Assessing Supply Chain Risks and Strategies

Q3: Have you integrated risk management into your company’s/supply chain agenda?... Q10: Do you have other strategies to deal with suppliers who are not willing to partner with you?

Contents
Introduction.................................................................................................................................................2
Chapter 2- Review of Literature..................................................................................................................2
Type of risks in Supply chain......................................................................................................................3
Impacts of supply chain risks on organization’s performance.....................................................................5
Tools and Techniques..................................................................................................................................7
Chapter 3- Research Methodology..............................................................................................................9
Research Approach......................................................................................................................................9
Research Strategies...................................................................................................................................10
Quantitative Approach...............................................................................................................................10
Research analysis.......................................................................................................................................13
Research Importance.................................................................................................................................13
Chapter- 4 Conclusion...............................................................................................................................14
Research Limitations.................................................................................................................................14
Conclusion.................................................................................................................................................14
References.................................................................................................................................................15
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Chapter-1 Introduction
The Supply chain is important for the organizations. Management study of supply chain will
improve the overall performance of the organizations. It is a value adding activities that connect
the supplier and customers of the organization. There are a number of factors that affects the
supply chain and results into increase the chances of risks. The supply chain risks, effects the
supplies that automatically affects the organization performance in certain ways. In this research
report the risks of supply chain are explained and the drivers of that risk.The impact of supply
chain risks on organizational performance in qualitative and quantitative form is explained on
different process. The different processes are suppliers, warehousing, marketing,transport and
productions. To manage these risks it’s important to identify the risks and analyze their impact.
The organizations should use tools and techniques for risk identifications and analysis.
Chapter 2- Review of Literature
Literature review represents the previous studies or current studies and analysis that were
published and presented. The followings are some literature review that relates to the research
report. Sharma and Chrisman(1999) address and defined the supply chain risks and analysis of
them. As their studies the impacts of the supply chain risks to the organization’s performance is
not necessary to be negative sometimes, that are positive also. Vikulov and Butrin (2014) define
the categories of risk and also the impacts of risks on organization performance. Authors
categories the organization’s performance in process and showed the risk impact qualitative. The
categories of business process are suppliers, transport, warehousing, production and marketing.
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Muhammad, Naseer Qayyum, Murtaza Ali and Khuram Shazad(2012) describe the supply chain
management method. The authors’ design a quantitative approach to calculate the risk impact on
the organization performance. They collect data with the help of questionnaires from the 30
managers of the organization. They design a hypothesis and correlate the hypothesis and the
values. This empirical study shows the results in the form of quantity(Qayyum, Muhammad, Ali,
& Shazad, 2013).
Type of risks in Supply chain
There are many risks that experienced in the supply chain. There are always some factors and
reason for any risk. It depends upon the type of supply, area of supply, demands, environment,
government, security policies. The three most occurred risks in the supply chain are
organizational, network and environment risks. The followings are some risks and their driving
factors are explained that affects the supply chain.
 Disruptions Risks:Disruption in the supply chain affects the organizational operation. The
driver of disruptions are natural disaster like flood, fire, storms, heavy rainfall, machinery
breakdown, labor strikes, bankruptcy, security reasons like terrorism, operating errors,
power cuts etc. To avoid or prevent these risks is not easy tasks, but managers must have
a risk mitigation plan for the Disruptions.
 Delay Risks: The production growth of an organization affects due to the delay in
material flows. These occur often and have many reasons for that..
 System Risks: In the era of information technology, every organization has the
information system that helps them to manage the work. But every system has their own
weakness that cause failures and risks in supply change(Cagliano, Marco, Grimaldi, &
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Rafele, 2012). The drivers of system risks are network failure or breakdown, issues with
E-commerce, integration errors, database failure and IT infrastructure breakdown.
 ForecastRisks: The mismatch between the actual demand and company’s projection
causes the forecast risks. Forecast risks depended upon the demand and forecast. A low
forecast might decrease product production for sell and the high forecast increase the
production and increase the inventory and decrease product price mark..
 Intellectual property risks: An intellectual property of any organization is important for
their growth and for their reputations. A less integrated and more global supply chain
increases the intellectual property risks. (McCormack, et al., 2008).
 Procurement risks: Collecting resources for the work is known as procurement process.
The procurement risks can occur in the supply chain, when there is an unexpected
increase in the supply costs that results from the exchange rates or the supplierprice hike.
 Receivables risks: These risks are related to the final product sales, that affects the
company growth and production. The drivers of receivables risks are customer’s strength
and financial conditions of the customers. (Dittmann, 2014).
 Inventory risks: Holding excessive inventory becomes a cause of loss for the companies.
Inventory risks are derived from the product shorter lifecyclecost of inventory holding,
product value and uncertainty in demand and supply.
