Supply chain vulnerability

Wagner, S. M. C. Bode. 2006. An empirical investigation into supply chain vulnerability. Journal of Purchasing and Supply Management 12(6 SPEC. ISS.) 301-312. 

Christopher, M., Peck, H., Wilding, R., Chapman, P. (2002). Supply chain vulnerabilities. Cranfield, UK Department of Transport, Local Government and the Regions, Home Office, Department of Trade and Industry. 

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. 

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. 

A study conducted by Cranfield University for the UK government defines supply chain vulnerability as ... 

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 ... 

Cranfield School of Management, Supply Chain Vulnerability, report on behalf of DTLR, DTI and Home Office, 2002. 

For global supply chain networks in which the entities (suppliers, manufacturers, warehouses, distribution centers, and retailers) are located in different regions, the geographical locations, government regulations, and the country risk of those entities could contribute to supply chain vulnerability (Kungwalsong 2013). Country risk refers to political, financial, and economic conditions of a country. For instance, Thailand is susceptible to meteorological hazards—such as intense rainfall, tropical storms, and cyclones. 

Inventory affects the assets held, the costs incurred, and responsiveness provided in the supply chain. High levels of inventory in an apparel snpply chain improve responsiveness bnt also leave the supply chain vulnerable to the need for markdowns, lowering profit margins. A higher level of inventory also facilitates a redaction in production and transportation costs... 

Peck, H. (2005). Drivers of supply chain vulnerability An integrated framework. International Journal of Physical Distribution and Logistics Management, 35(3/4), 210-232. 

In essence, we distinguish four interrelated terms Supply chain risk, supply chain disraption, supply chain risk source, and supply chain vulnerability. In the following, these terms will be briefly derived from the pertinent literature and discussed. Figure 17.1 illustrates how these concepts are coimected with each other. 

While a supply chain disraption is the trigger that leads to the occurrence of risk, it is not the sole determinant of the final loss. It seems consequential that also the susceptibility of the supply chain to the harm of this situation is of significant relevance. This leads to the concept of supply chain vulnerability. The basic premise is that supply chain characteristics are antecedents of supply chain vulnerability and impact both the probability of occurrence as well as the severity of supply chain dismptions. 

Wagner SM, Bode C (2006b) An empirical investigation into supply chain vulnerability experienced by German firms. In Kersten W, Blecker T (eds.) Managing Risks in Supply Chains How to Build Rehable Collaboration in Logistics. Erich Schmidt Verlag, Berlin, pp. 79-96. 

Supply Chain Vulnerability (2002). Cranfield University, UK. January, 2002. 

---