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Chap 1 Risk Management

The document provides an overview of risk management in supply chain networks, highlighting the complexity due to globalization, interdependence, and variability in demand and supply. It categorizes risks into external, internal, and operational, and emphasizes the importance of proactive risk management strategies and business continuity planning. Additionally, it discusses techniques for risk identification and assessment, including qualitative and quantitative approaches, and the significance of building resilience in supply chains.

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Rumaisa Saleem
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15 views16 pages

Chap 1 Risk Management

The document provides an overview of risk management in supply chain networks, highlighting the complexity due to globalization, interdependence, and variability in demand and supply. It categorizes risks into external, internal, and operational, and emphasizes the importance of proactive risk management strategies and business continuity planning. Additionally, it discusses techniques for risk identification and assessment, including qualitative and quantitative approaches, and the significance of building resilience in supply chains.

Uploaded by

Rumaisa Saleem
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Introduction to Risk

Management in Supply Chain


Networks
Understanding the Complexity of Supply
Chain Networks
•Definition of Supply Chain Networks
•Multi-tiered and interconnected relationships between suppliers, manufacturers,
distributors, and customers.

•Factors Contributing to Complexity:


•Globalization and international trade
•Interdependence between partners
•Variability in demand, supply, and logistics
The Role of Globalization in
Supply Chain Complexity
•Global Sourcing and Production:
•Goods and components sourced from different countries.
•Examples: Apple's global supply chain (components from
Asia, assembly in China, design in the U.S.).

•International Trade Dependencies:


•Challenges like trade wars, tariffs, and political instability.
•Example: The impact of Brexit on European supply
chains.
Risk Factors in Supply Chain
Networks

Categories of Risk:
External Risks: Political instability, natural disasters, pandemics (e.g.,
COVID-19).
Internal Risks: Supplier failure, demand fluctuations, cybersecurity
breaches.
Operational Risks: Equipment failure, labor shortages, transportation
delays.
Example: The Suez Canal blockage in 2021 and its impact on global
shipping.
Key Concepts in Supply
Chain Risk Management

Risk Identification:
•Mapping risks across the supply chain (suppliers, logistics, production).
•Tools: Risk registers, scenario analysis.
•Risk Assessment:
•Evaluating risk likelihood and impact.
•Quantitative and qualitative assessment models.
•Example: Use of Monte Carlo simulation in supply chain risk assessment.
Importance of Supply
Chain Risk Management
Preventing Disruptions:
Managing potential disruptions before they
happen.
Importance of proactive measures and
contingency planning.
Financial Impact:
Reducing the cost of disruptions through risk
management.
Case Study: How Toyota adjusted its supply
chain after the 2011 Japan earthquake.
Strategies for Managing
Supply Chain Risks
•Risk Mitigation Techniques:
•Diversification of Suppliers: Reducing dependency on single suppliers or
regions.
•Stockpiling and Buffer Inventory: Maintaining safety stock to cushion supply
disruptions.
•Vertical Integration: Controlling key parts of the supply chain.
•Example: How General Motors managed supplier risks by investing in
alternative suppliers.
Business Continuity
Planning in Supply Chains
•Business Continuity Management (BCM):
•Ensuring supply chain operations can continue during disruptions.
•Importance of having an emergency response plan, redundancy, and
backup systems.

Components of a BCM Plan:


•Risk assessments, recovery strategies, crisis communication, recovery
teams.
•Example: Amazon’s robust logistics and BCM during the COVID-19
pandemic.
Building Resilience in Supply
Chain Networks
Definition of Resilience:
The ability of a supply chain to bounce back
after a disruption.
Attributes of a Resilient Supply Chain:
Flexibility, redundancy, adaptability, visibility,
and collaboration.
Example: Cisco’s resilient supply chain strategy
that helped it navigate the 2010 earthquake in
Chile.
International Examples of
Supply Chain Risk
Management
COVID-19 Pandemic:
Impact on global supply chains and how
companies like Walmart adapted by diversifying
suppliers and increasing e-commerce capacity.
Natural Disasters:
Example: How Unilever responded to supply chain
disruptions after floods in South Asia by enhancing
local supplier relationships.
Geopolitical Risks:
Example: Huawei and its reconfiguration of its
supply chain in response to U.S. sanctions.
Linking Risk Management to
Business Continuity and Resilience

•Integration of Risk Management and Resilience:


•Risk management as a core component of a resilient supply chain.
•Long-term success through preparedness, response, and adaptation.

•Key Takeaways:
•Risk management ensures business continuity.
•A resilient supply chain mitigates long-term damage from disruptions.
Risk Identification
and Assessment in
Supply Chains
Techniques for Identifying Risks,
Assessment Models, and
Prioritization
Techniques for Identifying
Supply Chain Risks
1. Internal Risks:
• Process Risks (production, handling,
warehousing)
• Financial Risks (cash flow, credit)
• Resource Risks (labor, infrastructure)
Techniques for Identifying
Supply Chain Risks
2-External Risks:
• Market Risks (demand variability, competition)
• Environmental Risks (natural disasters,
regulations)
• Political and Economic Risks (trade policies,
currency fluctuations)
International Examples:
• COVID-19 disruption of global supply chains.
Risk Assessment Models:
Qualitative and Quantitative
Approaches
1. Qualitative Approaches:
• Expert Judgment and Brainstorming
• Risk Matrix (Impact vs. Likelihood)
• Scenario Analysis
2. Quantitative Approaches:
• Failure Mode and Effects Analysis (FMEA)
• Statistical Models (Monte Carlo Simulations)
• Sensitivity Analysis and Probability Distributions
Prioritizing Risks Based
on Impact and Likelihood
1. Risk Scoring and Categorization:
• High Impact & High Likelihood (Critical Risks)
• Low Impact & High Likelihood (Moderate Risks)
• High Impact & Low Likelihood (Occasional but
Severe Risks)

2. Prioritization Techniques:
• Risk Heat Maps
• Bow-tie Diagrams
• Cost-Benefit Analysis for Risk Mitigation

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