 Capacity risks: the drivers of capacity risks are the cost of capacity and capacity
flexibility. The capacity can be decreased and increased with the time. The capacity must
be flexible to overcome the risks.
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Impacts of supply chain risks on organization’s performance
Supply chain risks impact to the organization’s performance in some certain ways. The Supply
chain is associated with all activities of production, procurement, productions for their planning
and management. Accordingly an article that was published in 1999 by Sharma and Chrisman
supply chain risks have negative as well as positive impact to the organization(SCRLC, 2011).
Their approach was rooted in the Markowitz portfolio selection theory. And in another article
that was published in 2014 by Vikulov and Butrin classify the supply chain risks in business
process and their impacts on them. The followings are business process and impact of supply
chain risks to them.
 Suppliers: Supply chain risks associated with the suppliers can direct impact on the
product production and product delivery process. Delivery schedules would be changed
due to the impact the product.
 Transport: The supply chain risks on the transport service of the organizations can
damage of goods while transport and loss of goods.
 Warehouse: Risk associate with the warehousing and their impact are during storage
good damage and changes in taxes and other costs of warehousing that are rented,
security, etc. (Charles, Dennery, Guttikonda, & O’Connor, 2015).
 Production: Supply chain risks have a great impact on organization’s production
performance in the form of quality issues, over productions, machinery failure and
procurement issues.
 Marketing: The risks of supply chain that cause wrong forecasts and take wrong
promotion strategy and the failures of networking sales. The market value of the
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organization will decrease and organization will not able to stand in the market with their
competitors.(Bank, 2016).
The above some process of the organization that has the impacts of supply chain risks. These
processes are the core of any organization’s performance. With that there other some other
impacts to the organization performance. Those are:
 System failures: Nowadays every organization adopts information technology.
Organizations have the large system that helps them to, maintain every task. The
important information may steal from the system and the virus, worm, Trojan horse
attacks might be injected into the system by the attackers.
 Legal barriers: Government rules and policies sometimes act as the supply chain risks.
(PWC, 2014).
 Natural losses: The impact on the organization performance by the natural reasons. Those
are called as the external risks of supply chain. The organization could not avoid these
reasons or nor predict them. These are natural disasters, wars, diseases and terrorist
attacks.
These all risks impact in the organization performance, but in different ways. Organization’s
budget, inventory, suppliers, workers, system, security, market and warehouse all are the part of
the performance. If all the units of organization work properly and maintain the growth and
production level, then the organization will always rise. And this the performance factor of the
organization. Sometimes the risks impact a lot on the company performance that cost company
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value. To overcome these impacts and risks some tools and techniques are available for risk
analysis and mitigation. Organizations have to follow those tools(Ghadge & Dani, 2012)
Tools and Techniques
To manage the risk, risk management process work in two phases, that is risk analysis and risk
control. Risk analysis referred a process that deals with risk identification, risk estimation and
risk evaluation. While risk controls manage the mitigation and monitoring the risks.
Risk identification: before planning and developing any risk mitigation plan first of all risk
identification is important, risk identification process explains the each and every detail of risks
like source of risk, nature of risks, occurrence area, time period or expected outcomes. The
details of risks can be obtained from the conditions by using tools and methods. The followings
are the step to identify the risks.
Methods and tools for risk identification- The methods of supply chain risk identification are:
1. Geomaping or supply chain mapping: This method provides the details about the
dependencies and hand offs in the supply chain that cause the risks.
2. Supply chain operation reference (SCOR): This method researches the historical
problems and the reason of risks. Provide guidelines to overcome the further risks.
3. Brainstorming: brainstorming with highly expert people in the supply chain. They have
experience in risks of supply chain and provide a huge information about the risk’s
sources, nature, time periods of the risks etc.
4. Assessment surveys: Well-designed surveys help to gather the information about the
supply chain risks in quick and effective ways.
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5. Sites visits: The risk management team visit sites to identify the risks. They collect
information from the workers, weather forecasts, company, machinery and other factors
that affect the supply chain and cause risks.
6. Information audits: There are some systems that audit the past issues and trends and
generate the performance result. An Audit provides information about the area of
organization where risks effect and decrease the performance and also predict the future
performances of the organization.
The tools of supply chain risk identifications are:
1. Risk checklists: Preparing a list of risks that are very common in company environment
and from the past records of the organization(Ghadge & Dani, 2012).
2. Cause and effect diagram: In this tool, a diagram of an organization’s supply chain to
trace the causes of risks. And with this also find out the effects of risks on that particular
area.
3. Gantt chart: Gantt chart represents the tasks or procedures with time. Critical path can
be identified with the help of the Gantt chart. That shows the area of disruptions.
