Global Supply Chain Development – Workshop 8 (Risk Analysis)
Executive Summary Video
The Appleton Greene Corporate Training Program (CTP) for Global Supply Chain Development is provided by Mr. Buck BS Certified Learning Provider (CLP). Program Specifications: Monthly cost USD$2,500.00; Monthly Workshops 6 hours; Monthly Support 4 hours; Program Duration 12 months; Program orders subject to ongoing availability.
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Learning Provider Profile
Mr Buck is an approved Senior Consultant at Appleton Greene and he has experience in management, production and globalization. He has achieved a Bachelor of Applied Science IET/MET in Concentration in Operations Management. He has industry experience within the following sectors: Biotechnology; Manufacturing; Aerospace; Logistics and Technology. He has had commercial experience within the following countries: China; United Kingdom; Ireland and United States of America, or more specifically within the following cities: Shanghai; London; Cork; Minneapolis MN and Chicago IL. His personal achievements include: founded a corporation in 1991 and sold it in 2018 for $400m; entrepreneur of the year Ernst & Young 1998; entrepreneur of the year Ernst & Young 2004; built global manufacturing infrastructure and lead acquisition of 16 companies. His service skills incorporate: strategic planning; leadership development; supply chain; executive mentoring and merger & acquisition.
MOST Analysis
Mission Statement
The lack of a robust process for identifying, prioritizing, managing and mitigating risks is a clear threat to an organization’s supply chain and its strategy. A systematic risk assessment becomes even more important as an organization decides to compete globally and/or to expand its supply chain to other countries and regions. Unfortunately, without a crisis to motivate actions, risk planning often falls to the bottom of the priority list.
Objectives
01. Critical review of Global Supply Chain Risk: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
02. How Global Supply Chain Risk has evolved over the years; departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
03. Core characteristics of Supply Chain risk; departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
04. Risk assessment process in Global Supply Chain; departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
05. Common risks involved in Global Supply Chains; departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
06. Understanding Supply Chain risk management; departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
07. Understanding supplier profiles: departmental SWOT analysis; strategy research & development. 1 Month
08. Mitigating transport and logistic risks in a Global Supply Chain: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
09. Practical approaches to build risk resilience: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
10. Best practices for Supply Chain risk management: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
11. Mining for potential Global Supply Chain threats: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
12. Risk and compliance in the global economy: departmental SWOT analysis; strategy research & development. Time Allocated: 1 Month
Strategies
01. Critical review of Global Supply Chain Risk: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
02. How Global Supply Chain Risk has evolved over the years: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
03. Core characteristics of Supply Chain risk: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
04. Risk assessment process in Global Supply Chain: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
05. Common risks involved in Global Supply Chains: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
06. Understanding Supply Chain risk management: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
07. Understanding supplier profiles: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
08. Mitigating transport and logistic risks in a Global Supply Chain: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
09. Practical approaches to build risk resilience: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
10. Best practices for Supply Chain risk management: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
11. Mining for potential Global Supply Chain threats: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
12. Risk and compliance in the global economy: Each individual department head to undertake departmental SWOT analysis; strategy research & development.
Tasks
01. Create a task on your calendar, to be completed within the next month, to analyze Critical review of Global Supply Chain Risk.
02. Create a task on your calendar, to be completed within the next month, to analyze How Global Supply Chain Risk has evolved over the years.
03. Create a task on your calendar, to be completed within the next month, to analyze Core characteristics of Supply Chain risk.
04. Create a task on your calendar, to be completed within the next month, to analyze Risk assessment process in Global Supply Chain.
05. Create a task on your calendar, to be completed within the next month, to analyze Common risks involved in Global Supply Chains.
06. Create a task on your calendar, to be completed within the next month, to analyze Understanding Supply Chain risk management.
07. Create a task on your calendar, to be completed within the next month, to analyze Understanding supplier profiles.
08. Create a task on your calendar, to be completed within the next month, to analyze Mitigating transport and logistic risks in a Global Supply Chain.
09. Create a task on your calendar, to be completed within the next month, to analyze Practical approaches to build risk resilience.
10. Create a task on your calendar, to be completed within the next month, to analyse Best practices for Supply Chain risk management.
11. Create a task on your calendar, to be completed within the next month, to analyse Mining for potential Global Supply Chain threats.
12. Create a task on your calendar, to be completed within the next month, to analyse Risk and compliance in the global economy.
Introduction
Introduction to Global Supply Chain Risk Analysis
Risk assessment and analysis in the supply chain is a necessary evil today. Organizations have to ensure that they have all corners covered and are ready for the complications involving these processes. This introduction will take you through all that you should know to learn more about risk in the global supply chain, and the issues it can lead to.
Risks in the supply chain have evolved to become even more prevalent and common with time. The risk management strategies that businesses implemented and followed in yesteryears have failed to stack up in this day and age. The policies of days gone by have failed to maintain their efficacy during these modern times, and businesses now have to improvise and adapt to the changing environment.
No type of provider can avoid the risks of a global supply chain today. Even with the growing addition of security across the supply chain, risks exist across ocean, land and air freight. These risks are often unavoidable and inevitable for global supply chain businesses, since there is no way around them.
Definition of Risk
Traditionally, risk has been defined as an amalgam of two factors – a particular hazard and the chances or likelihood that the hazard will occur. To simplify this definition, risk is the probability or likelihood that a hazard such as financial fraud will occur inside a business.
As per environmental and human rights terms, this definition of risk translates into identifying all environmental and human rights violations that can result through a supply chain including pollution incidents, forced labor, and coming up with a probability for their likelihood.
Going by these terms, risk can be considered theoretical, and something that has a negative impact, which can potentially damage a business and hasn’t yet happened.
The aim behind risk assessment processes in the supply chain is to identify all potential sources of risk in the supply chain and to grade or prioritize them on the basis of their importance. As studied in previous sections, the importance of risk is evaluated and determined on the basis of the impact that the risk carries. The aim of risk management, on the contrary, is to reduce the likelihood or probability of these hypothetical problems and ensure there aren’t any roadblocks along the way. It is necessary for all supply chain stakeholders to have a clear understanding of the risk assessment and management processes. Where risk assessment deals with prioritizing, assessing and grading risk, risk management deals with managing and mitigating their impact. Risk assessment puts down the foundation for what’s to follow during a typical risk management process.
Who Is at Risk?
There are many areas of risk inside an organization. These areas can have different impacts, often leading to complications in revenue generation and profitability. There are many areas of risk, with the greater ones leading to a loss of business, financial failure and major interruptions to operations in a number of different ways.
When it comes to human rights and sustainability risks, the discussion hovers around the impact the risk will have on the outside environment and the reputation of the supply chain and parent organization. While organizations often look through the lens of profitability, they have now realized the importance of providing friendly working conditions to workers and practicing sustainable measures for protecting the environment from the perils of industrial smoke and transportation inefficiencies.
Risk Assessment and Compliance
A publication released back in 2011 by UNGP provided businesses with a framework they should follow for not only understanding their own responsibilities, but to also come up with a plan to mitigate and minimize the likelihood of risk. Human rights risk assessment is of great concern to the United Nations and was highly emphasized in the document.
When it comes to human rights risks, organizations should run consultations with all business stakeholders and determine strategies to combat risk. Stakeholders such as business partners, communities, employees, NGOs and even trade unions can share valuable insights into the process of policy making and setting the right course for risk management.
The UNGP made it clear within this document that the primary responsibility of ensuring human rights lies with the State. The private sector should uphold and comply with the laws mentioned by the State and should also be responsible toward respecting and promoting human rights. Private sector entities should realize the negative attributes that come with their management styles and what can be done to limit them.
Compliance with the laws and regulative measures is necessary, but it isn’t the only thing organizations are required to do today. Organizations in the business world today are required to also maintain a strict code of conduct, based on which they perform in a particular manner toward employees and the environment.
Most developing countries have concrete laws in place for risk management but lack the steps that should be taken here. The lack of proper steps and decision making can lead to companies exploiting labor and not giving human rights the importance they should be given. Companies have a responsibility of their own as well and should go beyond simple legal compliance to remain on the right side of ethics and the law.
Common Worker Rights and Environmental Risks Ignored by Supply Chains
There are a number of sustainability and human rights issues that businesses today can focus more on. The UNGP has termed the risks below to be the most salient ones and has crafted a policy to ensure businesses comply with risk management in this regard.
Fundamental Labor Rights
Workers suffer during the non-implementation of fundamental labor rights. The inability to provide these risks can land supply chains in hot waters.
Rights violations made here include:
• Forced labor
• Child labor
• Discrimination in employment toward people of a particular religion or caste
• Lack of respect for worker freedom and unions
Working Conditions and Remuneration Risks
Obviously, employees need to be given feasible working conditions to work in and should also be given the wages and remuneration they require. Risky violations that shouldn’t be made here include:
• Wages below the minimum wage level decided by the governing organizations
• Excessive hours of work
• Abusive treatment leveled toward employees for no violations as such
• Health and safety breaches
• Lack of access to the grievance mechanism
• Abuse of contracts
Social and Economic Rights Violations
These risky violations are mostly leveled on communities near the supply chain and manufacturing unit. The inability to address these violations can leave organizations with lasting repercussions, along with a supply chain that may never recover.
The risk factors involved in these violations include:
• Noise and air pollution affecting the local population in a specific area
• Emissions impacting the local water supplies or an improper drainage system
• Road transportation methods that create traffic constraints and lead to challenges
• Land grabbing activities without proper legal compliance
Civil and Political Rights Violations
Violations of civil and political rights are conducted by global supply chains and operators on communities and their own employees. These risk factors are a show of power and limit the voices against regressive policies.
Violations that can lead to this risk include:
• Preventing workers from forming unions and being part of unions together
• Collaboration within companies and security forces to repress community complaints against regressive measures
• Bribery and land grabbing policies
Sources of Risk
Risk can come at you from multiple sources or dimensions. Obviously, it is very hard to manage or determine where risk is coming from, but a simple grouping can help you determine the course of action.
For supply chain managers, the sources of risks are of key importance. These sources are a major part of the risk and need to be fully minimized or mitigated if a strategy is to be prepared. Sourcing your risks and being prepared for them can also lead to the aversion of possible dangers that result because of the risk.
Also, risk categories and sources aren’t meant to be exclusive. This means that the category basically operates as a tag or a label and that the risk in question can have more than one tag. In short, most risks are generated through inefficiencies in multiple sources and not just one.
Typical risk categories include:
• External
• Internal
• Project
• Product
• Technical
• People
• Organization etc.
External Risk
An example of an external risk for a global supply chain operator would be a supplier missing their deadline and delaying the shipment that they have to provide. These delays cannot only lead to customer retention issues, but also signal problems in revenue generation. However, since supplier delivery timelines are often out of the organization’s control, there isn’t much that can be done about them.
This is something that we discuss in greater detail within the rest of this chapter as well. Supplier relationships are a key part of averting supply chain risk, and with good relationships, organizations can mitigate and minimize the chances of risks.
Internal Risk
Internal risk factors come to the surface during change management. Change is a major part of supply chain progress, but can be really complicated for global operators to manage. Signaling a change in global sourcing and procurement patterns can lead to implications.
To take an example of internal risks, a management that isn’t involved in the organization’s transformation process will see a number of risks during the implementation of an Agile framework. These risks are however linked with internal management and external forces cannot be blamed for them.
Project
Projects can often act as sources of risk as well. Projects are a major part of every supply chain today and need to be managed carefully for the right results. Project managers should be involved in the process, so that the backlog items are ready for the next iteration. Failure to keep a check and balance on the project can lead to delays and backlog creation for the next iteration.
Product
Risk can also come through the final product being offered to customers at the end of a supply chain. All marketing attributes related to the product should be finalized and managed in a decent manner to manage the risks involved with them. If the product owner isn’t involved and sets either price, product, promotion or location wrong, the product is bound to suffer.
Technical Risks
With the higher dependency on tech solutions in the supply chain, there are a growing number of technical risks involved as well. Technical risks make management difficult and can lead to massive downtimes if your management team and the tech team aren’t well equipped in the processes that they should follow for risk mitigation.
In short, the greater an organization’s reliability on tech solutions, the higher will be their chances of falling for technical risks. Automated solutions do make global supply chain processes easier, but they also come with their own perils in the way.
People
The people employed in a global supply chain also carry their risk. Global supply chains are stringent in their hiring procedures and hire the crème de la crème to represent their business. This is because people play an important role in not only mitigating but managing risk as well.
Training is an important part of the process here, where employees are trained to follow best practices in the industry and to ensure that they are up and available whenever the need be. If recruitment fails to rope in the best candidates and does not improve the pipeline, performance is bound to suffer.
Organization
The management and organization of processes is also a key factor in determining and dictating risk. The organization of key resources can either increase or decrease risk, based on the reaction to it.
We will look at the sources of risk and the common risks found in supply chains in greater detail in the coming chapters.
Time-Based and Situational Characteristics
Changes in situations and time periods can often result in a number of new risks. If we look at situations, it is a key characteristic for risks to pop up during change. The changing of team members, the undergoing of a major reorganization process, the changing scope of a project and the enhanced use of technology are all factors that can contribute and lead to risk. Change management is hence extremely important and helps steady the ship during times of turbulence.
Time-based risks can also pop up in a global supply chain. Time-based risks are certain risks that repeat themselves at particular times. For instance, the time during the start of a project or a new chain is often considered the riskiest. This time period comes with certain risks of its own and can be difficult to manage for managers or professionals involved in the process. The risk then diminishes along as the project moves forward and the impact reduces.
Interdependence
A core characteristic of risk is to have a domino-like impact on organizational processes. Many tasks and deliverables within a global supply chain are dependent on each other. A certain risk endangering the delivery of one shipment or one batch can accumulate and have a cascading impact on all other tasks as well. The result could be similar to a domino effect with lasting repercussions.
Risks are also known to be magnitude dependent. As we studied earlier, a higher impact can increase the magnitude of a risk as well. To explain this through a simple example, take up the choice of investing $1 for a 50/50 reward of $5 versus the risk of investing $1000 for a 50/50 chance of winning $5000. Obviously, the latter is a lot more complicated and riskier because the opportunity cost is higher.
History of Supply Chain and Risk Resilience
The roots of both operations research and industrial engineering can be found in logistics and supply chain-oriented research patterns. Frederick Taylor, who is accredited with writing The Principles of Scientific Management, back in 1911, is considered to be the father of both operations research and industrial engineering. The research conducted by Fredrick Taylor was inspired by logistics, after his early life experiences as a manual loader.
Operations Research gained precedence when scientists and innovators demonstrated just how useful analytics could be in studying and solving key military logistics problems. The complex requirements of the World War II required new innovations and strategies in military tactics, which is where these advancements came in particularly handy.
While both Industrial Research and Operations Engineering have been maintained separately, both these factors have found their best success when used together in the supply chain. The integrated framework used in global supply chains of today is the amalgam of both operations engineering and industrial research. This integrated framework helps address logistics and supply chain issues, while providing feasible conclusions and solutions for everyone involved.
This amalgam of engineering with operations planning is known as the supply chain engineering approach and is a major part of the supply chain today.
Supply Chain Management in the Early Years
Back in the early 1940s and 1950s the focus of most research conducted in logistics was on the use of mechanization. Mechanization processes such as pallet lifts and pallets were becoming increasingly common during the period, and research was focused on improving the tiring labor intensive processes in logistics, and to find a better racking and layout technology that would utilize space. The lack of technology and the extreme reliance on manual labor meant that racking and utilization of space in the warehouse was an integral issue in the supply chain process.
The ‘unit load’ concept gained particular popularity during this period, with readers and aficionados of the supply chain. The use of pallets became common with the rising popularity of the unit load concept. The concept of unit load and pallets was even extended to transportation management in the 1950s, with the innovation and development of containers for trains, trucks and ships. Although, supply chain globalization actualized much later, the founding stones had been set during these decades and the progress was evident. While these advancements and processes are termed as ‘material handling’ and ‘warehousing’, it is best to include the functions under fundamental and core application of industrial engineering, rather than creating an entirely new discipline.
The arrival of the 1960s saw a clearer trend towards the use of trucks in the transport networks. While rail tracks were previously used for shifting more time-dependent freight transport, trucks provided a more lucrative, efficient and easy to manage alternative. This alternative greatly enhanced with the growing infrastructure of highways, filling stations and logistic points in developed countries. The inclusion of trucks in local transport led to the much-needed development of a separate segment known as physical distribution.
The National Council of Physical Distribution Management was formed in 1963 to focus the attention of supply chain stakeholders and governments towards this field. The interest showed by governments was followed with enhanced academic research and education. This academic research satisfied the growing needs of this paradigm change.
The addendum of technology in 1970s opened the doors to a completely new era of supply chain management and technologies. Where all record keeping and communication was done manually between supply chain stakeholders, computers provided an easy solution for everyone. The addition of technology, especially the computer and later the internet, led to an efficient inventory mechanism with optimized truck routes.
The transition from theory to the practice of technology took time and effort for many supply chain providers. In the late 1970s, the supply chain industry saw the formation of the Material Handling Research Center, the Georgia Tech of the Production and Distribution Research Center and the Computational Optimization Center. Each of these centers was operated with a focus on understanding and simplifying the solutions offered by computer technology. The end objective was to make the transition to computers easier for all involved.
Coming of Age for Logistics
The 1980s was the decade of change for logistics and the relevant supply chain management details. The emergence and widespread adoption of personal computers in the 1980s had led to the provision of better computer access to all planners and executioners involved in the supply chain.
The Production and the Distribution Research Center was an early innovator in this regard as it helped spread a flood of technology. It was during this time that flexible spreadsheets and map-based interfaces were huge improved and implemented in the supply chain. The Material Handling Research Center had also largely settled into its role and initiated major tech upgrades in the material handling and automation process.
The Computational Optimization Center developed a number of new and implementable algorithms that initiated and highlighted solutions for airline scheduling problems. Much of all the innovations and methodologies unearthed in these centers made its way to the commercial technology of that era.
Perhaps the biggest trend in favor of logistics in the 1980s was that the industry had finally started getting the recognition it deserved. Logistics was now considered as a very important, very complex and extremely expensive process to manage. And, with the growing drive for picking out all inefficiencies in the chain, executives and organizations sat down to become aware of logistics as an area that presented immense opportunities for them to improve. The bottom line was that executives and decision makers in supply chain firms realized that there was great potential for them to work on logistics and improve the experience that they offered in this regard.
Realizing this very fact, the National Council of Physical Distribution Management changed its name to CLM or the Council of Logistics Management in 1985. The reason they gave for this new name was: “to reflect the evolving discipline that included the integration of inbound, outbound and reverse flows of products, services, and related information.” Prior to this move, logistic as a term was strictly limited to military movements, but it had now made its intro to the expansive world of supply chain.
The Technology Revolution
The logistics boom of the 1980s was fueled further in the 1990s by the emergency of ERP or Enterprise Resource Planning Systems. ERP systems were motivated by the success of the Materials Requirement Planning systems of the past and acted as an upgrade over the previous system. These ERP systems opened the doors to a number of innovations and upgrades in the field of global supply chain technology.
The Material Requirements Planning Systems were developed back in 1970s and were partly replaced due to the intrinsic need for more automation and partly due to the fear that these systems will not be able to manage the dates that come with the start of the 20th Century.
Despite the complications and the issues that came with the widespread implementation and installation of ERP systems, most major supply chain players had these systems installed by 2000. The move to ERP systems resulted in a tremendous improvement with data availability and accuracy modules. This improvement was achieved through the ability of ERP systems to provide and update accurate information at all hours. The new ERP software also dramatically increased the need for more integration across all components and stakeholders of the supply chain. This recognition eventually led to the creation of APS or Advanced Planning and Scheduling software operations.
Globalization in the Supply Chain
The widespread recognition and use of the term ‘supply chain’ is owed primarily to the globalization in manufacturing since the start of the 1990s. The growth and globalization of the supply chain was achieved through manufacturing processes and the brilliance of China in providing the world with easy to source products. United States imports from China grew from some $45 billion during the year 1995 to over $280 billion per year in the year 2006. The growing focus on globalization also highlighted the need for global strategies with effective communication standards to be formed within stakeholders. This accented the need for an internet model that connected suppliers with customers and helped in the efficient communication of needs and demands. The growing association of supply chain management with the strategies in play within logistic was accented through the decision of the Council of Logistics Management to change its name to the Council of Supply Chain Management Professionals back in 2005.
The organization made the distinction that, “Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements” while “Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
The internet can be accredited for playing a vital role in the widespread adoption of global supply chain strategies. The internet not only improved communication between global partners, but also helped in the accuracy and provision of data to all partners.
Future of Supply Chain and Logistics
Ever since first being implemented in the 1980s, computer technology has advanced at a phenomenal rate of knots. The technology we have today is far ahead than what most supply chains in the global market have plans to utilize. Given just how many internet users access the internet today, one finds it hard to fathom that Internet Explorer – Microsoft’s first internet browser – was initially launched in 1995.
The communication capabilities highlighted in the previous section as well have changed the way supply chain partners deal with each other. The distributed collaboration and team work we see today is definitely a harbinger of good times to come, where an efficient supply chain would greet us every time we talk about the global sphere.
There are modern implementations of the global supply chain in areas such as healthcare and humanitarian logistics, which require technology to become even more proficient and better. Technology and implementation does come with risk, but as we have learnt from the history of the global supply chain, tech risks have almost always paid off.
Understanding Supply Chain Resilience
The onset of the COVID-19 pandemic has led to a lot of talk over the supply chain resilience and how global firms try to operate, even with the restrictive measures in place across the world during the year. However, not many readers are able to interpret just what it actually means.
