While globalization, extended supply chains, and supplier consolidation offer many benefits in efficiency and effectiveness, they can also make supply chains more brittle and can increase risks of supply-chain disruption. Historic and recent events have proven the need to identify and mitigate such risks. That the reason that Supply Chain Risk Management (SCRM) is essential to a successful business. It is also a competence and capability many enterprises have yet to develop.
The Supply Chain Risk Leadership Council (SCRLC) defines Supply Chain Risk as the likelihood and consequence of events at any point in the end-to-end supply chain, from sources of raw materials to end use of customers, and SCRM as the coordination of activities to direct and control an enterprise’s end-to-end supply chain with regard to supply-chain risks.
SCRM focuses on:
- Identifying internal and external environments
- Risk identification and assessment
- Risk treatment
- Continual monitoring and review of risks and their treatment.
The efforts to implement SCRM must address four principles:
- Leadership
- Governance
- Change Management
- The Development Of A Business Case.
In the following table is demonstrated the potential risks to an organization and its Supply Chain by categories.
Category |
Potential Risk |
Samples |
External, End to End Supply Chain Risks |
Natural disasters |
|
Accidents |
|
|
Sabotage, terrorism, crime, war |
|
|
Government Compliance and Political Uncertainty |
|
|
Labor Unavailability and Shortage of Skills |
|
|
Market challenges |
|
|
Lawsuits |
|
|
Technological trends |
|
|
Supplier risks
|
Physical and regulatory risks |
|
Production problems |
|
|
Financial losses and premiums
|
|
|
Management risks
|
|
|
Upstream supply risks
|
|
|
Distribution Risks
|
Infrastructure unavailability
|
|
Assets-Lack of capacity or accidents
|
|
|
Labor unavailability
|
|
|
Cargo damage or theft
|
|
|
Warehouse inadequacies
|
|
|
IT system inadequacies or failure |
||
Long, multi-party supply pipelines |
|
|
Internal Enterprise Risks
|
Operational
|
|
Government Compliance and Political Uncertainty |
|
|
Demand Variability/Volatility |
|
|
Personnel Availability/Skills Shortfalls |
|
|
Design uncertainty
|
|
|
Planning failures
|
|
|
Financial Uncertainty/Losses |
|
|
Facility Unavailability/Unreliability/ Capacity |
|
|
Testing Unavailability / Inferiority / Capacity |
|
|
Enterprise Underperformance/Lack of Value |
|
|
Supplier relationship management |
|
To summarize the SCRM is an integrated sub-process of a company-wide risk management process. The coordinated goal definition, risk identification, risk analysis, risk management, and monitoring and control of the efficiency of systems and measures make up the key elements.
The proactive phase involves developing a corporate strategy that is in line with the objective to achieve a defined delivery capability in case of a harmful event, while striking an efficient balance between required capacities for recognizing and managing supply interruptions, and susceptibility to disruptions in the supply chain.
References:
- http://www.scrlc.com/articles/Supply_Chain_Risk_Management_A_Compilation_of_Best_Practices_final%5B1%5D.pdf
- http://globalsupplychaininstitute.utk.edu/publications/documents/Risk.pdf
- http://www.supplychain247.com/article/risk_management_in_the_supply_chain/riskmethods
- https://www.fbi.gov/file-repository/scrmbestpractices-1.pdf/view
- http://www.achilles.com/en/for-buyers/supply-chain-risk-and-performance-management
hi thanks for the information