Supply Chain Risk

RISK MANAGEMENT IN SUPPLY CHAINS

ANGELA BROTHERS

04/15/12

Table of Contents

Abstract p. 3

Risk Management in Supply Chains p. 4

Considering Comprehensive Risk Management Is Important p. 5

Evaluate Obvious and Not So Obvious Risks p. 5

Make Lists to Pin Point Risks p. 7

Costs Associated with Risk and Mitigation Alternatives p. 8

Monitor Risk Periodically p. 9

References p. 10

Abstract

Risk management in supply chains is more important than ever. With a booming global economy, supply chains are not localized as often as in the past. A global supply chain network is exposed to a variety of risks, including supply disruption, supply delays, demand fluctuations, price fluctuations, and exchange-rate fluctuations (Chopra, Meindl, 2010, p. 146). A good network design with consideration to supply chain risks and their drivers can mitigate risk. There is also a tradeoff when dealing with risk management and costs associated with each choice. Increasing inventory may combat against delays, but increase holding costs. The use of risk analysis during the planning stages and continually updating will ensure clear, concise information that should be transparent throughout the supply chain.

Risk Management in Supply Chains

To mitigate risk in supply chains there needs to be a clear plan of action in place before the risk occurs. With global supply chains there is much more risk to calculate and plan for. There are a variety of risks across supply chains; according to Kiser and Cantrell, these are external risks (Kiser & Cantrell 2006):

* Demand risks related to unpredictable or misunderstood customer demand.

* Supply risks related to disturbances in the flow of product within the chain.

* Environment risks originating from shocks outside the supply chain.

* Business risks related to factors such as suppliers’ financial or management stability.

* Physical risks related...