Supply chain resilience is the ability of a global supply chain to power through unexpected events and be prepared for them. A resilient supply chain has the ability to respond to uncertain and unexpected events that damage the flow of information across the supply chain. An organization with a resilient supply chain can not only respond well to disruptions, but also recover well from them, eventually returning back to the original condition it was in when the disruption started. Not only this, but truly resilient supply chains can return back to an even better performance level after a disruptive global event has transpired.
The COVID-19 pandemic has been nothing short of a complex change for the entire globe. Not only has it disrupted our style of living, but it has also shaken the business world as a whole. Companies today find themselves in a precarious situation with their legs within rough tides.
As most supply chains try to cope up with the relentless pressure of logistics during the pandemic, other more resilient supply chains have used years of practice, implementation and technology to power a remote style forward.
Smart Strategies to Build Supply Chain Resilience
Many C-level executives today have cited risk management as one of the biggest challenges facing supply chain and procurement teams. Businesses are exposed to supply chain risks in ways more than one, and only a resilient supply chain can survive and prosper. Based on the consistent pace at which risks around us have evolved and become even more complicated, it is even more necessary for organizations to build a resistant logistics method.
Some strategies to build supply chain resistance in the world today include:
Knowing the Risks of Each Supplier
Every supplier brings with them a certain set of risks. These risks often deal with the geographical distance between the customer and supplier, the lack of communication or any other related cause. Knowing the presence of risk in supplier relationships, organizations should understand what risks come up with all suppliers. They should also comprehend the significance of supplier risks, and the likelihood or chances of offsetting them. When organizations and global supply chains of today understand the common risks associated with global suppliers, they can take proactive measures to not only mitigate the damage, but to also make a stitch in time and save themselves from future predicaments.
Supply chain managers should drop the ‘tick-box’ mentality and go for a progressive and mature approach toward selecting suppliers. Your supplier should be capable of managing threats and counterproductive events and should have multiple streams or passages to get your raw materials to you.
Talk to Suppliers
There is no way for suppliers to get a hold of your expectations without a proper communication channel. Set clear expectations from the very outset and encourage proper dialogue and communication with your suppliers. The presence of a communication channel can help build mutual confidence and trust within suppliers, while minimizing the chances of any surprises.
Also communicate your concerns to suppliers, where and when you detect a certain risk. Consult them on what can be done to improve the situation, without giving the impression that you’re looking for means to bait out of the deal. Suppliers often hide certain risks in a bid to keep a contract. Give suppliers the confidence they need and work with them for the betterment of the deal.
Study the Long-Term
Supply chain planning and strategies have to be focused on the long-term. Reactive responses, inappropriate short term cash flow strategies and just-in-time procurement methods combine to form an increasingly short-sighted plan of progress. These short-term incentives do add a shiny layer of efficiency, but they also open organizations up to a heightened threat of risks. You can flip this around by reviewing geo-political and global threats and also asking suppliers to deliver a transparent model. Keep reviewing possible threats in the supply chain and improve them for all parties involved.
Learn and Adapt to Evolve
Projects go wrong, technologies can backfire, disruptions can lead to downtime, but through all this a resilient supply chain should continue to flow and evolve. Rome wasn’t built in a day and similarly your resilient supply chain will take some time to shape up, however you can start the process toward that overnight by implementing an attitude of learning, adapting and evolving.
Start by creating a knowledge base of best practices and benchmarks followed by others. Implement these changes across the organization and look at what can be done to drive the chances of future success.
Adopt Emerging Technologies
Organizations can also improve their supply chain resilience by adopting futuristic technologies with solutions for disruptions in the future. A remote supply chain collaboration model between all stakeholders, including customers, wasn’t implemented by many global supply chains. The implications of the COVID-19 pandemic have found all such organizations wanting and have clearly displayed the efficacy and preparedness of organizations with a remote model
The use of tech solutions can enable businesses to survive during tough times, without disrupting their business reserves.
Always Look Ahead
Keeping the current scenario in perspective, sales and demand figures are bound to bounce back when the pandemic and its repercussions subside. Supply chains should already be picking up the pace to prepare for this surge in demand for when the pandemic ends. An increased demand will require the most out of the supply chain, which is why processes should be oiled and fine-tuned in time.
Risk has evolved drastically over time and is present at the center of all supply chains. However, better communication with suppliers and a decent understanding of your weak points can drive resilience forward.
Executive Summary
Chapter 1: Critical Review of Global Supply Chain Risk
With the exponentially growing number of uncertainties facing the business world, the importance assigned to risk detection and mitigation has significantly grown. In recent decades and years, we have seen risk management and mitigation theories being applied in finance, decision theory, actuarial sciences, marketing, healthcare, management, psychology, emergency planning and supply chain processes.
Each process undertaken and decision made by an organization is prone to uncertainty and doubt. Since misjudgements and wrong assessments lead to unforeseen situations and developments, uncertainties need to be continuously monitored and mitigated if organizations want to improve their performance. Most risks and uncertainties in the business world today tend to have consequences and damages that are often detected too late, when the situation has deteriorated further.
The notion has particularly been felt in supply chain management, as managers and organizations have somehow tried their best to capture risk and reduce the complications involved. The global supply chain of today is based on the modern principles of interrelationship, which makes risk management and mitigation even more complicated and difficult than first imagined. Due to this interrelation of the global supply chain, organizations are unaware of the type and nature of certain developments, and are unable to predict the repercussions that they might lead to.
Besides the unpredictability of impact, organizations also face complications in the form of major world events. Major disruptions like the current COVID-19 crisis, piracy attacks offshore, global economic crisis, European ash-clouds, flooding in Asia and earthquakes/tsunamis across the world have shown project managers’ lack of preparedness toward uncertain and unpredictable global developments in general.
A closer look into the use of the phrase ‘supply chain risk’ in particular has revealed that the identification and interpretation of the term is far from clear. In fact, the term ‘risk’ itself is maligned with multiple interpretations, a few of which are a far cry away from the original meaning. The World Economic Forum has established a Risk Response Network, which has after deliberate negotiations, recently identified the need for more effort and time to be put into the creation of a global definition for the term ‘supply chain risk’. These explorations would require both, methodical and conceptual work, across the fine lines of the global supply chain.
Defining Risk
Having looked at the general context of risk and the critical analysis of how it is interpreted in supply chain, we can now take a more defined and clear look at what is meant by it. Once we do that, we will categorize risk into its main forms, and delve deeper to fully explicate the impact it has on the global supply chain.
We will then briefly consider and mention ways for analyzing and mitigating both, financial and non-financial forms of risk in the supply chain. This is to be done through risk mapping and risk assessment. Obviously, the concept of risk and its analysis in the supply chain will span over this entire coursework, but the concepts mentioned in this chapter will act as the perfect blurb for what’s to come.
The word risk is said to be derived from the Latin word risicum and the Arabic word rizq. The meanings of both these terms quite literally come together to form an amalgam that gives us the meaning for the English term risk, in the context that we look at it today. The Latin word risicum initially talked about the challenges and complications presented by hindrances in the sea to seafarers. The term implied a negative outcome that would result due to the challenges at sea. The Arabic word, on the flipside, looks at a more positive perspective and refers to everything or anything that has been given to you by God and from which you can derive a beneficial outcome or satisfy your needs.
A Greek twelfth-century derivative of this Arabic word referred to the role of chance, and how there is no set positive or negative implication involved. We can quite literally form an amalgam of all these definitions and find out what the term risk means. By this approach, we can infer that risk is every ‘uncertain future outcome that comes with the potential to worsen or improve any given position.’
There are two key elements implied through this definition:
1. Risk is probabilistic – The likely outcome is not known to any party. It can be assessed or mitigated, but is relatively unknown.
2. The outcome is based on chance – The outcome can be either favorable or unfavorable for the supply chain player.
It should also be noted that the definition for risk does not necessarily imply a symmetrical conjunction in the upsides and downsides of a risk undertaken by a business. In most risk situations facing supply chain businesses today, outcomes are skewed. This means that the positive outcome resulting from a favorable situation could be far less than the negative repercussions carried by that risk. Most supply chain players consider risk to be symmetrical, with an equivalent risk and reward parable. However, the negative outcomes often outweigh the positive ones, neglecting which can result in criminal negligence.
The Risk Management Process
A supply chain’s attitude toward the different forms of risks it is exposed to can act as a direct interpretation of its business strategy and success pattern. This comes with certain implications; the strategy should address and fully comprehend the appetite for risk within the organization. An organization with lower capacity for risky decisions will eventually maintain a lower risk appetite. Once the risk appetite is identified, the actions and decisions taken by the organization should be based on that appetite and capacity. This process of lining the risk appetite of a business with its risk exposure is known as risk mapping, and is said to be a key part of the risk identification and mitigation process.
Risk mapping is also something that we will discuss in greater detail as this coursework rolls out. The risk mapping process is divided into sequential stages, as outlined in the list below:
• Stage 1: Identifying Risk Exposures
• Stage 2: Measure and Estimate Exposure to Risk
• Stage 3: Assess the Effects of Exposure
• Stage 4: Form a Risk Mitigation Strategy
• Stage 5: Evaluate Performance
All these stages are looked at in greater detail within this chapter. We study a number of other sub-processes within these stages and look at the impact they have on the risk management process.
Chapter 2: How Global Supply Chain Risk Has Evolved Over the Years
This chapter continues the concepts we developed in the first chapter, to look at just how risk has evolved to stand where it does today. The chapter takes an in-depth look at the development and evolvement of risk.
As we have discussed previously, global supply chain risk can never be discussed or looked at as a separate identity. The best way to study this risk is through the lens and context of factors influencing it. The supply chain has drastically evolved during the last century or so. The global supply chain has shifted its focus from the daunting, labor-intensive processes to the incorporation of present day engineering and automated solutions. These solutions now bring the world closer than it ever was and offer businesses and stakeholders an opportunity to relish the experience of a global village.
Having studied the evolution of risk in the more general and economic direction, we now study just how much the supply chain has evolved and the challenges that this brings for organizations globally.
History of SCM
We start by exploring the history of supply chain management. The roots of both, operations research and industrial engineering, can be found in logistics and supply chain-oriented research patterns. Frederick Taylor, who is accredited with writing The Principles of Scientific Management back in 1911, is considered to be the father of both, operations research and industrial engineering. The research conducted by Fredrick Taylor was inspired by logistics, after his early life experiences as a manual loader.
Operations Research gained precedence when scientists and innovators demonstrated just how useful analytics could be in studying and solving key military logistics problems. The complex requirements of the World War II required new innovations and strategies in military tactics, which is where these advancements came in particularly handy.
While both Industrial Research and Operations Engineering have been maintained separately, both these factors have found their best success when used together in the supply chain. The integrated framework used in global supply chains of today is the amalgam of both operations engineering and industrial research. This integrated framework helps address logistics and supply chain issues, while providing feasible conclusions and solutions for everyone involved.
This amalgam of engineering with operations planning is known as the supply chain engineering approach and is a major part of the supply chain today.
Supply Chain Management in the Early Years
Back in the early 1940s and 1950s, the focus of most research conducted in logistics was on the use of mechanization. Mechanization processes such as pallet lifts and pallets were becoming increasingly common during the period, and research was focused on improving the tiring labor intensive processes in logistics, and to find a better racking and layout technology that would utilize space. The lack of technology and the extreme reliance on manual labor meant that racking and utilization of space in the warehouse was an integral issue in the supply chain process.
The ‘unit load’ concept gained particular popularity during this period, with readers and aficionados of the supply chain. The use of pallets became common with the rising popularity of the unit load concept. The concept of unit load and pallets was even extended to transportation management in the 1950s, with the innovation and development of containers for trains, trucks and ships. Although supply chain globalization actualized much later, the founding stones had been set during these decades and the progress was evident. While these advancements and processes are termed ‘material handling’ and ‘warehousing’, it is best to include the functions under fundamental and core applications of industrial engineering, rather than creating an entirely new discipline.
The arrival of the 1960s saw a clearer trend toward the use of trucks in the transport networks. While rail tracks were previously used for shifting more time-dependent freight transport, trucks provided a more lucrative, efficient and easy to manage alternative. This alternative was greatly enhanced with the growing infrastructure of highways, filling stations and logistic points in developed countries. The inclusion of trucks in local transport led to the much-needed development of a separate segment known as physical distribution.
The National Council of Physical Distribution Management was formed in 1963 to focus the attention of supply chain stakeholders and governments toward this field. The interest showed by governments was followed by enhanced academic research and education. This academic research satisfied the growing needs of the paradigm change.
This section will also explore the technological revolutions of the 1970s.
Coming of Age for Logistics
The 1980s was the decade of change for logistics and the relevant supply chain management details. The emergence and widespread adoption of personal computers in the 1980s had led to the provision of better computer access to all planners and executioners involved in the supply chain.
The Production and the Distribution Research Center was an early innovator in this regard as it helped spread a flood of technology. It was during this time that flexible spreadsheets and map-based interfaces were hugely improved and implemented in the supply chain. The Material Handling Research Center had also largely settled into its role and initiated major tech upgrades in the material handling and automation process.
The Computational Optimization Center developed a number of new and implementable algorithms that initiated and highlighted solutions for airline scheduling problems. Much of all the innovations and methodologies unearthed in these centers made its way to the commercial technology of that era.
Perhaps the biggest trend in favor of logistics in the 1980s was that the industry had finally started getting the recognition it deserved. Logistics was now considered a very important, very complex and extremely expensive process to manage. And, with the growing drive for picking out all inefficiencies in the chain, executives and organizations sat down to become aware of logistics as an area that presented immense opportunities for them to improve.
The Technology Revolution
The logistics boom of the 1980s was fueled further in the 1990s by the emergency of ERP or Enterprise Resource Planning Systems. ERP systems were motivated by the success of the Materials Requirement Planning systems of the past and acted as an upgrade over the previous system. These ERP systems opened the doors to a number of innovations and upgrades in the field of global supply chain technology.
The Material Requirements Planning Systems were developed back in the 1970s and were partly replaced due to the intrinsic need for more automation and partly due to the fear that these systems will not be able to manage the dates that come with the start of the 20th Century.
Despite the complications and the issues that came with the widespread implementation and installation of ERP systems, most major supply chain players had these systems installed by 2000. The move to ERP systems resulted in a tremendous improvement with data availability and accuracy modules. This improvement was achieved through the ability of ERP systems to provide and update accurate information at all hours. The new ERP software also dramatically increased the need for more integration across all components and stakeholders of the supply chain. This recognition eventually led to the creation of APS or Advanced Planning and Scheduling software operations.
Globalization in the Supply Chain
The widespread recognition and use of the term ‘supply chain’ is owed primarily to the globalization in manufacturing since the start of the 1990s. The growth and globalization of the supply chain was achieved through manufacturing processes and the brilliance of China in providing the world with easy to source products. United States imports from China grew from some $45 billion during the year 1995 to over $280 billion per year in the year 2006. The growing focus on globalization also highlighted the need for global strategies with effective communication standards to be formed within stakeholders. This accented the need for an internet model that connected suppliers with customers and helped in the efficient communication of needs and demands. The growing association of supply chain management with the strategies in play within logistics was accentuated through the decision of the Council of Logistics Management to change its name to the Council of Supply Chain Management Professionals back in 2005.
The organization made the distinction that, “Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements” while “Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
The internet can be accredited for playing a vital role in the widespread adoption of global supply chain strategies. The internet not only improved communication between global partners, but also helped in the accuracy and provision of data to all partners.
Future of Supply Chain and Logistics
Ever since first being implemented in the 1980s, computer technology has advanced at a phenomenal rate of knots. The technology we have today is far ahead than what most supply chains in the global market have plans to utilize. Given just how many internet users access the internet today, one finds it hard to fathom that Internet Explorer – Microsoft’s first internet browser – was initially launched in 1995.
The communication capabilities highlighted in the previous section as well have changed the way supply chain partners deal with each other. The distributed collaboration and team work we see today is definitely a harbinger of good times to come, where an efficient supply chain would greet us every time we talk about the global sphere.
There are modern implementations of the global supply chain in areas such as healthcare and humanitarian logistics, which require technology to become even more proficient and better. Technology and implementation does come with risk, but as we have learnt from the history of the global supply chain, tech risks have almost always paid off.
Chapter 3: Core Characteristics of Supply Chain Risk
This chapter will take the things discussed previously in other chapters and further the concept of core characteristics in the supply chain. These core characteristics display unique features and make management easier.
As we have discussed previously in this coursework, there is no unanimously approved definition of risk in the supply chain currently. There is, however, a vast amount of literature that deals with the topic of risk in the supply chain, and the multiple domains that fall under it. These domains include, but aren’t limited to, finance, decision theory, insurance, emergency management, safety, utility theory, environmental and reliability engineering, among others.
Based on these domains, supply chain risk understanding is driven by a number of core characteristics. The assessment and understanding of risks in the supply chain is very closely related to the objectives that organizations have to meet for achieving success in their relevant supply chain. The degree or level of achievement of these risks is based on the exposition of the supply chain. Risk exposition can further be classified into the supply chain’s abilities to handle major and minor disruptions, the time-based aspects of the disruption and the triggers that lead to the risk status of the supply chain.
Sources of Risk
Risk can come at you from multiple sources or dimensions. Obviously, it is very hard to manage or determine where risk is coming from, but a simple grouping can help you determine the course of action.
For supply chain managers, the sources of risks are of key importance. These sources are a major part of the risk, and need to be fully minimized or mitigated if a strategy is to be prepared. Sourcing your risks and being prepared for them can also lead to the aversion of possible dangers that result because of the risk.
Also, risk categories and sources aren’t meant to be exclusive. This means that the category basically operates as a tag or a label and that the risk in question can have more than one tag. In short, most risks are generated through inefficiencies in multiple sources and not just one.
Typical risk categories include:
• External
• Internal
• Project
• Product
• Technical
• People
• Organization etc.
External Risk
An example of an external risk for a global supply chain operator would be a supplier missing their deadline and delaying the shipment that they have to provide. These delays cannot only lead to customer retention issues, but also signal problems in revenue generation. However, since supplier delivery timelines are often out of the organization’s control, there isn’t much that can be done about them.
This is something that we discuss in greater detail within the rest of this chapter as well. Supplier relationships are a key part of averting supply chain risk, and with good relationships, organizations can mitigate and minimize the chances of risks.
Internal Risk
Internal risk factors come to the surface during change management. Change is a major part of supply chain progress, but can be really complicated for global operators to manage. Signaling a change in global sourcing and procurement patterns can lead to implications.
To take an example of internal risks, a management that isn’t involved in the organization’s transformation process will see a number of risks during the implementation of an Agile framework. These risks are however linked with internal management and external forces cannot be blamed for them.
Project
Projects can often act as sources of risk as well. Projects are a major part of every supply chain today and need to be managed carefully for the right results. Project managers should be involved in the process, so that the backlog items are ready for the next iteration. Failure to keep a check and balance on the project can lead to delays and backlog creation for the next iteration.
Product
Risk can also come through the final product being offered to customers at the end of a supply chain. All marketing attributes related to the product should be finalized and managed in a decent manner to manage the risks involved with them. If the product owner isn’t involved and sets either price, product, promotion or location wrong, the product is bound to suffer.
Technical Risks
With the higher dependency on tech solutions in the supply chain, there are a growing number of technical risks involved as well. Technical risks make management difficult and can lead to massive downtimes if your management team and the tech team aren’t well equipped in the processes that they should follow for risk mitigation.
In short, the greater an organization’s reliability on tech solutions, the higher will be their chances of falling for technical risks. Automated solutions do make global supply chain processes easier, but they also come with their own perils in the way.
People
The people employed in a global supply chain also carry their risk. Global supply chains are stringent in their hiring procedures and hire the crème de la crème to represent their business. This is because people play an important role in not only mitigating, but managing risk as well.
Training is an important part of the process here, where employees are trained to follow best practices in the industry and to ensure that they are up and available whenever the need be. If recruitment fails to rope in the best candidates and does not improve the pipeline, performance is bound to suffer.
Organization
The management and organization of processes is also a key factor in determining and dictating risk. The organization of key resources can either increase or decrease risk, based on the reaction to it.
We will look at the sources of risk and the common risks found in supply chains in greater detail in the coming chapters.
Chapter 4: Risk Assessment Process in Global Supply Chain
There are many areas of risk inside an organization. These areas can have differentiating impacts, often leading to complications in revenue generation and profitability. There are many areas of risk, with the greater ones leading to loss of business, financial failure and major interruptions to operations in a number of different ways.
When it comes to human rights and sustainability risks, the discussion hovers around the impact the risk will have on the outside environment and the reputation of the supply chain and parent organization. While organizations often look through the lens of profitability, they have now realized the importance of providing friendly working conditions to workers and practicing sustainable measures to protect the environment from the perils of industrial smoke and transportation inefficiencies.
Risk Assessment Process
The risk assessment process is made up of several stages. Not all of these steps are relevant in most supply chain cases but a global supply chain should be able to identify or work on these assessment methods. The best approach to take toward risk assessment and the processes to consider will depend on the perspective carried by the organization, and the decisions they’re willing to take forward.
Shorter supply chains, with fewer suppliers, can be risk assessed without any major complications, but in most other cases, a thorough understanding is required.
