate the potential for development and manipulation of fatty acid profiles to improve plant oil characteristics for industrial use, and in the case of HEAR, to improve the economics of processing, reducing costs to the end user. However, one of the downsides of manipulating fatty-acid profiles in crops that have both food and non-food uses is the need to keep crops separated on the farm and in the post-farm-gate supply chain, to avoid risks of contamination of either chain. 

A survey of over 3,000 senior executives undertaken by the consultancy company McKinsey in 2006 reported that they believed their companies faced growing risk to disruptions to their supply chains. However, the same survey found that in many cases companies had inadequate processes in place for the management and mitigation of that risk. Whilst most organisations recognise the need to regularly assess their risk profile, that assessment has tended to be focused on broader regulatory and financial risk issues rather than supply chain vulnerability. 

To widen the focus on supply chain vulnerability it is suggested that a supply risk profile be established for the business. The purpose of the risk profile is to establish where the greatest vulnerabilities lie and what the probability of disruption is. In a sense this approach takes the view that ... 

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. 

With a clear view of the supply chain s risk profile, a brainstorming session on potential risk mitigation measures should follow. As outlined above, it is ill-advised to provide a predefined, potentially incomplete list of measmes to choose from. Instead, the decision making team is prompted to think about as many cause-oriented (e.g., eliminating unrehable suppliers to reduce supply risk) and impact-oriented measures (e.g., safety stock) as possible. Mitigation measures can be implemented at the strategic level (e.g., alternative supphers), the tactical level (e.g., improved demand forecast) as well as at the operational level (e.g., business continuity plans). The result of this step is a list of different options to mitigate the most severe risks in the supply chain processes. 

Introducing the Supply Chain Stakeholders as a component of the organisation s performance is designed to emphasise the inter-dependence of the members of the supply chain. Expectations of performance and risk profiles for the organisation must be cognisant of the other partners and stakeholders in the supply chain. 

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. 

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