Risk analysis: Risk analysis helps to understand the risks. Risk analysis the sources of risks,
nature of risks, results and impact of them to organizational performance whether it is positive or
negative. This information helps to plan the better risk management plan for the future. In risk
identifications that affect the consequences should be identified. Risk analysis finds out the
reason and understand that factors that how frequently the risk happened and their impacts. Risk
analysis calculates the risk from its factors and report to the organizations.
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Chapter 3- Research Methodology
There are three methods to analysis the risks. These are qualitative, semi-quantitative and
quantitative methods.
1. Qualitative methods define the level of probability of occurrence and risky impacts based on
different scales and measures. There are several levels of probability in qualitative methods
are rare, unlikely, likely and most certain. The levels of probability and impact combined
result into the degree of risks, i.e. low, medium and high(Singhal & Agarwal, 2011).
2. Semi-quantitative methods the numerical values replaced the judgment levels. The range of
scale 1 to 4 for probability in terms of very unlikely, improbable, probable and very probable.
Analytic hierarchy process approach is used to calculate the relative weight of supply chain
risks.
3. Quantitative methods may perform by the simulation methods when there is a huge amount
of information is available from the past records. The tools that are used to calculate the
probability of occurrence and risky event impacts are fault and event trees, Monte Carlo
techniques and petri nets.
Research Approach
In this research report, there are two of the studies is evaluated, on the basis of organization
performance. The studies are qualitative approach and quantitative approach. The methodology
that is basically used in this report is the quantitative approach which depends on the results of
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the questionnaire. The data analysis will take place over the collection of the data through
questionnaires.
Research Strategies
The research strategy or method used in the organization is a quantitative approach. A
questionnaire is prepared to collect the data from the managers. Approx. 30 to 40 questionaries
form distributed to the managers and got feedback from 30 managers. The questions are very
basic and based upon the impacts of supply chain risks on the organizational performance.
Quantitative Approach
Muhammad, Naseer Qayyum, Murtaza Ali and Khuram Shazad(2012) gather the data through
questionnaires and can be used. The testing tool is SPSS (Statistical package for the social
sciences) to calculate the results. In this tool the results are calculated for the hypothesis. The
organization performance depends upon many variables(Monroe, 2012). The following is a
questionnaire that is used to collect the data and then analyze the results accordingly.
The purpose of the qualitative approach is to answer the research questions like types of the risks
involved in the supply chain, their impact and the techniques used to eliminate those risks.
.
Q1. Do you think so that organizations concerned about the risks in chain management?
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Yes
No
Q2. Do you have the questions and discussions wih the management team regarding the supply
chain risks?
Yes
No
Q3. Have you integrated risk management into your company’s/business unit’s supply chain
agenda?
Yes
No
Q4. Do you have any idea about the suppliers who face the one product line?
Yes
No
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Q5. Is it there any ongoing process available for the assessment of the supply chain risk in the
organization?
Yes
No
Q6. Do you collect the risk information periodically from your suppliers.
Yes
No
Q7. Do you agree with the supplier exposures integrated are helpful in making decision to select
a supplier?
Yes
No
Q8. Is it true that company developed a mitigation strategy for supply chain management?
Yes
No
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Q9. Is it true that to mitigate the risks, suppliers are happy to do the partnership with you?
Yes
No
Q10.Do you have other strategies to deal with suppliers who are not willing to partner with you?
Yes
No
Research analysis
The variables for the analysis are a strategic supplier partnership,customer relationship, the level
of information sharing, information quality, postponement, price/cost, delivery dependability,
product innovation, time to market and organizational performance. In the above statics every
variable has correlation with another variable. That depends upon the variables some have a
positive impact and some have a negative correlation impact. For example- with a strategic
supplier partnership and customer relationship, postponement has positive correlation as per the
above static values(Gyula, 2013).
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Research Importance
These results are again refined on the basis of different parameter as per the hypothesis.
Organizational performance is the depended variables and the text for coefficients. To check
their compatibility with regression models. This approach will help to find the positive as well as
the negative effect of the supply chain risks on the organizational performance.
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Chapter- 4 Conclusion
Research Limitations
The biggest limitation of the research analysis is the perception of the suppliers with regard to
the risk management in the supply chain.Supply chain risk management perform by the
simulation methods when there is a huge amount of information is available from the past
records. The tools that are used to calculate the probability of occurrence and risky event impacts
are fault and event trees,
Conclusion
In this research report, all the risks found in the supply chain are explained in detail. It is
concluded that there are many risks that the organizations are facing and it has a negative effect
on the performance of the organization. The organization should use or adopt the different tools
and techniques to analyze the risk and to solve the problem occurs through these risks.
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