Risk Management in Global Supply Chain Networks

Abstract

Abstract:In this paper, we develop a framework to classify the Global supply chain risk management problems and present an approach for the solution of these problems. The risk management problems need to be handled at three levels strategic, operational and tactical. In addition, risk within the supply chain might manifest itself in the form of deviations, disruptions and disasters.To handle unforeseen events in the supply chain there are two obvious approaches: (1) to design chains with built in risk-tolerance and (2) to contain the damage once the undesirable event has occurred. Both of these approaches require a clear understanding of undesirable events that may take place in the supply chain and also the associated consequences and impacts from these events. We focus our efforts on mapping out the propagation of events in the supply chain due to supplier non-performance, and employ our insight to develop a mathematical programming based model for strategic level deviation and disruption management. The first model, a simple integer quadratic optimization model, adapted from the Markowitz model, determines optimal partner selection with the objective of minimizing both the operational cost and the variability of total operational cost. This model offers a possible approach to robust supply chain design.

Improving supply chain risk management - can additional data help?

“…Peck (2006) on the other hand, claim that there seldom is an upside for risk in the supply chain context. Secondly, when discussing the probability and impact of risk, there is a difference between risk that occurs as a distribution and risk that occurs as a discrete event (Viswanadham and Gaonkar, 2008). One parameter within the supply chain, such as cost, demand or lead-time, can vary around an average value, whereas events such as natural disasters and accidents either occur or do not occur in a binary way.…”

“…Finally, supply chain risk can also be defined in totally different manner. Viswanadham and Gaonkar (2008) discuss supply chain risk in terms of supply chain exceptions. They define an exception using the 'seven R's' definition for the purpose of logistics, which is "to ensure the availability of the right product, in the right quantity, in the right condition, at the right place, at the right time, at the right cost, for the right customer".…”

“…When it comes to categorising supply chain risk, a multitude of different manners exist (Venkatesh et al, 2015). Some authors categorise supply chain risk according to the proximity of the risk source to the focal company, in other words distinguish between internal risk, network risk and external risk (Peck, 2006;Pfohl et al, 2010;Lockamy and McCormack, 2009;Viswanadham and Gaonkar, 2008). Others categorise supply chain risk in relation to the flows in the supply chain.…”

Differences in security risk perceptions between logistics companies and cargo owners

“…In general, risk is defined as an unfavorable event with a certain probability and impact, but this classical view of risk is seen as limited by several authors. Previous research identifies three groups of risks: deviations, where one parameter such as cost or demand change; disruptions, where the structures of the supply chain is radically transformed; and disasters, where the whole supply network is temporarily shut down (Christopher and Peck, 2004, Viswanadham and Gaonkar, 2008, Knemeyer et al, 2009. Literature points out that risk taking is not automatically negative and does not always relate to losses (Pfohl et al, 2010).…”

“…Peck (2006) on the other hand claims that there seldom is an upside for risk in the supply chain context. When discussing the probability and impact of risk, there is a difference between risk that occurs as a distribution and risk that occurs as a discrete event (Viswanadham and Gaonkar, 2008). One parameter within the supply chain, such as cost, demand or lead-time, can vary around an average value, whereas events such as natural disasters and accidents either occur or don't occur in a binary way.…”