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Supply Chain Risk Management

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Supply Chain Risk Management – Managing Disruptions in Global Sourcing – Edited by Robert B. Handfield and Kevin McCormack, Aurbach Publications

Review by Girish Bhatnagar

While we are so conscious of personal risks, and do lots of planning and insurances for our selves, Supply Chain Risk Management is often a neglected topic, till the crisis hits. That is why Tsunami in Japan took such a great toll of Supply Chains.

The book is one of the many available approaches to handling SCM Risk. In this book a technique called "Risk Wheel" is used to diagnose and address the probabilities of diffrenet causes of Risk. The usual risks are:

Causes

Disruptions

Consequences

Supplier Relatiuonships

Performance Problems

HRD Issues

Supply Chain Disruptions

Financial Health Risks

Situational/ Environmental

Misalignment of Interests,

Quality, Delivery, Service Issues

Supplier's Union Strike, Ownership change, Lockouts

In lower tiers of SCM,

Bankruptcy, Cash Flow Issues -

like politics/ Social/ Law and Order/ Statutes

Loss of Strategic Supplier

Recall/ Quality Issues/Reworks/ Rejects

Finished Goods Shipments Stops

Emergency Buys and Price escalations

Loss of Reputation

Loss of Market Share

The last of the causes is beyond one's control, but these factors should be kept in view when selecting suppliers from particular country/ region.

The book lays down a system for assessing Risk in a scientific manner. The report is in the form of a Risk Wheel, where the Red/ Yellow colour shows areas of danger, with probability of each cause and consequences being graphically shown. This is done for all the suppiers of a category of items and action is taken to eliminate high risk suppliers, reduce exposure to medium risk suppliers and increase orders on low risk suppliers. It also involves working with medium and low risk suppliers to address their areas of risks.

I feel SCM professionals need to include Risk Analysis as a major exercise in their tools. But I also feel that instead of periodic knee-jerk exercise, Risk profiling should be an integral part of the selection process of new suppliers.

Perhaps IRILMM can do a course in SCM Risk Management.

Last Updated ( Saturday, 11 October 2014 11:54 )  
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