Supply chain risk management
Supply chain risk management (SCRM) is "the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity".
In other words, SCRM is to collaboratively with partners in a supply chain or on your own, apply risk management process tools to deal with risks and uncertainties caused by, or impacting on, logistics related activities or resources in the supply chain.
Supply chain exposures
SCRM attempts to reduce supply chain vulnerability via a coordinated holistic approach, involving all supply chain stakeholders, which identifies and analyses the risk of failure points within the supply chain. Risks to the supply chain range from unpredictable natural threats to counterfeit products, and reach across quality, security, to resiliency and product integrity. Mitigation plans to manage these risks can involve logistics, cybersecurity, finance and risk management disciplines; the ultimate goal being to ensure supply chain continuity in the event of a scenario which otherwise would have interrupted normal business and thereby profitability.
Sometimes, it's possible for supply chain logistics techniques such as supply chain optimization to prejudice contingency planning which would otherwise reduce the overall risk level for that particular supply chain. It's also becoming more common among businesses especially manufacturers to employ a supplier quality management software, which integrates all phases of the supply chain cycle. This approach is shown to increase transparency, reduce overhead costs, and improve operational efficiency.
Supply chain risk management typically involves four processes: identification, assessment, controlling, and monitoring of supply chain risks. However, due to the complexity of many supply chains, these processes might not be sufficient to ensure that all eventualities are prepared for. Therefore, the concept of supply chain risk management, which is cause-oriented, is often combined with the concept of supply chain resilience, which is aims to ensure that the supply chain can bounce back from risks irrespective of their cause. Hereby, Wieland & Wallenburg (2013) distinguish between proactive and reactive elements of supply chain resilience. Durach et al. (2015) provide a systematic overview of proactive resilience, which they call supply chain robustness.
Some options to engineer an acceptable risk level include:
- Managing stock
- Considering alternative sourcing arrangements
- Business interruption / contingency insurance
- Risk assessments and audits
- Awareness campaigns and training programs
- The use of business intelligence from big data analytics and continuous monitoring for predictive security measures vs. clean up
- Redundancy optimization
- cf. Andreas Wieland, Carl Marcus Wallenburg (2011): Supply-Chain-Management in stürmischen Zeiten. Berlin.
- Wieland, A., Wallenburg, C.M., 2012. Dealing with supply chain risks: Linking risk management practices and strategies to performance. International Journal of Physical Distribution & Logistics Management, 42(10).
- Brindley, Clare (2004). Supply Chain Risk. England: Ashgate Publishing Ltd. p. 80. ISBN 0754639029.
- "Managing the Supply Chain with Quality Management Software". Sparta Systems. Retrieved 27 July 2015.
- Wieland & Wallenburg (2012)
- Wieland, A. & Wallenburg, C.M. (2013), The influence of relational competencies on supply chain resilience: a relational view, International Journal of Physical Distribution & Logistics Management, Vol. 43, No. 4, pp. 300-320.
- Durach, C.F. et al. (2015), Antecedents and dimensions of supply chain robustness: a systematic literature review, International Journal of Physical Distribution & Logistics Management, Vol. 45, No. 1/2, pp. 118-137.
- Tang, Christopher S. (2006). "Robust strategies for mitigating supply chain disruptions.". International Journal of Logistics Research and Applications. 9 (1): 33–45.
- Choi, T.M., C.H. Chiu. Risk Analysis in Stochastic Supply Chains: A Mean-Risk Approach, Springer, International Series in Operations Research and Management Science, 2012.
- Brindley, Clare. 2004. Supply Chain Risk. Ashgate Publishing Ltd., England, Ed. 1.
- World Economic Forum Supply Chain and Transport Risk Initiative
- Jan Husdal's private webpage about supply chain risk research, including dozens of literature reviews
- SCRM Blog, Blog on research in supply chain risk management
- Supply Chain Risk Management Software
- Airmic review of the supply chain insurance market (December 2012)
- SCRM SaaS Solution; to monitor all kinds of risks, minimize the impact and proactively take action to mitigate risk
- SCRM Blog; Blog posts from former CPOs, thought leaders and experts in the supply chain and procurement area
- Supply Chain Expert Community Blog
- The Supply Chain Risk World