Overview of the Risk Assessment Process
Before we delve into the details of the steps in the risk assessment process, let us first look at an overview:
Map Supply Chain
• Identify all suppliers and the locations they work from
• Address all tiers of the supply chain, and leave nothing out
• Identify the contractors you work with, along with the service providers related to you
Review All High Level Risks
• Look at all high level risks in the countries you operate in. Deeply consider the risks in your home country
• Look at and study all sectoral risks
• Study all tiers of the supply chain and understand all risks across tiers
Understand Supplier Profiles
• Understand the profile and delivery patterns of suppliers
• Build a workforce profile to understand how they work
• Form a commercial relationship, one that includes no discrepancies and can be long lasting
Assess and Prioritize
• This step deals with grading all your risks and ranking them based on their severity and the likelihood of them happening
• Consider all external and internal leverage
Follow Up Process
• Validate all your sources of risk
• Investigate the particular situations that lead to the risk in question
• Analyze all root causes and their resulting impact
Develop an Action Plan
• The process is finalized through the creation of timelines and collaboration plans
• Determine actions for buyers
• Determine actions for suppliers
• Set timelines
• Collaborate with all stakeholders
Risk Assessment and Compliance
A publication released back in 2011 by UNGP provided businesses with a framework they should follow for not only understanding their own responsibilities, but to also come up with a plan to mitigate and minimize the likelihood of risk. Human rights risk assessment is of great concern to the United Nations and was highly emphasized in the document.
When it comes to human rights risks, organizations should run consultations with all business stakeholders and determine strategies to combat risk. Stakeholders such as business partners, communities, employees, NGOs and even trade unions can share valuable insights to the process of policy making and setting the right course for risk management.
The UNGP made it clear within this document that the primary responsibility of ensuring human rights lies with the State. The private sector should uphold and comply with the laws mentioned by the State and should also be responsible for respecting and promoting human rights. Private sector entities should realize the negative attributes that come with their management styles and what can be done to limit them.
Compliance with the laws and regulative measures is necessary, but it isn’t entirely the only thing organizations are required to do today. Organizations in the business world today are required to also maintain a strict code of conduct, based on which they perform in a particular manner toward employees and the environment.
Most developing countries have concrete laws in place for risk management, but lack the steps that should be taken here. The lack of proper steps and decision making can lead to companies exploiting labor and not giving human rights the importance they should be given. Companies have a responsibility of their own as well, and should go beyond simple legal compliance to remain on the right side of ethics and the law.
Common Worker Rights and Environmental Risks Ignored by Supply Chains
There are a number of sustainability and human rights issues that businesses today can focus more on. The UNGP has termed the risks below to be the most salient ones and has crafted a policy to ensure businesses comply with risk management in this regard.
Fundamental Labor Rights
Workers suffer during the non-implementation of fundamental labor rights. The inability to provide these risks can land supply chains in hot waters.
Rights violations made here include:
• Forced labor
• Child labor
• Discrimination in employment toward people of a particular religion or caste
• Lack of respect for worker freedom and unions
Working Conditions and Remuneration Risks
Obviously, employees need to be given feasible working conditions to work in and should also be given the wages and remuneration they require. Risky violations that shouldn’t be made here include:
• Wages below the minimum wage level decided by the governing organizations
• Excessive hours of work
• Abusive treatment leveled toward employees for no violations per se
• Health and safety breaches
• Lack of access to the grievance mechanism
• Abuse of contracts
Social and Economic Rights Violations
These risky violations are mostly leveled on communities near the supply chain and manufacturing unit. The inability to address these violations can leave organizations with lasting repercussions, along with a supply chain that may never recover.
The risk factors involved in these violations include:
• Noise and air pollution affecting the local population in a specific area
• Emissions impacting the local water supplies or an improper drainage system
• Road transportation methods that create traffic constraints and lead to challenges
• Land grabbing activities without proper legal compliance
Civil and Political Rights Violations
Violations of civil and political rights are conducted by global supply chains and operators on communities and their own employees. These risk factors are a show of power and limit the voices against regressive policies.
Violations that can lead to this risk include:
• Preventing workers from forming unions and being part of unions together
• Collaboration within companies and security forces to repress community complaints against regressive measures
• Bribery and land grabbing policies
High Profile Risk Drivers
This chapter also includes a summary of all high profile risk drivers in the supply chain. These high profile risk drivers include:
Major Governance Risks
Governance risks can complicate things for supply chains operating at a global level. The risks include:
• A repressive regime in one of the countries’ part of the chain
• Civil unrest and internal security movements in the region
• Inadequate environmental protection and labor laws in the country. No regulation on local competitors breaking laws
• Inadequate inspection and enforcement of laws
• High levels of corruption with bribing being considered the norm
• Lack of proper channels to access justice and demand the right treatment
Economic Risks
Economic risks are again of high importance for global supply chains and are outside their domain of control. Some important economic risks that can influence supply chains include:
• High levels of poverty in the host region
• Growing economic instability
• High rates of interest and depleting forex rates
• Lack of proper opportunities
• Economic recession
• Lack of proper labor
Social Risks
Social risks again vary across countries and often trouble global supply chains, since they operate at a global level. Some social risks that are of high importance here include:
• Discrimination against minorities or women in a region
• Difficulties for all members of civil society to raise their voices and talk about integral social and cultural issues
• Weak definition of land tenure
Demographics and Labor Risks
The risks involved with the demographics and labor rights across different organizations can also pose a threat to organizations. These include:
• Internal migration in specific countries
• Presence of indigenous people
• Poor functioning of labor markets with no proper control over procedures
• Predominance of low-skilled employees
• Seasonal production patterns, where particular seasons prompt better productivity
• Dangerous production processes that can hinder efficiency
• Over reliance on female workers to get things done
• Dangerous production activities
Environment
Finally, there are a number of environmental risks as well that can be involved here:
• Water intensive drainage and production processes
• Energy intensive processes
• Processes leading to or producing toxic amounts of waste
These risk drivers and the information pertaining to them can be accessed from a number of sources. Information sources include UNDP and the ILO among many other agencies.
Chapter 5: Common Risks Involved in Global Supply Chains
Risks in the supply chain have evolved to become even more prevalent and common with time. The risk management strategies that businesses implemented and followed in yesteryears have failed to stack up in this day and age. The policies of days gone by have failed to maintain their efficacy during these modern times, and businesses now have to improvise and adapt to the changing environment.
No type of provider can avoid the risks of a global supply chain today. Even with the growing addition of security across the supply chain, risks exist across ocean, land and air freight. These risks are often unavoidable and inevitable for global supply chain businesses, since there is no way around them.
A poor understanding of hazards and complications across your supply chain will diminish brand value and land you in hot waters as far as your costs are concerned. Knowing the cost of negligence in this regard, it is in your best interest to not only understand the top global supply chain risks but also work on minimizing the impact that they carry for your business.
Through an understanding of the risks in the global supply chain sphere, supply chain stakeholders can work to mitigate the occurrence of disruptions across the board. In this chapter we will study the most common risk factors found in the global supply chain today and what can be done to minimize the impact. We will then follow these risk factors with metrics you can look at to track and manage the risk factors in your supply chain.
Extreme Weather Events
Tropical storms in the sea can wreck havoc to supply chain schedules and can toss ocean carriers and shipments aside like pieces of trash. Tropical storms can pose a major threat to operators, based on the route of the shipment and the weather conditions that they will meet on the way.
Extreme weather currently represents one of the biggest and most significant risks to ocean freight across the globe. The weather conditions across the globe tend to vary based on a number of factors. The diversity in weather makes it increasingly difficult for supply chain managers and key stakeholders to maintain a lookout on the happenings. A lack of proper control can lead to a number of different problems.
Political and Government Changes
Political instability is one of the top ranking factors when it comes to factors that can impact and risk a global supply chain. One of the imminent hallmarks of a global supply chain is that it operates across countries more than one. Expanding into such developed foreign markets comes at a cost, which is often associated with the growing risk of political instabilities globally.
Environmental Risks
Impact on the environment is a key factor to consider in the global supply chain ecosystem. The impact left on the environment, hence, forms another major risk for global supply chain operators. Organizations are given a defined list of statutes to follow in a bid to ensure optimal efficiency and complete adherence to the law. As countries and organizations amp up their compliance procedures, the onus now lies on organizations to ensure that they’re adhering to these strict rules and aren’t letting them slip by without taking any prompt action.
As more laws are passed concerning ocean freight carriers and others of the sort, there is going to be additional scrutiny of ocean freight carriers and how they impact the environment. The scrutiny will be focused on the impact these carriers have on our marine life, and whether they disrupt natural patterns or spill oil into the sea.
Economic Instability
After political instability, economic instability is the second biggest threat to the global supply chain model today. Economic instability isn’t just a threat to the global supply chain model, but it is also a threat to global trade across major avenues.
The recent COVID-19 crisis has put organizations and supply chains in an even bigger predicament through the economic instability and crisis that has stemmed as a result of it. While systematic lockdowns and route closures offer a different kind of risk, which we will follow later on, the rise in an economic crisis or period of instability can put businesses of all kinds in a state of bother.
Catastrophes
Catastrophes include all natural disasters or human made problems that do not really come in the category of weather-related events. Catastrophes can include famines in an operating country or a debilitating earthquake that damages infrastructure and leads to a number of other problems.
According to leading supply chain executives today, almost 50 percent of supply chains don’t have a continuity plan ready to deal with a catastrophe when it arrives. The recent COVID-19 pandemic was a catastrophe of sorts in the health sector. The catastrophe wrecked the very way of living that we had been following for as long as we can remember. Many people were forced to keep to their homes and there was a new normal that humans were suddenly supposed to follow. Businesses, especially those involved in the supply chain, suffered the most during this period, and had to put up with additional restrictions in trade.
Cyber Attacks
Ever since organizations made the move online, a number of malicious threat actors have jumped in and come up with a number of ways to scam organizations. If your data is present online as well, there is a significant chance that your resources will be subjected to such cyber crimes. Many global supply chain players have incorporated measures to minimize the damage caused through these cyber attacks and to also ensure that the errors are basic or minimal.
The only way out of this conundrum is to have stringent security systems that protect your resources. A security team can also come in handy here, as it will protect your resources.
There are a number of other supply chain risks as well, which we look at in greater detail within the course manual.
Chapter 6: Understanding Supply Chain Risk Management Practices
Global supply chain operators realize the impact that a poor risk management strategy can have on their plans, which is why they are in the process of not just redefining their strategy, but also ensuring that all forms of supply chain risks are minimized and mitigated in a thorough manner.
What Is Supply Chain Risk Management?
The need for supply chain risk management has never been felt more than it is being felt today. Organizations realize this and are handing over their manufacturing processes to supply networks operating externally. These supply networks form a completely different chain of their own, and ensure optimal delivery across the chain for best results. However, working with a 3PL or third party logistics provider ensures better production cycles, new technology, timely strategies and a number of other benefits.
With a growing network of prospects and global dependencies, organizations today realize that a slip in supply chain efficiency can eventually lead them to a stage of chaos and panic, where they lose customers left, right and center.
Risks including the shortage of raw materials, miscommunications with clients, plant failures as a result of negligence or natural disasters can be debilitating for any organization. The process that organizations today come up with, to not only minimize the perils of the risk but also to ensure the perfect output for everyone involved, is known as the supply chain risk management strategy.
The Benefits of Supply Chain Risk Management
Supply chain risk management obviously comes with a unique set of benefits. Before we discuss management strategies and the policies you can follow, let us first shed some light on the benefits of supply chain risk management in the modern global supply chain of today.
Ignorance Isn’t Bliss
Organizations that do not actively approach the topic of risk management in their supply chain processes form the equivalent of a person driving with a blindfold on their eyes. Ignorance toward important problems is not bliss in this case, and it is time operators took the blindfold off their eyes and saw the situation on ground zero.
You cannot manage aspects of the supply chain you cannot see. Obviously, if you want to exercise your control over the entirety of the supply chain, it is necessary that you manage aspects that were previously hidden from you.
Study the routes that you have drafted for your logistics and look at all the processes in detail. Where do your raw materials come from? What locations do they pass through before arriving at your facility? Where are your distributors located and how efficiently do they perform? Are there any complaints being given by the end customer or the retailer that you need to deal with, with regards to the service provided by distributors? These are all questions that you need to know answers to.
Supply chain risk management allows global supply chain operators to maintain a keen eye on all happenings across the supply chain. Not only are risks identified, but concrete measures are also taken to minimize the damage that they might cause. Analyze the supply chain in detail. Simplify it. Criticize it. If you don’t, you’ll always be the person driving the car with a blindfold on their eyes. The devil almost always lies in the details, and can only be unearthed when you jump deep into the details related to a particular project and find everything that is troubling you or deserves immediate attention.
Stimulates Supply Chain Best Practices
Risk management is ideal for reducing and eliminating inefficiencies from your supply chain. Wasting resources and inefficiently going about processes can add an element of risk to any organization with a global supply chain presence. Organizations looking to maintain and uphold their global stature need to build their risk profile and keep a check on it for early detection of risks across the supply chain.
Helps Build Response to Events
Supply chain risk management can help organizations with a global supply chain presence respond easily to risks and unexpected events across the supply chain. Such unexpected events warrant a quick response with appropriate solutions being generated and passed around the supply chain.
The first step in the process is to identify the risks that might cause unexpected delays in the delivery of products to customers. Once that is done, organizations may find themselves in a better place to mitigate undue delays and respond to errors in the supply chain.
Shoulders Fragile Supply Chain Processes
The strength of a global supply chain model lies not at its strongest point, but at its weakest point. It is the weakest link in the chain that is often infiltrated during a disruption or the subject of major risk events. Organizations should create a risk profile that helps them identify areas where they are the most vulnerable and the chances of risk are highest. An example of this would be identifying weak links in logistics and trying to limit the exposure at these risk points.
The course manual will take you through the entire risk management process with additional details on risk mapping and identification.
Chapter 7: Understanding Supplier Profiles
This chapter in the course manual will take an in-depth look at the concept of risk while dealing with supply chain and looks at all avenues of the interaction to give you tips on what can be done to avoid or minimize that risk in full.
In a global supply chain, the supplier is defined as the person or organization that provides a service or product to another business. Supply chains with a global presence are dependent on positive supplier relationships as part of their risk mitigation strategy. A number of strategic risks can be avoided by maintaining a positive relationship with suppliers, and minimizing the chances of miscommunication between both parties.
Managing Expectations While Hiring a Supplier
Many factors need to be taken into perspective while hiring a supplier. Some of the things you should prioritize include:
Payment Terms and Conditions:
The payment terms are also best discussed during the start, since confusion can arise with payment issues later down the line. Appropriate payment terms and conditions should be decided.
Communication Standards:
This is something that you can gauge throughout the discussion and selection process. Look at their communication standards and decide whether they match with your own or not. Your communication standards should be the same as the supplier’s if you want effective communication to develop and prosper with them. Language barriers can often be a problem when dealing with foreign or overseas suppliers.
Ideal Lead Time:
Ideal lead time is the time a supply chain would have to wait to receive their goods after placing an order. The lead time should be as short as possible, as global supply chains need immediate replenishment to meet global demand trends.
Maximum and Minimum Quantity:
The maximum and minimum order quantity limit is an important parameter in the process, which allows organizations to settle on what their possible maximum and minimum order limits would be. A low-scale supplier will not be able to meet your limits, which is why it is best to clarify these limits right at the start, rather than leaving them for later.
Return Policy:
Many suppliers operate with a strict no-return policy, which is often a red flag of its own. Deal with suppliers that are a bit relaxed when it comes to the return policy and don’t operate under any strict obligation.
Drop Shipping Capabilities:
Drop Shipping is a growing supply chain model today that requires suppliers to directly drop ship products to the end consumer. This takes the retailer or the seller out of the picture and builds communication between the supplier and customer. Drop shipping, however, can only be possible if you have a supplier that you trust.
Quality Assurance Processes:
The customer base you enjoy is a direct result of the quality of the products you provide. The steps suppliers take to ensure quality assurance will eventually be replicated in your end products as well.
Chapter 8: Mitigating Transport and Logistic Risks in a Global Supply Chain
Transport risk management is a growing industry today and is inundated with a number of options. Risks faced by supply chains when it comes to transport include fleet integrity and management, driver return, compliance issues and others that we have mentioned. Some of these risks can be influenced by the supply chain executives, but there are others that are out of their control and are dependent on external factors, such as the weather.
With so much on the line for the business, every transport and logistics company needs to touch base and determine a risk management solution for their transport business. These risk management practices should guide their operations and policies. A transport risk management solution can help organizations mitigate risk, and can also ensure that your goods always remain safe and reach where they’re intended to be at times.
When a global supply chain does not prioritize risk management in transportation and logistics, they communicate this to their employees and stakeholders. This announcement has a detrimental impact on morale and can push a number of key employees away. Many shippers today are incorporating and integrating policies that reduce risk.
Supply chain members often use third party transportation services for goods shipment and delivery, and they can get in touch with them to ensure the smooth delivery and provision of goods.
A transport risk management strategy can be developed here to prioritize and minimize risk in logistics. These strategies can help businesses achieve better growth patterns over time.
Transport Risk Management Strategy
A transport risk management strategy may not be the same for every industry, organization or department. There are, however, a number of foundational and fundamental elements that should be present in the policy that is implemented. Some of the directions that help in the creation of a transport risk management strategy include:
• Defining the leadership and organizational responsibilities related to risk management.
• Developing support for risk management solutions to truckers and employees on-the-go.
• Using a holistic approach to formalize risk management. This holistic approach can help support decision making processes and also improve the progress toward strategic objectives and goals.
• Risk management can be used to reexamine all existing standards, processes and policies.
• Risk management should be embedded in existing business processes so that all factors can be combined to make successful decision making.
• Identifying all risk owners.
Modern solutions in place within organizations today enable supply chain operators to analyze the severity of risk involved and automate the task of finding lower-risk alternatives.
Chapter 9: Practical Approaches to Build Risk Resilience
Supply chain risk resilience is achieved through strategic investments in your organization over a period of time. Supply chain managers need to take concrete measures for insurgency planning and to signal improvements in supply chain patterns for the time to come.
Resilience oriented investments can be divided into eight basic categories, with each category demanding continuous improvement and money to be invested into the business from time to time.
Information
The second category is of information, where businesses invest money to improve the speed, quantity and quality of the information making rounds across the supply chain. This is done to minimize informational downtime during the course of a supply chain emergency.
Investments in information are initiated by improving the information technology mechanism. Additionally, businesses can also invest in an effective communication model that hears from all stakeholders present within the firm. This can help streamline opinions and can open doors for enhanced communication between organizations. Investments can also be made to improve the visibility of information in and around the supply chain.
Discovery
The first investment in the endeavor for resilience goes toward discovery. In this investment category, you evaluate and implement investment strategies that allow your firm to identify potential problems present within the supply chain and to come up with quick resolution methods. Supply chain disturbances can often have a subtle impact, which needs to be discovered and monitored for a resilient strategy to develop.
An organization can initiate their investment in discovery by improving the information technology and information sharing system they have in place. These systems can work as an early warning mechanism to alert supply chain stakeholders about possible insurgencies in the future. Additional investment can be put into demand sensing, forecasting and monitoring the performance of different areas in the supply chain. Investments here would help in the discovery of emergencies.
Supply Chain Design
Altering the supply chain design is perhaps the most important area of investment for achieving resistance in the purest form. This investment is meant to create and implement supply chain models that can be quickly configured in response to certain changes in the political and the general environment involving stakeholders. These changes in the environment could either come through a supplier that you work with or through a specific market that you sell in. Regardless of the source of this environmental uncertainty, the supply chain should be equipped with flexibility and designed to quickly respond to all such changes.
Investments here are focused on supply base management, where suppliers go through a rigorous process of training and information before a proper agreement is created. Additionally, investments can also relate to supply base configuration for more flexibility in choosing supply chain partners and suppliers.
These investments build the risk resilience of organizations in the supply chain and also help amp up the core processes implemented within the supply chain. With structural upgrades, organizations can ensure that the progress is maintained for longer and shows the rewards that are expected of it.
Chapter 10: Best Practices for Supply Chain Risk Management
Supply chains are volatile to disruptions and risks that can change the efficacy and efficiency that they host. Supply chain disruptions and risks materialize from inside and outside the supply chain, and vary based on the effects they carry, magnitude and the attributes. As a result of these differences, the impact and nature of these risks can be highly divergent. Consequently, different types of risks have different kinds of impacts on the market. For instance, a delayed shipment of a non-critical material, which is already in supply within your factory, may have a less serious impact than a labor strike organized by labor workers inside a supplier’s main production facility. The latter can obviously halt your production and send management into a frenzy.
Risks in the supply chain market are broken down into either internal or external risks. Internal risks are related to happenings within your own organization, whereas external risks are related to conditions outside of your organization. We look through both these risks in greater detail within this chapter, along with an eye on the best practices for supply chain risk management.
Internal Risks
• Cultural Risks: Cultural risks are a result of the culture in place within an organization. Most organizations have a toxic culture to hide and delay negative information that can impact workflow processes.
• Planning and Control Risks: Planning and control risks are caused by an inadequate standard of planning and assessment inside an organization.
• Manufacturing Risks: Manufacturing risks are caused by basic disruptions to the internal processes and operations in your organization. These risks basically include unplanned stops and disruptions in the manufacturing process.
• Mitigation and Contingency Risks: These risks are caused due to the lack of contingency or mitigation planning. As we have studied earlier in this chapter, businesses can achieve a competitive advantage through their resilience.
• Business Risks: Business risks are risks caused due to the change in key management personnel, business processes, reporting structures and other business coordination methods.
External Risks
• Physical Plant Risks: Physical plant risks usually relate to risks at the supplier’s physical facility. Lack of regulatory compliance or lack of proper measures at their plant can lead to disruptions within your supply chain.
• Environmental Risks: Environmental risks come from outside the supply chain and are usually related to the social, governmental, climate and economic factors in your country.
• Business Risks: There are external business risks as well such as the instability at a supplier’s firm.
