Daily Archives: October 30, 2007

Risk is Everywhere!

One of the presentations I hoped to make, but wasn’t able to (due to a prior commitment), at the 5th Annual International Symposium on Supply Chain Management was the presentation by Philipp Hohrath from the Hamburg University of Technology on A Supply Chain Risk Management Process. Fortunately, the paper on which the presentation was based was one of the papers included in the conference materials.

The process the authors presented in the paper for supply chain risk management, defined as part of Supply Chain Management which contains all strategies and measures, all knowledge, all institutions, all processes, and all technologies, which can be used on the technical, personal, and organizational level to reduce supply chain risk, was pretty straight-forward and obvious – Identify Risk, Analyze risk, Assess Risk, Handle Risk, and Control Risk – without any new insights beyond what was already out their in the traditional and web 2.0 literature, but the paper contained a great table on the different risks that logistics service providers and manufacturing companies have to worry about, categorized by source. This table is as follows:

  Company Supply Demand Environment
Manufacturing
  • Loss of Production
  • Quality Failure
  • Logistics Service Provider Failure
  • Employee Shortage
  • Supplier Failure
  • Decreasing Supply Quality
  • Decreasing Supply Reliability
  • Increasing Supply Lead Times
  • Price Increase
  • Stock Outage
  • Logistics Service Provider Failure
  • Single Supplier Dependence
  • Demand Variation Increase
  • Customer Insolvency
  • Margin
  • Unpredictable Product Substitution
  • Single Customer Dependence
  • Logistics Service Provider Failure
  • Legal Risk
  • Liability Risk
  • Political Risk
  • War / Conflict Risk
  • Natural Disaster
Logistics Services Providers
  • Insufficient Capacity
  • Quality Failure
  • Employee Shortage
  • Subcontractor Failure
  • Decreasing Service Quality
  • Decreasing Supply Reliability
  • Price Increase
  • Subcontractor Dependency
  • Customer Insolvency
  • Margin
  • Service Substitution
  • Single Customer Dependence
  • Legal Risk
  • Liability Risk
  • Political Risk
  • War / Conflict Risk
  • Natural Disaster

The paper also addressed the rising importance of supply chain risk management, from the 3-8% range in 2000, to the 27-38% range in 2005, to a project range of 70-82% in 2010, as well as some of the barriers to the implementation of supply chain risk management, including competitive thinking, lack of transparency, lack of understanding, and lack of sufficiently qualified employees. What’s important to note about the barriers is that the first three are easily solved with training and organizational transformation, whereas the talent problem is going to be with us for some time.