• Demand Risks: Demand risks are caused due to unpredictable fluctuations in end-customer demand. These can lead to unpredictability and wastages.
• Supply Risks: Supply risks are caused by undue expectations in the delivery of materials. From raw materials to parts, delays in supply can lead to delays in the entire supply chain model.
The chapter in the course manual studies the key risk management processes and how they can be utilized for better results inside organizations.
Chapter 11: Mining for Potential Global Supply Chain Threats
This chapter looks at the mining process for potential threats, and the best way to minimize the impact these newfound risks have.
The stage is all but set for global supply chains to seize the day. In lieu of this, it is only justified that supply chain operators mine for threats at all times and minimize the damages they have on their global stature.
Potential global supply chain threats can be minimized through the following steps:
Know the Risks of Each Supplier
Supply chain managers should drop the ‘tick-box’ mentality and go for a progressive and mature approach toward selecting suppliers. Your supplier should be capable of managing threats and counterproductive events, and should have multiple streams or passages to get your raw materials to you.
Talk to Suppliers
There is no way for suppliers to get a hold of your expectations without a proper communication channel. Set clear expectations from the very outset and encourage proper dialogue and communication with your suppliers. The presence of a communication channel can help build mutual confidence and trust within suppliers, while minimizing the chances of any surprises.
Study the Long-Term
Supply chain planning and strategies have to be focused on the long-term. Reactive responses, inappropriate short term cash flow strategies and just-in-time procurement methods combine to form an increasingly short-sighted plan of progress. These short-term incentives do add a shiny layer of efficiency, but they also open organizations up to a heightened threat of risks.
Learn and Adapt to Evolve
Start by creating a knowledge base of best practices and benchmarks followed by others. Implement these changes across the organization and look at what can be done to drive the chances of future success.
Adopt Emerging Technologies
Organizations can also improve their supply chain resilience by adopting futuristic technologies with solutions for disruptions of the future. A remote supply chain collaboration model between all stakeholders, including customers, wasn’t implemented by many global supply chains. The implications of the COVID-19 pandemic have found all such organizations wanting and have clearly displayed the efficacy and preparedness of organizations with a remote model.
Always Look Ahead
Keeping the current scenario in perspective, sales and demand figures are bound to bounce back when the pandemic and its repercussions subside. Supply chains should already be picking up the pace to prepare for this surge in demand for when the pandemic ends. An increased demand will require the most out of the supply chain, which is why processes should be oiled and fine-tuned in time.
Global supply chain operators realize the impact that a poor risk management strategy can have on their plans, which is why they are in the process of not just redefining their strategy, but also ensuring that all forms of supply chain risks are minimized and mitigated in a thorough manner.
Chapter 12: Risk and Compliance in the Global Economy
Supply chain compliance is among the biggest challenges facing procurement and supply chain organizations. Almost 45 percent of all executives in global supply chain say that they experience enhanced pressure for internal compliance and regulatory compliance.
Compliance is a hot topic across the supply chain, as supplier management and other relative hazards come to the picture as well. Global supply chain manufacturers can also be sued over inabilities to maintain a strict check over supply chain practices.
Pitfalls That Can Sink Your Compliance Program
With the increase in global supply chain operators, we have also seen a massive increase in the number of compliance frameworks in play today. Organizations have come up with all sorts of compliance frameworks that make management easier and help them pass through critical situations and crises.
Every established global supply chain operator has a compliance risk management framework in play already. However, this framework itself isn’t clear of all flaws and errors. A majority of all organizations have key flaws in their supply chain compliance management framework. Rather than developing a reactive approach and fixing these flaws once they have already led to financial errors, it is necessary that businesses fix the flaws before anything major pops up.
Compliance should be viewed as a means to develop competitive advantage rather than a means of being run over by competition. We’ve highlighted some of the common pitfalls and blind spots that organizations can look into to avoid compliance risks.
Failure to Study the External Operating Environment
Market driven factors, including situational factors such as political developments and geo-political tensions, are very likely to elevate the risk of compliance programs in companies operating at a global level. Sometimes even major global players with strong frameworks find themselves in the wrong place at the wrong time. Due to the failure to plan for the situation, they’re often found lacking on different parts.
Considering Only Compliance Enforcement
Compliance failures or breaches in regulations have an impact far beyond the sanctions most people can see around them. Implications in compliance can create a number of obstacles and challenges for business, both locally and across the global supply chain.
Compliance related disruptions often lead to civil society actions against organizations, disruption to business operations and extreme regulatory pressure on the organization. These issues can eventually damage the reputation of the firm and lead to implications in other parts of the business as well.
Hence, global supply chain operators should look at compliance in a different light than before, and should also consider the broad-based impact it can have on the business. This approach enables compliance teams to raise awareness regarding the risks that can be activated through a rather simple compliance breach.
Failure to Use Resources in a Sustainable Manner
Resources are often scarce, and compliance teams have to ensure that they manage their work in the best manner possible, without letting the limited resources become a problem. Most organizations have a specific compliance budget at hand, and the failure to use that budget and other resources in a sustainable manner can lead to a number of repercussions across the board. Businesses should look to optimize their resources and minimize any wastage in the process. A frugal approach to resource management can work wonders for the organization.
The course manual studies these compliance pitfalls in greater detail, along with the best strategy to improve compliance and minimize risks involved in the process.
Curriculum
Global Supply Chain Development – Workshop 8 – Risk Analysis
- Critical review of Global Supply Chain risk
- How Global Supply Chain risk has evolved over the years
- Core characteristics of Supply Chain risk
- Risk assessment process in Global Supply Chain
- Common risks involved in Global Supply Chains
- Understanding Supply Chain risk management
- Understanding supplier profiles
- Mitigating transport and logistic risks in Global Supply Chain
- Practical approaches to build risk resilience
- Best practices for Supply Chain risk management
- Mining for potential Global Supply Chain threats
- Risk and compliance in the global economy
Distance Learning
Introduction
Welcome to Appleton Greene and thank you for enrolling on the Global Supply Chain Development corporate training program. You will be learning through our unique facilitation via distance-learning method, which will enable you to practically implement everything that you learn academically. The methods and materials used in your program have been designed and developed to ensure that you derive the maximum benefits and enjoyment possible. We hope that you find the program challenging and fun to do. However, if you have never been a distance-learner before, you may be experiencing some trepidation at the task before you. So we will get you started by giving you some basic information and guidance on how you can make the best use of the modules, how you should manage the materials and what you should be doing as you work through them. This guide is designed to point you in the right direction and help you to become an effective distance-learner. Take a few hours or so to study this guide and your guide to tutorial support for students, while making notes, before you start to study in earnest.
Study environment
You will need to locate a quiet and private place to study, preferably a room where you can easily be isolated from external disturbances or distractions. Make sure the room is well-lit and incorporates a relaxed, pleasant feel. If you can spoil yourself within your study environment, you will have much more of a chance to ensure that you are always in the right frame of mind when you do devote time to study. For example, a nice fire, the ability to play soft soothing background music, soft but effective lighting, perhaps a nice view if possible and a good size desk with a comfortable chair. Make sure that your family know when you are studying and understand your study rules. Your study environment is very important. The ideal situation, if at all possible, is to have a separate study, which can be devoted to you. If this is not possible then you will need to pay a lot more attention to developing and managing your study schedule, because it will affect other people as well as yourself. The better your study environment, the more productive you will be.
Study tools & rules
Try and make sure that your study tools are sufficient and in good working order. You will need to have access to a computer, scanner and printer, with access to the internet. You will need a very comfortable chair, which supports your lower back, and you will need a good filing system. It can be very frustrating if you are spending valuable study time trying to fix study tools that are unreliable, or unsuitable for the task. Make sure that your study tools are up to date. You will also need to consider some study rules. Some of these rules will apply to you and will be intended to help you to be more disciplined about when and how you study. This distance-learning guide will help you and after you have read it you can put some thought into what your study rules should be. You will also need to negotiate some study rules for your family, friends or anyone who lives with you. They too will need to be disciplined in order to ensure that they can support you while you study. It is important to ensure that your family and friends are an integral part of your study team. Having their support and encouragement can prove to be a crucial contribution to your successful completion of the program. Involve them in as much as you can.
Successful distance-learning
Distance-learners are freed from the necessity of attending regular classes or workshops, since they can study in their own way, at their own pace and for their own purposes. But unlike traditional internal training courses, it is the student’s responsibility, with a distance-learning program, to ensure that they manage their own study contribution. This requires strong self-discipline and self-motivation skills and there must be a clear will to succeed. Those students who are used to managing themselves, are good at managing others and who enjoy working in isolation, are more likely to be good distance-learners. It is also important to be aware of the main reasons why you are studying and of the main objectives that you are hoping to achieve as a result. You will need to remind yourself of these objectives at times when you need to motivate yourself. Never lose sight of your long-term goals and your short-term objectives. There is nobody available here to pamper you, or to look after you, or to spoon-feed you with information, so you will need to find ways to encourage and appreciate yourself while you are studying. Make sure that you chart your study progress, so that you can be sure of your achievements and re-evaluate your goals and objectives regularly.
Self-assessment
Appleton Greene training programs are in all cases post-graduate programs. Consequently, you should already have obtained a business-related degree and be an experienced learner. You should therefore already be aware of your study strengths and weaknesses. For example, which time of the day are you at your most productive? Are you a lark or an owl? What study methods do you respond to the most? Are you a consistent learner? How do you discipline yourself? How do you ensure that you enjoy yourself while studying? It is important to understand yourself as a learner and so some self-assessment early on will be necessary if you are to apply yourself correctly. Perform a SWOT analysis on yourself as a student. List your internal strengths and weaknesses as a student and your external opportunities and threats. This will help you later on when you are creating a study plan. You can then incorporate features within your study plan that can ensure that you are playing to your strengths, while compensating for your weaknesses. You can also ensure that you make the most of your opportunities, while avoiding the potential threats to your success.
Accepting responsibility as a student
Training programs invariably require a significant investment, both in terms of what they cost and in the time that you need to contribute to study and the responsibility for successful completion of training programs rests entirely with the student. This is never more apparent than when a student is learning via distance-learning. Accepting responsibility as a student is an important step towards ensuring that you can successfully complete your training program. It is easy to instantly blame other people or factors when things go wrong. But the fact of the matter is that if a failure is your failure, then you have the power to do something about it, it is entirely in your own hands. If it is always someone else’s failure, then you are powerless to do anything about it. All students study in entirely different ways, this is because we are all individuals and what is right for one student, is not necessarily right for another. In order to succeed, you will have to accept personal responsibility for finding a way to plan, implement and manage a personal study plan that works for you. If you do not succeed, you only have yourself to blame.
Planning
By far the most critical contribution to stress, is the feeling of not being in control. In the absence of planning we tend to be reactive and can stumble from pillar to post in the hope that things will turn out fine in the end. Invariably they don’t! In order to be in control, we need to have firm ideas about how and when we want to do things. We also need to consider as many possible eventualities as we can, so that we are prepared for them when they happen. Prescriptive Change, is far easier to manage and control, than Emergent Change. The same is true with distance-learning. It is much easier and much more enjoyable, if you feel that you are in control and that things are going to plan. Even when things do go wrong, you are prepared for them and can act accordingly without any unnecessary stress. It is important therefore that you do take time to plan your studies properly.
Management
Once you have developed a clear study plan, it is of equal importance to ensure that you manage the implementation of it. Most of us usually enjoy planning, but it is usually during implementation when things go wrong. Targets are not met and we do not understand why. Sometimes we do not even know if targets are being met. It is not enough for us to conclude that the study plan just failed. If it is failing, you will need to understand what you can do about it. Similarly if your study plan is succeeding, it is still important to understand why, so that you can improve upon your success. You therefore need to have guidelines for self-assessment so that you can be consistent with performance improvement throughout the program. If you manage things correctly, then your performance should constantly improve throughout the program.
Study objectives & tasks
The first place to start is developing your program objectives. These should feature your reasons for undertaking the training program in order of priority. Keep them succinct and to the point in order to avoid confusion. Do not just write the first things that come into your head because they are likely to be too similar to each other. Make a list of possible departmental headings, such as: Customer Service; E-business; Finance; Globalization; Human Resources; Technology; Legal; Management; Marketing and Production. Then brainstorm for ideas by listing as many things that you want to achieve under each heading and later re-arrange these things in order of priority. Finally, select the top item from each department heading and choose these as your program objectives. Try and restrict yourself to five because it will enable you to focus clearly. It is likely that the other things that you listed will be achieved if each of the top objectives are achieved. If this does not prove to be the case, then simply work through the process again.
Study forecast
As a guide, the Appleton Greene Global Supply Chain Development corporate training program should take 12-18 months to complete, depending upon your availability and current commitments. The reason why there is such a variance in time estimates is because every student is an individual, with differing productivity levels and different commitments. These differentiations are then exaggerated by the fact that this is a distance-learning program, which incorporates the practical integration of academic theory as an as a part of the training program. Consequently all of the project studies are real, which means that important decisions and compromises need to be made. You will want to get things right and will need to be patient with your expectations in order to ensure that they are. We would always recommend that you are prudent with your own task and time forecasts, but you still need to develop them and have a clear indication of what are realistic expectations in your case. With reference to your time planning: consider the time that you can realistically dedicate towards study with the program every week; calculate how long it should take you to complete the program, using the guidelines featured here; then break the program down into logical modules and allocate a suitable proportion of time to each of them, these will be your milestones; you can create a time plan by using a spreadsheet on your computer, or a personal organizer such as MS Outlook, you could also use a financial forecasting software; break your time forecasts down into manageable chunks of time, the more specific you can be, the more productive and accurate your time management will be; finally, use formulas where possible to do your time calculations for you, because this will help later on when your forecasts need to change in line with actual performance. With reference to your task planning: refer to your list of tasks that need to be undertaken in order to achieve your program objectives; with reference to your time plan, calculate when each task should be implemented; remember that you are not estimating when your objectives will be achieved, but when you will need to focus upon implementing the corresponding tasks; you also need to ensure that each task is implemented in conjunction with the associated training modules which are relevant; then break each single task down into a list of specific to do’s, say approximately ten to do’s for each task and enter these into your study plan; once again you could use MS Outlook to incorporate both your time and task planning and this could constitute your study plan; you could also use a project management software like MS Project. You should now have a clear and realistic forecast detailing when you can expect to be able to do something about undertaking the tasks to achieve your program objectives.
Performance management
It is one thing to develop your study forecast, it is quite another to monitor your progress. Ultimately it is less important whether you achieve your original study forecast and more important that you update it so that it constantly remains realistic in line with your performance. As you begin to work through the program, you will begin to have more of an idea about your own personal performance and productivity levels as a distance-learner. Once you have completed your first study module, you should re-evaluate your study forecast for both time and tasks, so that they reflect your actual performance level achieved. In order to achieve this you must first time yourself while training by using an alarm clock. Set the alarm for hourly intervals and make a note of how far you have come within that time. You can then make a note of your actual performance on your study plan and then compare your performance against your forecast. Then consider the reasons that have contributed towards your performance level, whether they are positive or negative and make a considered adjustment to your future forecasts as a result. Given time, you should start achieving your forecasts regularly.
With reference to time management: time yourself while you are studying and make a note of the actual time taken in your study plan; consider your successes with time-efficiency and the reasons for the success in each case and take this into consideration when reviewing future time planning; consider your failures with time-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future time planning; re-evaluate your study forecast in relation to time planning for the remainder of your training program to ensure that you continue to be realistic about your time expectations. You need to be consistent with your time management, otherwise you will never complete your studies. This will either be because you are not contributing enough time to your studies, or you will become less efficient with the time that you do allocate to your studies. Remember, if you are not in control of your studies, they can just become yet another cause of stress for you.
With reference to your task management: time yourself while you are studying and make a note of the actual tasks that you have undertaken in your study plan; consider your successes with task-efficiency and the reasons for the success in each case; take this into consideration when reviewing future task planning; consider your failures with task-efficiency and the reasons for the failures in each case and take this into consideration when reviewing future task planning; re-evaluate your study forecast in relation to task planning for the remainder of your training program to ensure that you continue to be realistic about your task expectations. You need to be consistent with your task management, otherwise you will never know whether you are achieving your program objectives or not.
Keeping in touch
You will have access to qualified and experienced professors and tutors who are responsible for providing tutorial support for your particular training program. So don’t be shy about letting them know how you are getting on. We keep electronic records of all tutorial support emails so that professors and tutors can review previous correspondence before considering an individual response. It also means that there is a record of all communications between you and your professors and tutors and this helps to avoid any unnecessary duplication, misunderstanding, or misinterpretation. If you have a problem relating to the program, share it with them via email. It is likely that they have come across the same problem before and are usually able to make helpful suggestions and steer you in the right direction. To learn more about when and how to use tutorial support, please refer to the Tutorial Support section of this student information guide. This will help you to ensure that you are making the most of tutorial support that is available to you and will ultimately contribute towards your success and enjoyment with your training program.
Work colleagues and family
You should certainly discuss your program study progress with your colleagues, friends and your family. Appleton Greene training programs are very practical. They require you to seek information from other people, to plan, develop and implement processes with other people and to achieve feedback from other people in relation to viability and productivity. You will therefore have plenty of opportunities to test your ideas and enlist the views of others. People tend to be sympathetic towards distance-learners, so don’t bottle it all up in yourself. Get out there and share it! It is also likely that your family and colleagues are going to benefit from your labors with the program, so they are likely to be much more interested in being involved than you might think. Be bold about delegating work to those who might benefit themselves. This is a great way to achieve understanding and commitment from people who you may later rely upon for process implementation. Share your experiences with your friends and family.
Making it relevant
The key to successful learning is to make it relevant to your own individual circumstances. At all times you should be trying to make bridges between the content of the program and your own situation. Whether you achieve this through quiet reflection or through interactive discussion with your colleagues, client partners or your family, remember that it is the most important and rewarding aspect of translating your studies into real self-improvement. You should be clear about how you want the program to benefit you. This involves setting clear study objectives in relation to the content of the course in terms of understanding, concepts, completing research or reviewing activities and relating the content of the modules to your own situation. Your objectives may understandably change as you work through the program, in which case you should enter the revised objectives on your study plan so that you have a permanent reminder of what you are trying to achieve, when and why.
Distance-learning check-list
Prepare your study environment, your study tools and rules.
Undertake detailed self-assessment in terms of your ability as a learner.
Create a format for your study plan.
Consider your study objectives and tasks.
Create a study forecast.
Assess your study performance.
Re-evaluate your study forecast.
Be consistent when managing your study plan.
Use your Appleton Greene Certified Learning Provider (CLP) for tutorial support.
Make sure you keep in touch with those around you.
Tutorial Support
Programs
Appleton Greene uses standard and bespoke corporate training programs as vessels to transfer business process improvement knowledge into the heart of our clients’ organizations. Each individual program focuses upon the implementation of a specific business process, which enables clients to easily quantify their return on investment. There are hundreds of established Appleton Greene corporate training products now available to clients within customer services, e-business, finance, globalization, human resources, information technology, legal, management, marketing and production. It does not matter whether a client’s employees are located within one office, or an unlimited number of international offices, we can still bring them together to learn and implement specific business processes collectively. Our approach to global localization enables us to provide clients with a truly international service with that all important personal touch. Appleton Greene corporate training programs can be provided virtually or locally and they are all unique in that they individually focus upon a specific business function. They are implemented over a sustainable period of time and professional support is consistently provided by qualified learning providers and specialist consultants.
Support available
You will have a designated Certified Learning Provider (CLP) and an Accredited Consultant and we encourage you to communicate with them as much as possible. In all cases tutorial support is provided online because we can then keep a record of all communications to ensure that tutorial support remains consistent. You would also be forwarding your work to the tutorial support unit for evaluation and assessment. You will receive individual feedback on all of the work that you undertake on a one-to-one basis, together with specific recommendations for anything that may need to be changed in order to achieve a pass with merit or a pass with distinction and you then have as many opportunities as you may need to re-submit project studies until they meet with the required standard. Consequently the only reason that you should really fail (CLP) is if you do not do the work. It makes no difference to us whether a student takes 12 months or 18 months to complete the program, what matters is that in all cases the same quality standard will have been achieved.
Support Process
Please forward all of your future emails to the designated (CLP) Tutorial Support Unit email address that has been provided and please do not duplicate or copy your emails to other AGC email accounts as this will just cause unnecessary administration. Please note that emails are always answered as quickly as possible but you will need to allow a period of up to 20 business days for responses to general tutorial support emails during busy periods, because emails are answered strictly within the order in which they are received. You will also need to allow a period of up to 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Please therefore kindly allow for this within your time planning. All communications are managed online via email because it enables tutorial service support managers to review other communications which have been received before responding and it ensures that there is a copy of all communications retained on file for future reference. All communications will be stored within your personal (CLP) study file here at Appleton Greene throughout your designated study period. If you need any assistance or clarification at any time, please do not hesitate to contact us by forwarding an email and remember that we are here to help. If you have any questions, please list and number your questions succinctly and you can then be sure of receiving specific answers to each and every query.
Time Management
It takes approximately 1 Year to complete the Global Supply Chain Development corporate training program, incorporating 12 x 6-hour monthly workshops. Each student will also need to contribute approximately 4 hours per week over 1 Year of their personal time. Students can study from home or work at their own pace and are responsible for managing their own study plan. There are no formal examinations and students are evaluated and assessed based upon their project study submissions, together with the quality of their internal analysis and supporting documents. They can contribute more time towards study when they have the time to do so and can contribute less time when they are busy. All students tend to be in full time employment while studying and the Global Supply Chain Development program is purposely designed to accommodate this, so there is plenty of flexibility in terms of time management. It makes no difference to us at Appleton Greene, whether individuals take 12-18 months to complete this program. What matters is that in all cases the same standard of quality will have been achieved with the standard and bespoke programs that have been developed.
Distance Learning Guide
The distance learning guide should be your first port of call when starting your training program. It will help you when you are planning how and when to study, how to create the right environment and how to establish the right frame of mind. If you can lay the foundations properly during the planning stage, then it will contribute to your enjoyment and productivity while training later. The guide helps to change your lifestyle in order to accommodate time for study and to cultivate good study habits. It helps you to chart your progress so that you can measure your performance and achieve your goals. It explains the tools that you will need for study and how to make them work. It also explains how to translate academic theory into practical reality. Spend some time now working through your distance learning guide and make sure that you have firm foundations in place so that you can make the most of your distance learning program. There is no requirement for you to attend training workshops or classes at Appleton Greene offices. The entire program is undertaken online, program course manuals and project studies are administered via the Appleton Greene web site and via email, so you are able to study at your own pace and in the comfort of your own home or office as long as you have a computer and access to the internet.
How To Study
The how to study guide provides students with a clear understanding of the Appleton Greene facilitation via distance learning training methods and enables students to obtain a clear overview of the training program content. It enables students to understand the step-by-step training methods used by Appleton Greene and how course manuals are integrated with project studies. It explains the research and development that is required and the need to provide evidence and references to support your statements. It also enables students to understand precisely what will be required of them in order to achieve a pass with merit and a pass with distinction for individual project studies and provides useful guidance on how to be innovative and creative when developing your Unique Program Proposition (UPP).
Tutorial Support
Tutorial support for the Appleton Greene Global Supply Chain Development corporate training program is provided online either through the Appleton Greene Client Support Portal (CSP), or via email. All tutorial support requests are facilitated by a designated Program Administration Manager (PAM). They are responsible for deciding which professor or tutor is the most appropriate option relating to the support required and then the tutorial support request is forwarded onto them. Once the professor or tutor has completed the tutorial support request and answered any questions that have been asked, this communication is then returned to the student via email by the designated Program Administration Manager (PAM). This enables all tutorial support, between students, professors and tutors, to be facilitated by the designated Program Administration Manager (PAM) efficiently and securely through the email account. You will therefore need to allow a period of up to 20 business days for responses to general support queries and up to 30 business days for the evaluation and assessment of project studies, because all tutorial support requests are answered strictly within the order in which they are received. This does not include weekends or public holidays. Consequently you need to put some thought into the management of your tutorial support procedure in order to ensure that your study plan is feasible and to obtain the maximum possible benefit from tutorial support during your period of study. Please retain copies of your tutorial support emails for future reference. Please ensure that ALL of your tutorial support emails are set out using the format as suggested within your guide to tutorial support. Your tutorial support emails need to be referenced clearly to the specific part of the course manual or project study which you are working on at any given time. You also need to list and number any questions that you would like to ask, up to a maximum of five questions within each tutorial support email. Remember the more specific you can be with your questions the more specific your answers will be too and this will help you to avoid any unnecessary misunderstanding, misinterpretation, or duplication. The guide to tutorial support is intended to help you to understand how and when to use support in order to ensure that you get the most out of your training program. Appleton Greene training programs are designed to enable you to do things for yourself. They provide you with a structure or a framework and we use tutorial support to facilitate students while they practically implement what they learn. In other words, we are enabling students to do things for themselves. The benefits of distance learning via facilitation are considerable and are much more sustainable in the long-term than traditional short-term knowledge sharing programs. Consequently you should learn how and when to use tutorial support so that you can maximize the benefits from your learning experience with Appleton Greene. This guide describes the purpose of each training function and how to use them and how to use tutorial support in relation to each aspect of the training program. It also provides useful tips and guidance with regard to best practice.
Tutorial Support Tips
Students are often unsure about how and when to use tutorial support with Appleton Greene. This Tip List will help you to understand more about how to achieve the most from using tutorial support. Refer to it regularly to ensure that you are continuing to use the service properly. Tutorial support is critical to the success of your training experience, but it is important to understand when and how to use it in order to maximize the benefit that you receive. It is no coincidence that those students who succeed are those that learn how to be positive, proactive and productive when using tutorial support.
Be positive and friendly with your tutorial support emails
Remember that if you forward an email to the tutorial support unit, you are dealing with real people. “Do unto others as you would expect others to do unto you”. If you are positive, complimentary and generally friendly in your emails, you will generate a similar response in return. This will be more enjoyable, productive and rewarding for you in the long-term.
Think about the impression that you want to create
Every time that you communicate, you create an impression, which can be either positive or negative, so put some thought into the impression that you want to create. Remember that copies of all tutorial support emails are stored electronically and tutors will always refer to prior correspondence before responding to any current emails. Over a period of time, a general opinion will be arrived at in relation to your character, attitude and ability. Try to manage your own frustrations, mood swings and temperament professionally, without involving the tutorial support team. Demonstrating frustration or a lack of patience is a weakness and will be interpreted as such. The good thing about communicating in writing, is that you will have the time to consider your content carefully, you can review it and proof-read it before sending your email to Appleton Greene and this should help you to communicate more professionally, consistently and to avoid any unnecessary knee-jerk reactions to individual situations as and when they may arise. Please also remember that the CLP Tutorial Support Unit will not just be responsible for evaluating and assessing the quality of your work, they will also be responsible for providing recommendations to other learning providers and to client contacts within the Appleton Greene global client network, so do be in control of your own emotions and try to create a good impression.
Remember that quality is preferred to quantity
Please remember that when you send an email to the tutorial support team, you are not using Twitter or Text Messaging. Try not to forward an email every time that you have a thought. This will not prove to be productive either for you or for the tutorial support team. Take time to prepare your communications properly, as if you were writing a professional letter to a business colleague and make a list of queries that you are likely to have and then incorporate them within one email, say once every month, so that the tutorial support team can understand more about context, application and your methodology for study. Get yourself into a consistent routine with your tutorial support requests and use the tutorial support template provided with ALL of your emails. The (CLP) Tutorial Support Unit will not spoon-feed you with information. They need to be able to evaluate and assess your tutorial support requests carefully and professionally.
Be specific about your questions in order to receive specific answers
Try not to write essays by thinking as you are writing tutorial support emails. The tutorial support unit can be unclear about what in fact you are asking, or what you are looking to achieve. Be specific about asking questions that you want answers to. Number your questions. You will then receive specific answers to each and every question. This is the main purpose of tutorial support via email.
Keep a record of your tutorial support emails
It is important that you keep a record of all tutorial support emails that are forwarded to you. You can then refer to them when necessary and it avoids any unnecessary duplication, misunderstanding, or misinterpretation.
Individual training workshops or telephone support
Please be advised that Appleton Greene does not provide separate or individual tutorial support meetings, workshops, or provide telephone support for individual students. Appleton Greene is an equal opportunities learning and service provider and we are therefore understandably bound to treat all students equally. We cannot therefore broker special financial or study arrangements with individual students regardless of the circumstances. All tutorial support is provided online and this enables Appleton Greene to keep a record of all communications between students, professors and tutors on file for future reference, in accordance with our quality management procedure and your terms and conditions of enrolment. All tutorial support is provided online via email because it enables us to have time to consider support content carefully, it ensures that you receive a considered and detailed response to your queries. You can number questions that you would like to ask, which relate to things that you do not understand or where clarification may be required. You can then be sure of receiving specific answers to each individual query. You will also then have a record of these communications and of all tutorial support, which has been provided to you. This makes tutorial support administration more productive by avoiding any unnecessary duplication, misunderstanding, or misinterpretation.
Tutorial Support Email Format
You should use this tutorial support format if you need to request clarification or assistance while studying with your training program. Please note that ALL of your tutorial support request emails should use the same format. You should therefore set up a standard email template, which you can then use as and when you need to. Emails that are forwarded to Appleton Greene, which do not use the following format, may be rejected and returned to you by the (CLP) Program Administration Manager. A detailed response will then be forwarded to you via email usually within 20 business days of receipt for general support queries and 30 business days for the evaluation and assessment of project studies. This does not include weekends or public holidays. Your tutorial support request, together with the corresponding TSU reply, will then be saved and stored within your electronic TSU file at Appleton Greene for future reference.
Subject line of your email
Please insert: Appleton Greene (CLP) Tutorial Support Request: (Your Full Name) (Date), within the subject line of your email.
Main body of your email
Please insert:
1. Appleton Greene Certified Learning Provider (CLP) Tutorial Support Request
2. Your Full Name
3. Date of TS request
4. Preferred email address
5. Backup email address
6. Course manual page name or number (reference)
7. Project study page name or number (reference)
Subject of enquiry
Please insert a maximum of 50 words (please be succinct)
Briefly outline the subject matter of your inquiry, or what your questions relate to.
Question 1
Maximum of 50 words (please be succinct)
Maximum of 50 words (please be succinct)
Question 3
Maximum of 50 words (please be succinct)
Question 4
Maximum of 50 words (please be succinct)
Question 5
Maximum of 50 words (please be succinct)
Please note that a maximum of 5 questions is permitted with each individual tutorial support request email.
Procedure
* List the questions that you want to ask first, then re-arrange them in order of priority. Make sure that you reference them, where necessary, to the course manuals or project studies.
* Make sure that you are specific about your questions and number them. Try to plan the content within your emails to make sure that it is relevant.
* Make sure that your tutorial support emails are set out correctly, using the Tutorial Support Email Format provided here.
* Save a copy of your email and incorporate the date sent after the subject title. Keep your tutorial support emails within the same file and in date order for easy reference.
* Allow up to 20 business days for a response to general tutorial support emails and up to 30 business days for the evaluation and assessment of project studies, because detailed individual responses will be made in all cases and tutorial support emails are answered strictly within the order in which they are received.
* Emails can and do get lost. So if you have not received a reply within the appropriate time, forward another copy or a reminder to the tutorial support unit to be sure that it has been received but do not forward reminders unless the appropriate time has elapsed.
* When you receive a reply, save it immediately featuring the date of receipt after the subject heading for easy reference. In most cases the tutorial support unit replies to your questions individually, so you will have a record of the questions that you asked as well as the answers offered. With project studies however, separate emails are usually forwarded by the tutorial support unit, so do keep a record of your own original emails as well.
* Remember to be positive and friendly in your emails. You are dealing with real people who will respond to the same things that you respond to.
* Try not to repeat questions that have already been asked in previous emails. If this happens the tutorial support unit will probably just refer you to the appropriate answers that have already been provided within previous emails.
* If you lose your tutorial support email records you can write to Appleton Greene to receive a copy of your tutorial support file, but a separate administration charge may be levied for this service.
How To Study
Your Certified Learning Provider (CLP) and Accredited Consultant can help you to plan a task list for getting started so that you can be clear about your direction and your priorities in relation to your training program. It is also a good way to introduce yourself to the tutorial support team.
Planning your study environment
Your study conditions are of great importance and will have a direct effect on how much you enjoy your training program. Consider how much space you will have, whether it is comfortable and private and whether you are likely to be disturbed. The study tools and facilities at your disposal are also important to the success of your distance-learning experience. Your tutorial support unit can help with useful tips and guidance, regardless of your starting position. It is important to get this right before you start working on your training program.
Planning your program objectives
It is important that you have a clear list of study objectives, in order of priority, before you start working on your training program. Your tutorial support unit can offer assistance here to ensure that your study objectives have been afforded due consideration and priority.
Planning how and when to study
Distance-learners are freed from the necessity of attending regular classes, since they can study in their own way, at their own pace and for their own purposes. This approach is designed to let you study efficiently away from the traditional classroom environment. It is important however, that you plan how and when to study, so that you are making the most of your natural attributes, strengths and opportunities. Your tutorial support unit can offer assistance and useful tips to ensure that you are playing to your strengths.
Planning your study tasks
You should have a clear understanding of the study tasks that you should be undertaking and the priority associated with each task. These tasks should also be integrated with your program objectives. The distance learning guide and the guide to tutorial support for students should help you here, but if you need any clarification or assistance, please contact your tutorial support unit.
Planning your time
You will need to allocate specific times during your calendar when you intend to study if you are to have a realistic chance of completing your program on time. You are responsible for planning and managing your own study time, so it is important that you are successful with this. Your tutorial support unit can help you with this if your time plan is not working.
Keeping in touch
Consistency is the key here. If you communicate too frequently in short bursts, or too infrequently with no pattern, then your management ability with your studies will be questioned, both by you and by your tutorial support unit. It is obvious when a student is in control and when one is not and this will depend how able you are at sticking with your study plan. Inconsistency invariably leads to in-completion.
Charting your progress
Your tutorial support team can help you to chart your own study progress. Refer to your distance learning guide for further details.
Making it work
To succeed, all that you will need to do is apply yourself to undertaking your training program and interpreting it correctly. Success or failure lies in your hands and your hands alone, so be sure that you have a strategy for making it work. Your Certified Learning Provider (CLP) and Accredited Consultant can guide you through the process of program planning, development and implementation.
Reading methods
Interpretation is often unique to the individual but it can be improved and even quantified by implementing consistent interpretation methods. Interpretation can be affected by outside interference such as family members, TV, or the Internet, or simply by other thoughts which are demanding priority in our minds. One thing that can improve our productivity is using recognized reading methods. This helps us to focus and to be more structured when reading information for reasons of importance, rather than relaxation.
Speed reading
When reading through course manuals for the first time, subconsciously set your reading speed to be just fast enough that you cannot dwell on individual words or tables. With practice, you should be able to read an A4 sheet of paper in one minute. You will not achieve much in the way of a detailed understanding, but your brain will retain a useful overview. This overview will be important later on and will enable you to keep individual issues in perspective with a more generic picture because speed reading appeals to the memory part of the brain. Do not worry about what you do or do not remember at this stage.
Content reading
Once you have speed read everything, you can then start work in earnest. You now need to read a particular section of your course manual thoroughly, by making detailed notes while you read. This process is called Content Reading and it will help to consolidate your understanding and interpretation of the information that has been provided.
Making structured notes on the course manuals
When you are content reading, you should be making detailed notes, which are both structured and informative. Make these notes in a MS Word document on your computer, because you can then amend and update these as and when you deem it to be necessary. List your notes under three headings: 1. Interpretation – 2. Questions – 3. Tasks. The purpose of the 1st section is to clarify your interpretation by writing it down. The purpose of the 2nd section is to list any questions that the issue raises for you. The purpose of the 3rd section is to list any tasks that you should undertake as a result. Anyone who has graduated with a business-related degree should already be familiar with this process.
Organizing structured notes separately
You should then transfer your notes to a separate study notebook, preferably one that enables easy referencing, such as a MS Word Document, a MS Excel Spreadsheet, a MS Access Database, or a personal organizer on your cell phone. Transferring your notes allows you to have the opportunity of cross-checking and verifying them, which assists considerably with understanding and interpretation. You will also find that the better you are at doing this, the more chance you will have of ensuring that you achieve your study objectives.
Question your understanding
Do challenge your understanding. Explain things to yourself in your own words by writing things down.
Clarifying your understanding
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your understanding.
Question your interpretation
Do challenge your interpretation. Qualify your interpretation by writing it down.
Clarifying your interpretation
If you are at all unsure, forward an email to your tutorial support unit and they will help to clarify your interpretation.
Qualification Requirements
The student will need to successfully complete the project study and all of the exercises relating to the Global Supply Chain Development corporate training program, achieving a pass with merit or distinction in each case, in order to qualify as an Accredited Global Supply Chain Development Specialist (AGSCDS). All monthly workshops need to be tried and tested within your company. These project studies can be completed in your own time and at your own pace and in the comfort of your own home or office. There are no formal examinations, assessment is based upon the successful completion of the project studies. They are called project studies because, unlike case studies, these projects are not theoretical, they incorporate real program processes that need to be properly researched and developed. The project studies assist us in measuring your understanding and interpretation of the training program and enable us to assess qualification merits. All of the project studies are based entirely upon the content within the training program and they enable you to integrate what you have learnt into your corporate training practice.
Global Supply Chain Development – Grading Contribution
Project Study – Grading Contribution
Customer Service – 10%
E-business – 05%
Finance – 10%
Globalization – 10%
Human Resources – 10%
Information Technology – 10%
Legal – 05%
Management – 10%
Marketing – 10%
Production – 10%
Education – 05%
Logistics – 05%
TOTAL GRADING – 100%
Qualification grades
A mark of 90% = Pass with Distinction.
A mark of 75% = Pass with Merit.
A mark of less than 75% = Fail.
If you fail to achieve a mark of 75% with a project study, you will receive detailed feedback from the Certified Learning Provider (CLP) and/or Accredited Consultant, together with a list of tasks which you will need to complete, in order to ensure that your project study meets with the minimum quality standard that is required by Appleton Greene. You can then re-submit your project study for further evaluation and assessment. Indeed you can re-submit as many drafts of your project studies as you need to, until such a time as they eventually meet with the required standard by Appleton Greene, so you need not worry about this, it is all part of the learning process.
When marking project studies, Appleton Greene is looking for sufficient evidence of the following:
Pass with merit
A satisfactory level of program understanding
A satisfactory level of program interpretation
A satisfactory level of project study content presentation
A satisfactory level of Unique Program Proposition (UPP) quality
A satisfactory level of the practical integration of academic theory
Pass with distinction
An exceptional level of program understanding
An exceptional level of program interpretation
An exceptional level of project study content presentation
An exceptional level of Unique Program Proposition (UPP) quality
An exceptional level of the practical integration of academic theory
Preliminary Analysis
A number of studies and research work has focused on supply chain management and risk analysis. Risk management strategies in the supply chain are focused on a broad assessment of all risk.
The aim behind risk assessment processes in the supply chain is to identify all potential sources of risk and to grade or prioritize them on the basis of their importance. As studied in previous sections, the importance of risk is evaluated and determined on the basis of the impact that the risk carries. The aim of risk management, on the contrary, is to reduce the likelihood or probability of these hypothetical problems and ensure there are no roadblocks in the way. It is necessary for all supply chain stakeholders to have a clear understanding of the risk assessment and management processes.
Where risk assessment deals with prioritizing, assessing and grading risk, risk management deals with managing and mitigating their impact. Risk assessment puts down the foundation for what’s to follow during a typical risk management process.
There have been a number of studies discussing risk assessment and the steps that should be taken within it. These steps include:
Reviewing High-Level Risks
The first step in the risk assessment process is to build an understanding of all high-level risks that can have a major impact on certain sectors or companies. There are a number of external socio-political drivers that can influence the risk profile of an organization. All organizations need to be well aware of these changes and should have policies in place to limit the damages.
Examples of high profile risk drivers include:
Major Governance Risks
Governance risks can complicate things for supply chains operating at a global level. The risks include:
• A repressive regime in one of the countries’ part of the chain
• Civil unrest and internal security movements in the region
• Inadequate environmental protection and labor laws in the country. No regulation on local competitors breaking laws
• Inadequate inspection and enforcement of laws
• High levels of corruption with bribing being considered the norm
• Lack of proper channels to access justice and demand right treatment
Economic Risks
Economic risks are again of high importance for global supply chains and are outside their domain of control. Some important economic risks that can influence supply chains include:
• High levels of poverty in the host region
• Growing economic instability
• High rates of interest and depleting forex rates
• Lack of proper opportunities
• Economic recession
• Lack of proper labor
Social Risks
Social risks again vary across countries and often trouble global supply chains, since they operate at a global level. Some social risks that are of high importance here include:
• Discrimination against minorities or women in a region
• Difficulties for all members of civil society to raise their voices and talk about integral social and cultural issues
• Weak definition of land tenure
Demographics and Labor Risks
The risks involved with the demographics and labor rights across different organizations can also pose a threat to organizations. These include:
• Internal migration in specific countries
• Presence of indigenous people
• Poor functioning of labor markets with no proper control over procedures
• Predominance of low-skilled employees
• Seasonal production patterns, where particular seasons prompt better productivity
• Dangerous production processes that can hinder efficiency
• Over reliance on female workers to get things done
• Dangerous production activities
Environment
Finally, there are a number of environmental risks as well that can be involved here:
• Water intensive drainage and production processes
• Energy intensive processes
• Processes leading to or producing toxic amount of wastes
These risk drivers and the information pertaining to them can be accessed from a number of sources. Information sources include UNDP and the ILO among many other agencies.
Understanding Supplier Profiles
The next thing to do in the assessment process is to drill down and understand the risk profile of the supplier you’re working with. Although certain suppliers might look high-risk due to the sector or the location they operate in, this doesn’t necessarily reflect in the specific behavior that they show. For instance, some suppliers might come from politically turbulent nations, but they strive to negate the impact through their consistent policies and decisions.
A typical supplier assessment should consider the following factors:
Location and Site
The first thing you should consider to assess a supplier is the location they work from and the site of their manufacturing center.
The information you should look to get here includes:
• The number of locations they operate from and whether they have an outlet or work remotely.
• The quality of buildings in their manufacturing facility.
• The provision of welfare facilities to workers and worker accommodation provided to employees.
• The use of security guards to guard against theft in areas with high crime rates.
Enterprise
The next thing to consider is the business entity or enterprise of the supplier. Obviously, the supplier you’re working with must operate as a business entity. With regards to that, there are a few things you ought to know:
• How long has the supplier’s enterprise been in business?
• What is the length and significance of their commercial relationships with other competitors?
• What are their financial resources? Are they financially sound enough to provide deliveries?
Production Cycle and Manufacturing Methods
Organizations should also consider the production cycles and methods followed by the supplier to identify the supply routine and pattern they would follow.
The production cycle and methods can include the following information:
• The seasonality of production followed by the supplier. Are supply and manufacturing levels the same all across the year, or do they keep going up and down?
• The use of out growers or remote home workers for goods
• The use of dangerous production processes and hazardous chemicals that harm the environment and are below par in quality
• The use of sub-contractors
Workforce
The workforce or employees working under the supplier of your choice should also be considered. The workforce can help indicate a thing or two about a supplier. The information you generate from here can come in handy.
The info to gather about a supplier’s workforce includes:
• The workforce profile for the supplier in terms of gender, age, position and language groups
• The number of permanent and contractual workers. This will also help you explore seasonality trends
• The method of payment
• The unions found within the workforce
• The grievance record
• The record of industrial relations with other suppliers and firms
Management
The management in place within a supplier’s firm should also be studied. The info to be studied here in the assessment includes:
• Quality of human resource protocols and processes
• The staff currently working for them
• The quality of all environmental management processes
• The number of inspection staff or internal audit members working for them
Recruitment and Relations
Finally, when performing your supplier analysis, you should also consider their recruitment and relations. These factors have to be given their due importance when finding out all you need to know about a supplier.
The info to gather here includes:
• Where they source their workers from
• The use of any labor providers. Do check these labor providers to ensure they’re verified, and that workers have authentic experience
• Study their community outreach efforts to determine their relations and reputation within the community. A supplier with a good reputation will uphold this reputation at all costs and wouldn’t let it slip by
• Relations with people of the local communities and a record of the complaints that have been submitted by residents, if any
While the information above deals with suppliers providing raw materials, supply chains should also assess suppliers providing services. There are two kinds of service providers here – staffing companies and security/cleaning service providers.
Labor Providers
Labor providers should be assessed based on the following info:
• The length of time they’ve been in business
• Where they get their workers from
• The worker profiles by age, nationality and gender
• The use of sub-agents
• Their record keeping abilities
• The skill level and the jobs most of their workers are asked to do
Contractual Provider
A contractual provider providing cleaning, security or any other contractual service to the supply chain should also be assessed here on:
• How they recruit workers
• The average median length in business and the age of their workers
• The types of contracts they offer
• Worker profiles by gender, nationality, age, skill levels and language groups
• Human resources staff
• The level of training provided to workers
• And, the use of labor providers
These risks all need to be mitigated for better handling.
Risk Mapping
Risk mapping is a process used to show key areas and concerns of risk for organizations in terms of the size of exposure and the danger offered by particular risks. The aim is to provide all policymakers within the organization with data to enable an informed and strategic decision-making process. The informed process is concerned with the allocation and integration of the rick capacity hosted by an organization.
When it is deemed necessary, risk mapping should also include benchmarks for different kinds of risks. This is ideal for market-oriented risks, as discussed in the previous section (including interest rate fluctuations, foreign currency changes and rises in commodities from global markets and so on).
Against each risk category mentioned earlier in the chapter, mapping requires thorough analysis and examination, probing the qualitative and numeric information associated along the way. It is necessary to also identify instruments that can trade or shift risks during this stage.
Mapping a supply chain is the first step to take in a global risk assessment process. The objective behind the mapping process is to get a clearer and full picture of business operations and where they come from. Supply chain mapping includes a detailed understanding of where all operations and business partners like retail customers and suppliers are located, and where the sourced products and raw materials come from. This information, once found out, can then be used to assess the risks associated with these factors and the locations/activities pertaining to them.
Better information of suppliers can come in handy in processes other than just risk assessment. For instance, in-depth information on your suppliers can also help you build an understanding of supply chain resilience.
There is no single and approved way of supply chain mapping. The process and its intricacies can change with the industry that organizations operate in. In some sectors and industries, such as the food sector, where traceability is of paramount importance, getting the information required for supply chain mapping is easier. Regulations such as the Modern Slavery Act in the United Kingdom require all organizations to thoroughly report risks in their business. A number of businesses today are now going beyond the first tier to identify sub-suppliers for their suppliers and validating their supply of goods.
Mapping can also involve requesting information from suppliers about their own suppliers. Effort should hence be made to gather as much information as possible from the chain. Another thing to identify about the mapping process is that it does take time. Businesses shouldn’t look to hurry it, as that might lead to a loss of strategic information.
Risk Metrics to Manage
Even with a better understanding of risk, procurement teams continue to suffer when it comes to shipping capacity and finding the suppliers available to them.
A peer research in the Harvard Business Review mentions, “vital information is often not available or accessible across their global teams, as a result, their response to disruptions has been reactive and uncoordinated, and the impact of the crisis is hitting many of their companies’ full force.”
The top metrics that global supply chain players should keep an eye on to measure and mitigate risks in the supply chain include:
1. General Carrier Performance: This metric will help unearth the general performance of carriers in the supply chain. It will also determine carrier adherence to timely deliveries and if they encounter any delays.
2. Percent of Carriers with Lower than Average Capacity: Maintaining control over inventory and ensuring optimal delivery standards is still a major problem for carriers. In lieu of this, this metric can help determine carrier capacity risks and avoid major ones.
3. Total Landed Cost for Procurements: During a disruption or event of that nature, total landed costs will significantly increase. This can damage the supply chain and increase costs. The landed cost for the procurements metric hence prepares organizations for discrepancies and minimizes damages.
4. Number of Backup Suppliers: Disruption or no disruption, this is another metric that should ideally be maintained. The number of backup suppliers determines the readiness of a supply chain to manage and stop processes from getting out of hand if a supplier fails to deliver.
5. Compliance to Routes: The routes determined by a supply chain should be managed to the letter. Non-compliance to these routes should be investigated and the reasons behind them found out.
These are just some metrics that can reduce common supply chain risks and make management easier across the board.
The Benefits of Supply Chain Risk Management
Supply chain risk management obviously comes with a unique set of benefits. Before we discuss management strategies and the policies you can follow, let us first shed some light on the benefits of supply chain risk management in the modern global supply chain of today.
Ignorance Isn’t Bliss
Organizations that do not actively approach the topic of risk management in their supply chain processes form the equivalent of a person driving with a blindfold on their eyes. Ignorance toward important problems is not bliss in this case, and it is time operators took the blindfold off their eyes and saw the situation on ground zero.
You cannot manage aspects of the supply chain you cannot see. Obviously, if you want to exercise your control over the entirety of the supply chain, it is necessary that you manage aspects that were previously hidden from you.
Study the routes that you have drafted for your logistics and look at all the processes in detail. Where do your raw materials come from? What locations do they pass through before arriving at your facility? Where are your distributors located and how efficiently do they perform? Are there any complaints being given by the end customer or the retailer that you need to deal with, with regards to the service provided by distributors? These are all questions that you need to know answers to.
Supply chain risk management allows global supply chain operators to maintain a keen eye on all happenings across the supply chain. Not only are risks identified, but concrete measures are also taken to minimize the damage that they might cause. Analyze the supply chain in detail. Simplify it. Criticize it. If you don’t, you’ll always be the blind person driving the car with a blindfold on their eyes. The devil almost always lies in the details, and can only be unearthed when you jump deep into the details related to a particular project and find everything that is troubling you or deserves immediate attention.
Weak Supply Chain Processes Can Break Under Pressure
The strength of a global supply chain model lies not at its strongest point, but at its weakest point. It is the weakest link in the chain that is often infiltrated during a disruption or the subject of major risk events. Organizations should create a risk profile that helps them identify areas where they are the most vulnerable and the chances of risk are highest. An example of this would be identifying weak links in logistics and trying to limit the exposure at these risk points.
Stimulates Supply Chain Best Practices
Risk management is ideal for reducing and eliminating inefficiencies from your supply chain. Wasting resources and inefficiently going about processes can add an element of risk to any organization with a global supply chain presence. Organizations looking to maintain and uphold their global stature need to build their risk profile and keep a check on it for early detection of risks across the supply chain.
Ability to Respond to Unexpected Events
Supply chain risk management can help organizations with a global supply chain presence respond easily to risks and unexpected events across the supply chain. Such unexpected events warrant a quick response with appropriate solutions being generated and passed around the supply chain.
The first step in the process is to identify the risks that might cause unexpected delays in the delivery of products to customers. Once that is done, organizations may find themselves in a better place to mitigate undue delays and respond to errors in the supply chain.
Guide to Supply Chain Risk Management
Natural disasters, sanctions, fires, insolvencies, strikes and a number of other events can cause disruptions to the supply chain. The global supply chain model is flourishing today and the effective means of communication around us have meant that organizations can effortlessly communicate and reach out to each other. However, this progress comes at the cost of enhanced risks and other problems. Most global supply chain organizations today are in the way of harm and need to come up with risk management strategies that help manage complex solutions and reduce problems in communication.
In any risk based scenario, managers and entrepreneurs have three possible strategies; control, transfer and complete avoidance. Risk avoidance can best be explained as refusal to partake in any action or move that you may find too risky. Supply chain managers assess information and decisions before partaking in them. If you adopt a risk avoidance strategy, you will be avoiding all risky moves altogether. This might kill possible sources of revenue, but will save you from the additional burden of risk. This is known as risk avoidance and supply chain managers avoid the revenue potential altogether, just to avoid risk.
Risk control requires taking control of all risky actions and ensuring that all kinds of damages are monitored and kept to a minimum. As you will learn over time, in a supply chain, running a global business is all about taking calculated risks and backing yourself through them. While risk avoidance does sound like a decent strategy for supply chains just building their presence, it is not the recipe you want to follow for success. Hence, rather than avoiding risks, some businesses try to take control over the process in a bid to minimize and mitigate all damages that could be caused by this risk. For a manager of a global supply chain, this includes conducting regular inspections of the supply chain and completing communication standards.
Risk transfer, which is the final strategy for combating risk, deals with handing over the responsibility of the risk onto someone else. Shifting responsibility over to someone else can minimize damage and can also make life easier for supply chain managers. For instance, a supply chain might shift responsibility of overseeing certain risks to insurance companies. This is a decent strategy to minimize risk and the burden of damages on your shoulders.
The answer to the problem of enhanced supply chain risk in the global industry is to have a successful and comprehensive supply chain risk management program that helps secure relationships with suppliers, ensures that your company is operating in a completely legal and ethical manner, and also prevents supply and delivery bottlenecks from harming your services and product standards.
To do this, it is necessary that you fully understand the risk management procedure and identify, assess and mitigate all forms of risk, based on the threat that they pose to your organization. In this section, we will walk through the phases of risk management and look at it as an integral process for supply chain operators today.
Risk Identification
Risk identification is the very first, and perhaps the most important, step in the risk management process. The only way you can properly address risk in the global supply chain is by identifying it and knowing all there is to know about it. The very first process that you should embark on during the risk management process is the establishment of risk profiles for all elements you believe are risky in your current global supply chain model. Once you have established risk profiles for your supply chain, you should come up with ways to monitor and keep an eye on these profiles on a regular basis. Constant checks and balances on these profiles will help you incorporate a successful risk avoidance strategy.
Remembering risk identification systems can only be implemented through active monitoring. Active monitoring is important to this stage, as it is through active monitoring and implementation that businesses are able to identify all areas of risk. Just a simple risk assessment of a supplier or distributor at the time of onboarding them on to your supply chain isn’t enough when it comes to keeping a vigilant eye on your supply chain. Circumstances keep changing with time, and a successful risk identification process must account for that.
What Is a Risk Profile?
A risk profile is an assessment of all threats faced by an organization toward particular assets in position of the firm. The goal of a risk profile is to ensure that all assets based in the organization are relatively safe and don’t carry any untoward threat. For instance, all of your suppliers, ports and the locations they operate from should have a separate risk profile. These separate risk profiles help you identify the weak points in your supply chain, and also help you prepare a successful risk mitigation strategy that you can follow to improve processes related to that specific risk.
Identify What to Monitor
A lot of the risk identification process is about identifying what should be monitored in the supply chain. It is necessary for organizations and supply chain managers to group their supply chain on the basis of segments and sub-tiers to actively monitor and implement a risk management process. Typically, global supply chain operators monitor the following attributes in partners as part of their risk management program; purchasing volume, scarcity, effect on sales, ownership structures, geography, custom requirements and patents.
At a minimum, supply chain operators should know all of the above information related to their tier 1 direct material suppliers. But it is recommended that the due diligence should expand beyond the first tier as well. It is necessary that supply chain managers also consider the suppliers of their direct supplier and identify whether there are any risk factors that should be minimized or mitigated.
Besides the tiers in your supply chain model, it is necessary to also monitor logistics routes and supply paths. From the routes taken by suppliers to the routes available to the distributors, all factors related to the supply chain should also be discussed in detail as well.
Know How to Measure Risk
Even with a better understanding of risk, procurement teams continue to suffer when it comes to shipping capacity and finding the suppliers available to them.
A peer study in the Harvard Business Review mentions, “vital information is often not available or accessible across their global teams, as a result, their response to disruptions has been reactive and uncoordinated, and the impact of the crisis is hitting many of their companies’ full force.”
The top metrics that global supply chain players should keep an eye on to measure and mitigate risks in the supply chain include:
1. General Carrier Performance: This metric will help unearth the general performance of carriers in the supply chain. It will also determine carrier adherence to timely deliveries and if they encounter any delays.
2. Percent of Carriers with Lower than Average Capacity: Maintaining control over inventory and ensuring optimal delivery standards is still a major problem for carriers. In lieu of this, this metric can help determine carrier capacity risks and avoid major ones.
3. Total Landed Cost for Procurements: During a disruption or event of that nature, total landed costs will significantly increase. This can cause damages to the supply chain and increase costs. The landed cost for procurements metric hence prepares organizations for discrepancies and minimizes damages.
4. Number of Backup Suppliers: Disruption or no disruption, this is another metric that should ideally be maintained. The number of backup suppliers determines the readiness of a supply chain to manage and stop processes from getting out of hand if a supplier fails to deliver.
5. Compliance to Routes: The routes determined by a supply chain should be managed to the letter. Non-compliance to these routes should be investigated and the reasons behind them found out.
These are just some metrics that can reduce common supply chain risks and make management easier across the board.
Capture Risk Data
There are a number of problems that supply chains have to face today while capturing risk data. These problems relate to relevance, standardization and volume. The primary challenge in this process relates to performing and maintaining a constant check on data – which is necessary for a supply chain risk management program to flourish.
In addition to the risk measurement process, volume and relevance are also factors that matter here. The volume of data being measured can put data systems to shame and can challenge their efficiency. While data management systems have come a long way in the past, there still is some progress for them to make before being considered able enough to monitor tons of supply chain data.
The evolution and emergence of risk management methods has helped organizations overcome these challenges and develop a Risk Intelligence program. Such programs zero down on the lack of risk measurement and use technology as a driver to achieve static results from data.
Uniformity is also important here as it is necessary that businesses implement uniform procedures for risk measurement. Uniform policies help improve the results generated from the risk measurement process and make standardization easier.
Once standardization is achieved in this process, global supply chains will find it easier to keep an eye on all facets of the supply chain and incorporate a program that helps increase risk measurements. The modern supply chain will hence become even more efficient at risk identification, as remote processes would be mapped and monitored through the use of technology and data measurement tools.
Factors Affecting Supplier Relationships
A number of factors can affect relationships between suppliers and global supply chain operators. These factors include:
Trust and Loyalty
Aside from the financial aspect of things, developing trust and loyalty through mutual stakeholder relationships is just as important. Perhaps the most effective manner to deal with your suppliers is to make them feel like they’re part of the business. Once they feel like strategic partners and stakeholders in your business, they will automatically up their game and give you the best services they can provide.
To make sure that this happens, you can start by informing them about ongoing strategies and processes, and the role they play in them. You should talk to your suppliers about product releases, promotions and other factors of the nature to give them an idea of demand spikes, and how they come into the picture.
Listening to the pain points and strategic demands of your suppliers can also help you solve trust issues and any hassles associated with it.
Information Sharing
Information sharing is another factor that can impact and affect the development of a decent relationship with your suppliers. The sharing of information across the supply chain is bound to make suppliers feel connected to your organization.
Information sharing enhances the coordination between all stakeholders in the supply chain and also leads to better levels of integration. Global supply chains with better communication standards happen to have better efficiency and can save on a number of business costs that are otherwise avoided. In fact, many studies focused on this concept have found out that information sharing is highly integral to the success of an SRM implementation process.
With the right information sharing processes, businesses can implement and follow the right protocols. A sufficient level of communication can connect all stakeholders together and add a much needed boost to the supply chain.
Risk and Reward Sharing
Within a partnership, all suppliers in an organization should be intimated and assured that the rewards, benefits and risks associated with different transactions would be shared equally. This risk and reward sharing protocol can help in the establishment and maintenance of strong relationship ties between all partners, including suppliers.
Risk sharing is an essential supply chain risk mitigating strategy that we discuss in further detail within this coursework. Risk sharing is used as a strategy to save costs and improve quality across the supply chain. This helps reduce losses. On the flip side, reward sharing adds as an incentive to bring suppliers toward the risk sharing program.
The sharing of risk and reward can also help create good camaraderie within all partners of a supply chain. This newfound camaraderie is especially important if the supply chain has multiple partners involved and needs better negotiation between them. Risk sharing further helps develop better long-term relationships between all partners. Such arrangements come with many benefits.
Commitment
It goes without saying or proving that the promise of commitment in a partnership can do wonders for everyone involved. Committed partners are more than willing to sustain and maintain their relationship with the organization. Suppliers should be reminded and guaranteed from time to time that the organization is committed to working with them. This promise of commitment will definitely ring in their ears and help them perform their best.
Suppliers or any other strategic partner involved in the supply chain will not perform well unless and until they’re lured through the promise of commitment. The commitment between partners and the security of long term work goes well for suppliers and other stakeholders as well.
The preliminary analysis available on supply chain risk assessment and analysis can form a basic guideline for the actual coursework in our manual.
Course Manuals 1-12
Course Manual 1: Critical review of Global Supply Chain risk
Risk Preparedness in the Global Supply Chain
Each process undertaken and decision made by an organization is prone to uncertainty and doubt. Since misjudgments and wrong assessments lead to unforeseen situations and developments, uncertainties need to be continuously monitored and mitigated if organizations want to improve their performance. Most risks and uncertainties in the business world today tend to have consequences and damages that are often detected too late, when the situation has deteriorated further.
With the exponentially growing number of uncertainties facing the business world, the importance assigned to risk detection and mitigation has significantly grown. In recent decades and years, we have seen risk management and mitigation theories being applied in finance, decision theory, actuarial sciences, marketing, healthcare, management, psychology, emergency planning and supply chain processes.
The notion has particularly been felt in supply chain management, as managers and organizations have somehow tried their best to capture risk and reduce the complications involved with it. The global supply chain of today is based on the modern principles of interrelationship, which makes risk management and mitigation even more complicated and difficult than first imagined. Due to this interrelation of the global supply chain, organizations are unaware of the type and nature of certain developments, and are unable to predict the repercussions that they might lead to.
Besides the unpredictability of impact, organizations also face complications in the form of major world events. Major disruptions like the current COVID-19 crisis, piracy attacks offshore, global economic crisis, European ash-clouds, flooding in Asia and earthquakes/tsunamis across the world have shown project managers’ lack of preparedness toward uncertain and unpredictable global developments in general.
A closer look into the use of the phrase ‘supply chain risk’ in particular has revealed that the identification and interpretation of the term is far from clear. In fact, the term ‘risk’ itself is maligned with multiple interpretations, a few of which are a far cry away from the original meaning. The World Economic Forum has established a Risk Response Network, which has after deliberate negotiations recently identified the need for more effort and time to be put into the creation of a global definition for the term ‘supply chain risk’. These explorations would require both, methodical and conceptual work, across the fine lines of the global supply chain.
Defining Risk
Having looked at the general context of risk and the critical analysis of how it is interpreted in supply chain, we can now take a more defined and clear look at what is meant by it. Once we do that, we will categorize risk into its main forms, and delve deeper to fully explicate the impact it has on the global supply chain.
We will then briefly consider and mention ways for analyzing and mitigating both, financial and non-financial forms of risk in the supply chain. This is to be done through risk mapping and risk assessment. Obviously, the concept of risk and its analysis in the supply chain will span over this entire coursework, but the concepts mentioned in this chapter will act as the perfect blurb for what’s to come.
The word risk is said to be derived from the Latin word risicum and the Arabic word rizq. The meanings of both these terms quite literally come together to form an amalgam that gives us the meaning for the English term risk, in the context that we look at it today. The Latin word risicum initially talked about the challenges and complications presented by hindrances in the sea to seafarers. The term implied a negative outcome that would result due to the challenges at sea. The Arabic word, on the flipside, looks at a more positive perspective and refers to everything or anything that has been given to you by God and from which you can derive a beneficial outcome or satisfy your needs.
A Greek twelfth-century derivative of this Arabic word referred to the role of chance, and how there is no set positive or negative implication involved. We can quite literally form an amalgam of all these definitions and find out what the term risk means. By this approach, we can infer that risk is every ‘uncertain future outcome that comes with the potential to worsen or improve any given position.’
There are two key elements implied through this definition:
1. Risk is probabilistic – The likely outcome is not known to any party. It can be assessed or mitigated, but is relatively unknown.
2. The outcome is based on chance – The outcome can be either favorable or unfavorable for the supply chain player.
It should also be noted that the definition for risk does not necessarily imply a symmetrical conjunction in the upsides and downsides of a risk undertaken by a business. In most risk situations facing supply chain businesses today, outcomes are skewed. This means that the positive outcome resulting from a favorable situation could be far less than the negative repercussions carried by that risk. Most supply chain players consider risk to be symmetrical, with an equivalent risk and reward parable. However, the negative outcomes often outweigh the positive ones, neglecting which can result in criminal negligence.
The Risk Management Process
A supply chain’s attitude toward the different forms of risks it is exposed to can act as a direct interpretation of its business strategy and success pattern. This comes with certain implications; the strategy should address and fully comprehend the appetite for risk within the organization. An organization with lower capacity for risky decisions will eventually maintain a lower risk appetite. Once the risk appetite is identified, the actions and decisions taken by the organization should be based on that appetite and capacity. This process of lining the risk appetite of a business with its risk exposure is known as risk mapping, and is said to be a key part of the risk identification and mitigation process.
Risk mapping is also something that we will discuss in greater detail as this coursework rolls out. The risk mapping process is divided into sequential stages, as outlined by the figure below:
Stage 1: Identifying Risk Exposures
There is no single way for supply chains operating at a global level to subdivide risk across the supply chain. The key point in this identification process is to categorize each chosen head based on the understanding of risks by all those working in that department. The identification process should ideally also be tailored to the size and stature of different organizations, and the complexity that it brings to the environment.
A smaller organization may only face a small number of risks directly relating to it in comparison to a seasoned global supply chain dealer. There are a number of risks that an organization can face in their day-to-day global operations, not specifically connected to supply chain or any other field for that matter.
Financial Risk
Financial risk is something that we will focus on in greater detail during the length of this coursework. Financial risk is also broken down into the top 3 risks mentioned in the figure above – market risk, credit risk and liquidity risk. Most forms of financial risk relate to the possible changes in the monetary value of wealth, because of fluctuations and routine variations in cash balances forming the liquidity of an organization. For supply chain players dealing in the global industry, market risks can include foreign currency risk and interest rate risks across the countries they operate in.
Obviously, every country today has its own exchange rate, and operates based on its own interest rates. Hence, adjusting to these changing rates across different countries can be a risk on its own.
Financial risk management cannot be performed in a vacuum without an understanding of the other factors impacting it. In fact, financial risk management should be part of a company-wide broad strategy that takes into account certain non-financial factors as well. The larger, overall, risk management strategy should not only safeguard financial interests, but also protect the firm from damage resulting due to poor decisions in other areas with negative financial impacts.
Operational Risk
Operational risk is by far the most wide ranging source of risk without financial implications involved. Operational risk is the only non-financial risk in supply chain, against which banks today are required to hold and maintain capital. Operational risks deal with the damages arising from the failure of controlling systems, processes and people. Many organizations are unable to maintain their operations if key systems and processes aren’t functioning. The inability of key systems to perform can impair the ability of most organizations to deliver the kind of results that are expected from them. This can eventually kill employee morale, damage efficiency and reduce revenue, adversely impacting the earnings being generated by the organization.
Similarly, the concept of operational risk relates to the workforce as well. An organization with an untrained or an untalented workforce will see a negative decline in its ability to both, engineer future developments in the organization and to deliver current services at full capacity. All future risk mitigation strategies are significantly impaired as well if the people working in the firm aren’t able to come up with innovative techniques and methods to develop future strategies.
To this end, there are a number of examples from the business world of organizations where operational failure, resulting due to either poor people management or system management, has put organizations at a disadvantage against their competitors. Given the importance of operational risk as one of the most regressive forms of non-financial risks, we will take another look at it later in this coursework.
Legal and Regulatory Risk
The second most important non-financial risk comes from the legal and regulatory forces in play within the global supply chain market. The legal requirements and regulations vary from country to country, which can be a bit tough to manage for most supply chain players. It is of tremendous importance to industries and sectors operating under severe legal regulations.
The supply chain sector logistically spans across a significant portion of the world, which is why there is a significant need to adhere to the different legal requirements in play within all countries. One recent example of legal changes and requirements in a global setting is the imposition of the new windfall tax on oil companies operating in the United Kingdom. These British tax laws were deemed regressive and companies such as Statoil halted their development in the North Sea due to the tax.
Additionally, another example of legal repercussions is the $308,000 fine imposed by the Chinese government on global brand Unilever for doing something as simple as warning about future price hikes. The NDRC development council in China believed that these warnings had an ulterior motive and disrupted the market. While this fine is peanuts for a global giant as big as Unilever, the imposition does prove that no company is immune to such legal conflicts and regulations.
Business Risk
Business risk is another global supply chain risk that most managers have to prepare for. This is a non-financial risk and is based on uncertainties regarding the potential sales level and the profitability of future years in different markets. The cost of shipping goods and taxations is often hard to compute or accurately predict for even seasoned global supply chain players. There is, hence, an underlying risk that needs to be understood and mitigated for careful operations.
Strategic Risk
Another form of non-financial risk closely related to operational risk is strategic risk. Many organizations and global supply chain management consider this to be part of business risk, but we believe otherwise. Strategic risk arises through the selection and implementation of strategies that prove to be detrimental and unsuccessful in the long run. There are countless examples of global supply chain players that have suffered due to poor and incongruent supply chain strategies. The damages suffered due to all such strategies come under strategic risk.
Reputation Risk
The final category of risks to be discussed in the identification process is reputational risk. Reputation is described as the perception that consumers and other stakeholders have of the organization. A positive reputation can help increase the loyalty of employees, customers and even suppliers from global markets. Improved relations with different stakeholders, more often than not, lead to a generous competitive advantage.
A negative reputation, in contrast, can not only kill revenue but can lead to a number of operational inefficiencies. Poor reputation with suppliers can lead to a number of inefficiencies in the operational process, including the inability to maintain a solid flow of the supply chain.
Stage 2: Measuring and Estimating Exposure to Risk
Having identified the different categorizations of financial and non-financial risks in the global supply chain, we now move on to help you measure and estimate your supply chain’s exposure to risk. This section does involve a few mathematical equations, so it is best to put on your thinking caps.
There are two main ways to discuss and identify the risk exposure in your firm. You can either focus on the expected return from a transaction or on the possible outcome versus return parable. The expected return technique is generally easier and simpler to use. The technique aids both, quantitative and comparative ways and can help with benchmarking as well.
The expected return technique to calculate risk can help you choose between Action A and Action B, each with a similar level of risk. The expected return for different alternatives is calculated through the sum of the values of each possible outcome multiplied by the probability of that outcome happening.
The mathematical formula for this is represented in the following equation:
Where:
E(R) = expected return
Ri = value of outcome i
Pi = probability of outcome i
The calculation for measuring expected return is the same as measuring mean return in statistics. The expected return and mean return equations are literally the same.
Perhaps the most important application of expected return comes when considering the chances of avoidable risk. Avoidable risk is best defined as the risk that an organization can willingly choose not to be exposed to. The simplest technique for finding out avoidable and unavoidable risk is to only take on or go for avoidable risk if the expected return for that risk is in the positive. Similarly, if you’re running a comparison between two alternatives, it is best to opt for the risk that gives the highest expected return on investment.
Risk Mapping
Risk mapping as a process needs to show key areas and concerns of risk for organizations in terms of the size of exposure and the danger offered by particular risks. The aim is to provide all policymakers within the organization data to enable an informed and strategic decision making process. The informed process is concerned with the allocation and integration of the rick capacity hosted by an organization.
When it is deemed necessary, risk mapping should also include benchmarks for different kinds of risks. This is ideal for market-oriented risks, as discussed in the previous section (including, interest rate fluctuations, foreign currency changes and the rises in commodities from global markets and so on).
Against each risk category chosen in the first stage, this stage requires thorough analysis and examination, probing the qualitative and numeric information associated with the way. It is necessary to also identify instruments that can trade or shift risks during this stage.
Stage 3: Assessing the Effects of Exposure
In this stage of the supply chain risk management process, the analysis involving risk identification is furthered and the effects of the many risks identified previously are discussed. Certain questions are also answered through thorough and in-depth analysis of the risks involved in the global supply chain:
1. Why be exposed to a certain risk? Is the exposure absolutely necessary and unavoidable? The analysis performed at this stage may find that certain risks identified previously can be avoided or at least minimized, if different, clever, choices are made.
2. What is the size of the exposure? This needs to be evaluated and analyzed on a relative basis – that is the proportion of the total risk represented by elements. The process, however, becomes even better if an absolute value can be placed on the risk or the exposure. The scale used for measuring risk exposure and the size of the risk should consist of real numbers, and should not discriminate against options.
3. Identify Warnings. The analysis of different risks should help point out any red flags or potentially catastrophic events that can result because of the tendency to go for certain risk elements. Where feasible, the analysis should underline and show all that is currently done to minimize the impact of a risk. Alternatively, suggestions for actions to be partaken in the nearby future can also be discussed.
4. What is the cost of risk avoidance? Obviously, supply chains can come up with risk avoidance strategies, but these strategies have a financial toll of their own. To this end, organizations should be able to identify the cost of risk avoidance as a whole. Many types of risks are interrelated to each other. Organizations should hence be able to find out the financial and non-financial costs of totally avoiding a risk. The potential benefits should also be discussed to find the answer.
5. Is there are a correlation between risks? As discussed earlier, many risks faced by global supply chains are unrelated.
Stage 4: Forming a Risk Mitigation Strategy
A risk mitigation strategy usually involves choosing from almost four major alternatives and identifying the risks in play. These four factors include:
• Avoidance
• Transfer
• Mitigation
• Keep
These factors will be discussed in greater detail as we proceed with this coursework, since there’ll be instances requiring clarification of management strategies. It is, however, important to understand the allocating risk capacity. The allocating risk capacity is the capacity of an organization to entertain risks and to determine whether risks should be completely avoided or kept. The risk allocation process is initiated by grouping risks previously identified into different chapters. These chapters include:
• Risks considered unavoidable, except by dropping activities considered important to the business
• Risks considered avoidable, but relating to core activities
• Avoidable risks, relation to non-core activities
• Selectable risks
The intention of these 4 groups is to help management in the decision-making process. Group 1 should consume the lion’s share of the risk capacity before you can consider the risks falling in Groups 2 to 4.
Group 1 usually relates to risks that are necessary to be run and performed if the organization wishes to continue conducting a core activity.
Group 2 usually includes risks that relate to an organization’s core business activity, but can be avoided with the right technique.
Group 3 includes all risks that can be avoided, if desired, as they relate to non-core business activities.
Group 4 includes all risks that a business can undertake to increase revenue or achieve some other benefit and can also avoid without facing any impact on a core or non-core business activity.
Risk elements can appear in different groups at the same time. Foreign currency risks can be part of both, group 2 and group 4, based on their impact on the business.
Stage 5: Evaluate Performance
Risk management is a single part of policy management and global success in a supply chain. It is an important element but can only work when it is put together in context with the other strategic requirements of a supply chain. In practice, risk is the consequence of impacts on different segments of the supply chain; hence its efficacy should also be discussed in context with policies in the organization, rather than in isolation.
It is fairly reasonable to believe that an organization indulges in risk management and mitigation strategies as a means to safeguard certain business processes. The performance evaluation process should hence include an understanding of the processes that were meant to be safeguarded and how they’ve performed under the pressure of the risk. This understanding can eventually lead organizations toward measuring the success of their risk management procedures.
The evaluation process is also necessary for advancing or improving risk management procedures in the future to come. As described above, risk management is not the end, but the start of an efficient means of reducing and mitigating risk. With a deep analysis of supply chain risks, global players can evaluate their risk score and improve performance drastically in the time to come.
Course Manual 2: How Global Supply Chain Risk has Evolved over the Years
In spite, or possibly because of the long history it has enjoyed, the term risk itself is extremely vague and ill-defined by experts in the supply chain industry. Although the term is frequently used in everyday language, and is easy to understand for most speakers of the English language, the underlying concepts behind it and the way they apply in the broader business context are difficult to understand and even harder to define. The reason behind the largely incongruent and heterogeneous definitions of risk goes back to the evolution of the term, the purpose it has been used for, the continuous change in its nature and the multi-purpose meaning it comes with.
Whenever we look into risks, risk management and risk measures, we also have to view the greater context that they carry and how that has evolved over time. The value of risk is measured both economically and financially. Economists have discussed upon the conversation of risk more than any other industry or field has. At one point in time, economist even measured satisfaction and return through units known as ‘utils’. These units were known as bliss points, and a higher number meant more satisfaction from the risk.
Utility Theory
The utility theory is a popular economic theory with its foundation based on specific individual preferences. The theory postulates the behavior of individuals based on their ability and reasoning to rank their choices in a specific order – an order that dictates both their preferences and inclinations. Each individual tends to show different behaviors and preferences, which are indirectly or directly hardwired into their system. These preferences are intrinsic and are generated from within the individual’s soul and mind.
To understand the utility theory in detail, let’s assume that an individual faces a set of bundles they can consume. We also assume that all individuals have the preferential and behavioral capability to rank all bundles on the basis of their desirability. This desirability is based on the level of satisfaction that will be provided by each bundle. This rank ordering makes the theory ordinal, as it is designed to study and analyze the relevant satisfaction levels.
As we’ve noted earlier, absolute satisfaction is a myth that comes with serious considerations, hence the theory by default does not have cardinal utility – utility that can be used to represent absolute desirability or satisfaction.
The theory of utility goes on to make the following economical assumptions:
1. Completeness: The theory assumes that individuals can rank all possible bundles in a preferential manner. Rank ordering basically implies that regardless of how many consumption bundles are placed for individuals to overview, most individuals will be able to rank them on the basis of their preferences. This requires the ability to use full cognition and compare bundles with each other. Each bundle will provide a specific amount of satisfaction to the consumer, allowing them to rank them on the basis of what they want most.
2. More is Better: An individual will prefer a bundle with more of what they like on offer. For instance an individual that loves chocolate over ice cream will probably choose a bundle offer 5 chocolates and 1 ice cream over another bundle offering 3 chocolates and 4 ice creams. More of what they like is always better and gives more satisfaction to humans.
The theory of utility rests upon the premise that people make decisions based on the imaginary value of utility they have assigned to different heads. The decision maker will recognize different monetary values, translate them into the hypothetical term of utils, process the value based on this utility and then translate the value back into monetary terms and make a decision. So, while there are monetary and financial terms involved in the process, the actual decision is often taken based on utility over anything else.
Evolution of the Supply Chain
As we have discussed previously, global supply chain risk can never be discussed or looked at as a separate identity. The best way to study this risk is through the lens and context of factors influencing it. The supply chain has drastically evolved during the last century or so. The global supply chain has shifted its focus from the daunting, labor-intensive processes to the incorporation of present day engineering and automated solutions. These solutions now bring the world closer than what it ever was and offer businesses and stakeholders an opportunity to relish the experience of a global village.
Having studied the evolution of risk in the more general and economic direction, we now study just how much the supply chain has evolved and the challenges that this brings for organizations globally.
History of Supply Chain Management
The roots of both operations research and industrial engineering can be found in logistics and supply chain oriented research patterns. Frederick Taylor, who is accredited with writing The Principles of Scientific Management, back in 1911, is considered to be the father of both operations research and industrial engineering. The research conducted by Fredrick Taylor was inspired by logistics, after his early life experiences as a manual loader.
Operations Research gained precedence when scientists and innovators demonstrated just how useful analytics could be in studying and solving key military logistics problems. The complex requirements of the World War II required new innovations and strategies in military tactics, which is where these advancements came in particularly handy.
While both Industrial Research and Operations Engineering have been maintained separately, both these factors have found their best success when used together in the supply chain. The integrated framework used in global supply chains of today is the amalgam of both operations engineering and industrial research. This integrated framework helps address logistics and supply chain issues, while providing feasible conclusions and solutions for everyone involved.
This amalgam of engineering with operations planning is known as the supply chain engineering approach and is a major part of the supply chain today.
Supply Chain Management in the Early Years
Back in the early 1940s and 1950s the focus of most research conducted in logistics was on the use of mechanization. Mechanization processes such as pallet lifts and pallets were becoming increasingly common during the period, and research was focused on improving the tiring labor intensive processes in logistics, and to find a better racking and layout technology that would utilize space. The lack of technology and the extreme reliance on manual labor meant that racking and utilization of space in the warehouse was an integral issue in the supply chain process.
The ‘unit load’ concept gained particular popularity during this period, with readers and aficionados of the supply chain. The use of pallets became common with the rising popularity of the unit load concept. The concept of unit load and pallets was even extended to transportation management in the 1950s, with the innovation and development of containers for trains, trucks and ships. Although, supply chain globalization actualized much later, the founding stones had been set during these decades and the progress was evident. While these advancements and processes are termed as ‘material handling’ and ‘warehousing’, it is best to include the functions under fundamental and core application of industrial engineering, rather than creating an entirely new discipline.
The arrival of the 1960s saw a clearer trend towards the use of trucks in the transport networks. While rail tracks were previously used for shifting more time-dependent freight transport, trucks provided a more lucrative, efficient and easy to manage alternative. This alternative greatly enhanced with the growing infrastructure of highways, filling stations and logistic points in developed countries. The inclusion of trucks in local transport led to the much needed development of a separate segment known as physical distribution.
The National Council of Physical Distribution Management was formed in 1963 to focus the attention of supply chain stakeholders and governments towards this field. The interest showed by governments was followed with enhanced academic research and education. This academic research satisfied the growing needs of this paradigm change.
The addendum of technology in 1970s opened the doors to a completely new era of supply chain management and technologies. Where all record keeping and communication was done manually between supply chain stakeholders, computers provided an easy solution for everyone. The addition of technology, especially the computer and later the internet, led to an efficient inventory mechanism with optimized truck routes.
The transition from theory to the practice of technology took time and effort for many supply chain providers. In the late 1970s, the supply chain industry saw the formation of the Material Handling Research Center, the Georgia Tech of the Production and Distribution Research Center and the Computational Optimization Center. Each of these centers was operated with a focus on understanding and simplifying the solutions offered by computer technology. The end objective was to make the transition to computers easier for all involved.
Coming of Age for Logistics
The 1980s was the decade of change for logistics and the relevant supply chain management details. The emergence and widespread adoption of personal computers in the 1980s had led to the provision of better computer access to all planners and executioners involved in the supply chain.
The Production and the Distribution Research Center was an early innovator in this regard as it helped spread a flood of technology. It was during this time that flexible spreadsheets and map-based interfaces were huge improved and implemented in the supply chain. The Material Handling Research Center had also largely settled into its role and initiated major tech upgrades in the material handling and automation process.
The Computational Optimization Center developed a number of new and implementable algorithms that initiated and highlighted solutions for airline scheduling problems. Much of all the innovations and methodologies unearthed in these centers made its way to the commercial technology of that era.
Perhaps the biggest trend in favor of logistics in the 1980s was that the industry had finally started getting the recognition it deserved. Logistics was now considered as a very important, very complex and extremely expensive process to manage. And, with the growing drive for picking out all inefficiencies in the chain, executives and organizations sat down to become aware of logistics as an area that presented immense opportunities for them to improve. The bottom line was that executives and decision makers in supply chain firms realized that there was great potential for them to work on logistics and improve the experience that they offered in this regard.
Realizing this very fact, the National Council of Physical Distribution Management changed its name to CLM or the Council of Logistics Management in 1985. The reason they gave for this new name was: “to reflect the evolving discipline that included the integration of inbound, outbound and reverse flows of products, services, and related information.” Prior to this move, logistic as a term was strictly limited to military movements, but it had now made its intro to the expansive world of supply chain.
The Technology Revolution
The logistics boom of the 1980s was fueled further in the 1990s by the emergency of ERP or Enterprise Resource Planning Systems. ERP systems were motivated by the success of the Materials Requirement Planning systems of the past and acted as an upgrade over the previous system. These ERP systems opened the doors to a number of innovations and upgrades in the field of global supply chain technology.
The Material Requirements Planning Systems were developed back in 1970s and were partly replaced due to the intrinsic need for more automation and partly due to the fear that these systems will not be able to manage the dates that come with the start of the 20th Century.
Despite the complications and the issues that came with the widespread implementation and installation of ERP systems, most major supply chain players had these systems installed by 2000. The move to ERP systems resulted in a tremendous improvement with data availability and accuracy modules. This improvement was achieved through the ability of ERP systems to provide and update accurate information at all hours. The new ERP software also dramatically increased the need for more integration across all components and stakeholders of the supply chain. This recognition eventually led to the creation of APS or Advanced Planning and Scheduling software operations.
Globalization in the Supply Chain
The widespread recognition and use of the term ‘supply chain’ is owed primarily to the globalization in manufacturing since the start of the 1990s. The growth and globalization of the supply chain was achieved through manufacturing processes and the brilliance of China in providing the world with easy to source products. United States imports from China grew from some $45 billion during the year 1995 to over $280 billion per year in the year 2006. The growing focus on globalization also highlighted the need for global strategies with effective communication standards to be formed within stakeholders. This accented the need for an internet model that connected suppliers with customers and helped in the efficient communication of needs and demands. The growing association of supply chain management with the strategies in play within logistic was accented through the decision of the Council of Logistics Management to change its name to the Council of Supply Chain Management Professionals back in 2005. The organization made the distinction that, “Logistics is that part of the supply chain process that plans, implements, and controls the efficient, effective forward and reverse flow and storage of goods, services, and related information between the point of origin and the point of consumption in order to meet customers’ requirements” while “Supply Chain Management is the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole.”
The internet can be accredited for playing a vital role in the widespread adoption of global supply chain strategies. The internet not only improved communication between global partners, but also helped in the accuracy and provision of data to all partners.
Future of Supply Chain and Logistics
Ever since first being implemented in the 1980s, computer technology has advanced at a phenomenal rate of knots. The technology we have today is far ahead than what most supply chains in the global market have plans to utilize. Given just how many internet users access the internet today, one finds it hard to fathom that Internet Explorer – Microsoft’s first internet browser – was initially launched in 1995.
The communication capabilities highlighted in the previous section as well have changed the way supply chain partners deal with each other. The distributed collaboration and team work we see today is definitely a harbinger of good times to come, where an efficient supply chain would greet us every time we talk about the global sphere.
There are modern implementations of the global supply chain in areas such as healthcare and humanitarian logistics, which require technology to become even more proficient and better. Technology and implementation does come with risk, but as we have learnt from the history of the global supply chain, tech risks have almost always paid off.
Understanding Supply Chain Resilience
The onset of the COVID-19 pandemic has led to a lot of talk over the supply chain resilience and how global firms try to operate, even with the restrictive measures in place across the world during the year. However, not many readers are able to interpret just what it actually means.
Supply chain resilience is the ability of a global supply chain to power through unexpected events and be prepared for them. A resilient supply chain has the ability to respond to uncertain and unexpected events that damage the flow of information across the supply chain. An organization with a resilient supply chain can not only respond well to disruptions, but also recover well from them, eventually returning back to the original condition it was in when the disruption started. Not only this, but truly resilient supply chains can return back to an even better performance level after a disruptive global event has transpired.
The COVID-19 pandemic has been nothing short of a complex change for the entire globe. Not only has it disrupted our style of living, but it has also shaken the business world as a whole. Companies today find themselves in a precarious situation with their legs within rough tides.
As most supply chains try to cope up with the relentless pressure of logistics during the pandemic, other more resilient supply chains have used years of practice, implementation and technology to power a remote style forward.
Smart Strategies to Build Supply Chain Resilience
Many C-level executives today have cited risk management as one of the biggest challenges facing supply chain and procurement teams. Businesses are exposed to supply chain risks in ways more than one, and only a resilient supply chain can survive prosper. Based on the consistent pace at which risks around us have evolved and become even more complicated, it is even more necessary for organizations to build a resistant logistics method.
Some strategies to build supply chain resistance in the world today include:
Know the Risks of Each Supplier
Every supplier brings with them a certain set of risks. These risks often deal with the geographical distance between the customer and supplier, the lack of communication or any other related cause. Knowing the presence of risk in supplier relationships, organizations should understand what risks come up with all suppliers. They should also comprehend the significance of supplier risks, and the likelihood or chances of offsetting them. When organizations and global supply chains of today understand the common risks associated with global suppliers, they can take proactive measures to not only mitigate the damage, but to also make a stitch in time and save themselves from future predicaments.
Supply chain managers should drop the ‘tick-box’ mentality and go for a progressive and mature approach towards selecting suppliers. Your supplier should be capable of managing threats and counterproductive events, and should have multiple streams or passages for getting your raw materials to you.
Talk to Suppliers
There is no way for suppliers to get a hold of your expectations without a proper communication channel. Set clear expectations from the very outset and encourage proper dialogue and communication with your suppliers. The presence of a communication channel can help build mutual confidence and trust within suppliers, while minimizing the chances of any surprises.
Also communicate your concerns to suppliers, where and when you detect a certain risk. Consult them on what can be done to improve the situation, without giving the impression that you’re looking for means to bait out of the deal. Suppliers often hide certain risks in a bid to keep a contract. Give suppliers the confidence they need and work with them for the betterment of the deal.
Study the Long-Term
Supply chain planning and strategies have to be focused on the long-term. Reactive responses, inappropriate short term cash flow strategies and just-in-time procurement methods combine to form an increasingly short-sighted plan of progress. These short-term incentives do add a shiny layer of efficiency, but they also open organizations up to a heightened threat of risks.
You can flip this around by reviewing geo-political and global threats and also asking suppliers to deliver a transparent model. Keep reviewing possible threats in the supply chain and improve them for all parties involved.
Learn and Adapt to Evolve
Projects go wrong, technologies can backfire, disruptions can lead to downtime, but through all this a resilient supply chain should continue to flow and evolve. Rome wasn’t built in a day and similarly your resilient supply chain will take some time to shape up, however you can start the process towards that overnight by implementing an attitude of learning, adapting and evolving.
Start by creating a knowledge base of best practices and benchmarks followed by others. Implement these changes across the organization and look at what can be done to drive the chances of future success.
Adopt Emerging Technologies
Organizations can also improve their supply chain resilience by adopting futuristic technologies with solutions for disruptions of the future. A remote supply chain collaboration model between all stakeholders, including customers, wasn’t implemented by many global supply chains. The implications of the COVID-19 pandemic have found all such organizations wanting and have clearly displayed the efficacy and preparedness of organizations with a remote model.
The use of tech solutions can enable businesses to survive during tough times, without disrupting their business reserves.
Always Look Ahead
Keeping the current scenario in perspective, sales and demand figures are bound to bounce back when the pandemic and its repercussions subside. Supply chains should already be picking up pace to prepare for this surge in demand for when the pandemic ends. An increased demand will require the most out of the supply chain, which is why processes should be oiled and fine-tuned in time.
Risk has evolved drastically over time and is present at the center of all supply chains. However, better communication with suppliers and a decent understanding of your weak points can drive resilience forward.
Course Manual 3: Core Characteristics of Supply Chain Risk
As we have discussed previously in this coursework, there is no unanimously approved definition of risk in the supply chain currently. There is, however, a vast amount of literature that deals with the topic of risk in the supply chain, and the multiple domains that fall under it. These domains include, but aren’t limited to, finance, decision theory, insurance, emergency management, safety, utility theory, environmental and reliability engineering, among others.
Based on these domains, supply chain risk understanding is driven by a number of core characteristics. The assessment and understanding of risks in the supply chain is very closely related to the objectives that organizations have to meet for achieving success in their relevant supply chain. The degree or level of achievement of these risks is based on the exposition of the supply chain. Risk exposition can further be classified into the supply chain’s abilities to handle major and minor disruptions, the time-based aspects of the disruption and the disrupting triggers that lead to the risk status of the supply chain.
Finally, the significance of the non-achievement process of all objectives is defined and assessed through the attitude of the key decision maker.
Objective Driven Risk
Risk considerations are popularly followed in both, financial and non-financial management of the supply chain. The aim behind this management process is to not only monitor, but efficiently plan and control all the capital resources within an organization. Financial risk management effectively deals with the predictive management of risks that affect an organization’s financial position. Risk management strategies to mitigate such risks will handle uncertain developments and find a way around them. These uncertain developments and financial risks come with the ability to stall an organization’s progress and can also lead to the degradation in its overall perceived value in the eyes of all stakeholders, including customers.
In the world of finance, risk is measured through fluctuations in expected results. The fluctuations shown in expected results eventually determine the success ratio. Hence, a risk can become averse if it impacts productivity as a whole and isn’t mitigated in the best manner possible.
Risk Probability
The central aspect of risk perception is measured through the probability of risk. Decision theory is based on the identification of probability and then developing a satisfying a decision.
Open any weather application on your phone today. Let’s imagine the app predicts 80 percent chance of rain in the region. Hence, based on this prediction, the chances of rain when you’re out to run an errand will be around 80 percent. Rain is a risk factor here, as it might disrupt your schedule and put you off your plans. Probability is hence a key factor in the risk process. By assigning a number to the process, probability helps determine the key factors attributed to risk. Probability is the likelihood that a risky event is bound to occur in the near future and can impact the decision making ability of brands as well as other key stakeholders.
Risk Impact
The other core characteristic of risk is the impact that it will have on activities that you’ve planned. Supply chains operating at a global level often have a number of activities planned on their charts. Keeping this in mind, it is necessary that the impact is measured and alternative measures taken on the basis of it.
Continuing the example we studied above, how much will the 80 percent chances of rain tomorrow impact a global supply chain? What if the supply chain has to manage an outdoor loading activity, where rain might act as a detriment or a threat of sorts? In situations like these, there is not much that risk managers in the supply chain can do.
An individual could have plans to go for a jog on a given day. They go out for a jog everyday with hopes to not just improve their health, but also to feel healthy, almighty and energized again. However, due to multiple factors involved in the process, they’re not able to go out. When the 80 percent chance of rain actualizes, the impact can lead to a cold and affect their day. Not only that, but there is a loss of time waiting for the outpour to pass and also a waste of money drying or cleaning the wet clothes.
Similarly, supply chains can suffer as a result as well. The amount at stake is usually what determines the impact or consequences of a risk event, if it does happen. The more at stake, the higher would be the risk. For instance, complications in a shipment with only one container of a supply chain’s goods on board will generate less attention than a rough shipment with 100 containers of goods on board. Supply chain risk impact is bound to increase with the value of what is at stake.
Sources of Risk
Risk can come at you from multiple sources or dimensions. Obviously, it is very hard to manage or determine where risk is coming from, but a simple grouping can help you determine the course of action.
For supply chain managers, the sources of risks are of key importance. These sources are a major part of the risk, and need to be fully minimized or mitigated if a strategy is to be prepared. Sourcing your risks and being prepared for them can also lead to the aversion of possible dangers that result because of the risk.
Also, risk categories and sources aren’t meant to be exclusive. This means that the category basically operates as a tag or a label and that the risk in question can have more than one tag. In short, most risks are generated through inefficiencies in multiple sources and not just one.
Typical risk categories include:
• External
• Internal
• Project
• Product
• Technical
• People
• Organization etc.
External
An example of an external risk for a global supply chain operator would be a supplier missing their deadline and delaying the shipment that they have to provide. These delays cannot only lead to customer retention issues, but also signal problems in revenue generation. However, since supplier delivery timelines are often out of the organization’s control, there isn’t much that can be done about them.
This is something that we discuss in greater detail within the rest of this chapter as well. Supplier relationships are a key part of averting supply chain risk, and with good relationships, organizations can mitigate and minimize the chances of risks.
Internal Risk
Internal risk factors come to the surface during change management. Change is a major part of supply chain progress, but can be really complicated for global operators to manage. Signaling a change in global sourcing and procurement patterns can lead to implications.
To take an example of internal risks, a management that isn’t involved in the organization’s transformation process will see a number of risks during the implementation of an Agile framework. These risks are however linked with internal management and external forces cannot be blamed for them.
Project
Projects can often act as sources of risk as well. Projects are a major part of every supply chain today and need to be managed carefully for the right results. Project managers should be involved in the process, so that the backlog items are ready for the next iteration. Failure to keep a check and balance on the project can lead to delays and backlog creation for the next iteration.
Product
Risk can also come through the final product being offered to customers at the end of a supply chain. All marketing attributes related to the product should be finalized and managed in a decent manner to manage the risks involved with them. If the product owner isn’t involved and sets either price, product, promotion or location wrong, the product is bound to suffer.
Technical Risks
With the higher dependency on tech solutions in the supply chain, there are a growing number of technical risks involved as well. Technical risks make management difficult and can lead to massive downtimes if your management team and the tech team aren’t well equipped in the processes that they should follow for risk mitigation.
In short, the greater an organization’s reliability on tech solutions, the higher will be their chances of falling for technical risks. Automated solutions do make global supply chain processes easier, but they also come with their own perils in the way.
People
The people employed in a global supply chain also carry their risk. Global supply chains are stringent in their hiring procedures and hire the crème de la crème to represent their business. This is because people play an important role in not only mitigating, but managing risk as well.
Training is an important part of the process here, where employees are trained to follow best practices in the industry and to ensure that they are up and available whenever the need be. If recruitment fails to rope in the best candidates and does not improve the pipeline, performance is bound to suffer.
Organization
The management and organization of processes is also a key factor in determining and dictating risk. The organization of key resources can either increase or decrease risk, based on the reaction to it.
We will look at the sources of risk and the common risks found in supply chains in greater detail in the coming chapters.
Time-Based and Situational Characteristics
Changes in situations and time periods can often result in a number of new risks. If we look at situations, it is a key characteristic for risks to pop up during change. The changing of team members, the undergoing of a major reorganization process, the changing scope of a project and the enhanced use of technology are all factors that can contribute and lead to risk. Change management is hence extremely important and helps steady the ship during times of turbulence.
Time-based risks can also pop up in a global supply chain. Time-based risks are certain risks that repeat themselves at particular times. For instance, the time during the start of a project or a new chain is often considered the riskiest. This time period comes with certain risks of its own and can be difficult to manage for managers or professionals involved in the process. The risk then diminishes along as the project moves forward and the impact reduces.
Interdependence
A core characteristic of risk is to have a domino-like impact on organizational processes. Many tasks and deliverables within a global supply chain are dependent on each other. A certain risk endangering the delivery of one shipment or one batch can accumulate and have a cascading impact on all other tasks as well. The result could be similar to a domino effect with lasting repercussions.
Risks are also known to be magnitude-dependent. As we studied earlier, a higher impact can increase the magnitude of a risk as well. To explain this through a simple example, take up the choice of investing $1 for a 50/50 reward of $5 versus the risk of investing $1000 for a 50/50 chance of winning $5000. Obviously the latter is a lot more complicated and riskier, because the opportunity cost is higher.
The Inherent Risk of a Global Supply Chain
Global supply chains come up with a key risk characteristic, which isn’t shared by other local supply chains. For instance, global supply chains have to look out for the nationalities, religious beliefs and cultural preferences of the employees they hire and the people they look after. Projects done in international locations with multiple cultures tend to have a greater risk than those done in a single location with a similar workforce.
Global supply chains are faced by a number of challenges when they step into foreign shores, and these challenges can make risk management difficult for them.
Course Manual 4: Risk Assessment Process in Global Supply Chain
This chapter will work as the perfect guide for organizations and employees looking to find risks in their supply chains and within their own operations, and finding means to not only mitigate, but assess them in the best manner possible. The chapter will provide brief guidelines on risk management processes as well and the facets they should cover.
Talking About Risk
Definition of Risk
Traditionally, risk has been defined as an amalgam of two factors – a particular hazard and the chances or likelihood that the hazard will occur. To simplify this definition, risk is the probability or likelihood that a hazard such as financial fraud will occur inside a business.
As per environmental and human rights terms, this definition of risk translates into identifying all environmental and human rights violations that can result through a supply chain including pollution incidents, forced labor, and coming up with a probability for their likelihood.
Going by these terms, risk can be considered theoretical, and something that has a negative impact, which can potentially damage a business, and hasn’t yet happened.
The aim behind risk assessment processes in the supply chain is to identify all potential sources of risk in the supply chain and to grade or prioritize them on the basis of their importance. As studied in previous sections, the importance of risk is evaluated and determined on the basis of the impact that the risk carries. The aim of risk management, on the contrary, is to reduce the likelihood or probability of these hypothetical problems, and ensure roadblocks in the way. It is necessary for all supply chain stakeholders to have a clear understanding of the risk assessment and management processes. Where risk assessment deals with prioritizing, assessing and grading risk, risk management deals with managing and mitigating their impact. Risk assessment puts down the foundation for what’s to follow during a typical risk management process.
Who Is at Risk?
There are many areas of risk inside an organization. These areas can have differentiating impacts, often leading to complications in revenue generation and profitability. There are many areas of risk, with the greater ones leading to loss of business, financial failure and major interruptions to operations in a number of different ways.
When it comes to human rights and sustainability risks, the discussion hovers around the impact the risk will have on the outside environment and the reputation of the supply chain and parent organization. While organizations often look through the lens of profitability, they have now realized the importance of providing friendly working conditions to workers and practicing sustainable measures for protecting the environment from the perils of industrial smoke and transportation inefficiencies.
Risk Assessment and Compliance
A publication released back in 2011 by UNGP provided businesses with a framework they should follow for not only understanding their own responsibilities, but to also come up with a plan to mitigate and minimize the likelihood of risk. Human rights risk assessment is of great concern to the United Nations and was highly emphasized in the document.
When it comes to human rights risks, organizations should run consultations with all business stakeholders and determine strategies to combat risk. Stakeholders such as business partners, communities, employees, NGOs and even trade unions can share valuable insights to the process of policy making and setting the right course for risk management.
The UNGP made it clear within this document that the primary responsibility of ensuring human rights lies with the State. The private sector should uphold and comply with the laws mentioned by the State and should also be responsible toward respecting and promoting human rights. Private sector entities should realize the negative attributes that come with their management styles and what can be done to limit them.
Compliance with the laws and regulative measures is necessary, but it isn’t entirely the only thing organizations are required to do today. Organizations in the business world today are required to also maintain a strict code of conduct, based on which they perform in a particular manner toward employees and the environment.
Most developing countries have concrete laws in place for risk management, but lack the steps that should be taken here. The lack of proper steps and decision making can lead to companies exploiting labor and not giving human rights the importance they should be given. Companies have a responsibility of their own as well, and should go beyond simple legal compliance to remain on the right side of ethics and the law.
Common Worker Rights and Environmental Risks Ignored by Supply Chains
There are a number of sustainability and human rights issues that businesses today can focus more on. The UNGP has termed the risks below to be the most salient ones and has crafted a policy to ensure businesses comply with risk management in this regard.
Fundamental Labor Rights
Workers suffer during the non-implementation of fundamental labor rights. The inability to provide these risks can land supply chains in hot waters. Rights violations made here include:
• Forced labor
• Child labor
• Discrimination in employment toward people of a particular religion or caste
• Lack of respect for worker freedom and unions
Working Conditions and Remuneration Risks
Obviously, employees need to be given feasible working conditions to work inand should also be given the wages and remuneration they require. Risky violations that shouldn’t be made here include:
• Wages below the minimum wage level decided by the governing organizations
• Excessive hours of work
• Abusive treatment leveled toward employees for no violations as such
• Health and safety breaches
• Lack of access to the grievance mechanism
• Abuse of contracts
Social and Economic Rights Violations
These risky violations are mostly leveled on communities near the supply chain and manufacturing unit. The inability to address these violations can leave organizations with lasting repercussions, along with a supply chain that may never recover.
The risk factors involved in these violations include:
• Noise and air pollution affecting the local population in a specific area
• Emissions impacting the local water supplies or an improper drainage system
• Road transportation methods that create traffic constraints and lead to challenges
• Land grabbing activities without proper legal compliance
Civil and Political Rights Violations
Violations of civil and political rights are conducted by global supply chains and operators on communities and their own employees. These risk factors are a show of power and limit the voices against regressive policies.
Violations that can lead to this risk include:
• Preventing workers from forming unions and being part of unions together
• Collaboration within companies and security forces to repress community complaints against regressive measures
• Bribery and land grabbing policies
Risk Assessment Process
The risk assessment process is made up of several stages. Not all of these steps are relevant in most supply chain cases but a global supply chain should be able to identify or work on these assessment methods. The best approach to take toward risk assessment and the processes to consider will depend on the perspective carried by the organization, and the decisions they’re willing to take forward.
Shorter supply chains, with fewer suppliers, can be risk assessed without any major complications, but in most other cases, a thorough understanding is required.
Overview of the Risk Assessment Process
Before we delve into the details of the steps in the risk assessment process, let us first look at an overview:
Map Supply Chain
• Identify all suppliers and the locations they work from
• Address all tiers of the supply chain, and leave nothing out
• Identify the contractors you work with, along with the service providers related to you
Review All High Level Risks
• Look at all high level risks in the countries you operate in. Deeply consider the risks in your home country
• Look at and study all sectoral risks
• Study all tiers of the supply chain and understand all risks across tiers
Understand Supplier Profiles
• Understand the profile and delivery patterns of suppliers
• Build a workforce profile to understand how they work
• Form a commercial relationship, one that includes no discrepancies and can be long lasting
Assess and Prioritize
• This step deals with grading all your risks and ranking them based on their severity and the likelihood of them happening
• Consider all external and internal leverage
Follow Up Process
• Validate all your sources of risk
• Investigate the particular situations that lead to the risk in question
• Analyze all root causes and their resulting impact
Develop an Action Plan
• The process is finalized through the creation of timelines and collaboration plans
• Determine actions for buyers
• Determine actions for suppliers
• Set timelines
• Collaborate with all stakeholders
1. Mapping a Supply Chain
Mapping a supply chain is the first step to take in a global risk assessment process. The objective behind the mapping process is to get a clearer and full picture of business operations and where they come from. Supply chain mapping includes a detailed understanding of where all operations and business partners like retail customers and suppliers are located, and where the sourced products and raw materials come from. This information, once found out, can then be used to assess the risks associated with these factors and the locations/activities pertaining to them.
Better information of suppliers can come in handy in processes other than just risk assessment. For instance, in-depth information on your suppliers can also help you build an understanding of supply chain resilience.
There is no single and approved way for supply chain mapping. The process and its intricacies can change with the industry that organizations operate in. In some sectors and industries, such as the food sector, where traceability is of paramount importance, getting the information required for supply chain mapping is easier. Regulations such as the Modern Slavery Act in the United Kingdom require all organizations to thoroughly report on risks in their business. A number of businesses today are now going beyond the first-tier to identify sub-suppliers for their suppliers and validating their supply of goods.
Mapping can also involve requesting information from suppliers about their own suppliers. Effort should hence be made to gather as much information as possible from the chain. Another thing to identify about the mapping process is that it does take time. Businesses shouldn’t look to hurry it, as that might lead to a loss of strategic information.
2. Reviewing High-Level Risks
The next step in the risk assessment process is to build an understanding of all high-level risks that can have a major impact on certain sectors or companies. There are a number of external socio-political drivers that can influence the risk profile of an organization. All organizations need to be well aware of these changes and should have policies in place to limit the damages.
Examples of high profile risk drivers include:
Major Governance Risks
Governance risks can complicate things for supply chains operating at a global level. The risks include:
• A repressive regime in one of the countries’ part of the chain.
• Civil unrest and internal security movements in the region.
• Inadequate environmental protection and labor laws in the country. No regulation on local competitors breaking laws.
• Inadequate inspection and enforcement of laws
• High levels of corruption with bribing being considered the norm.
• Lack of proper channels to access justice and demand right treatment.
Economic Risks
Economic risks are again of high importance for global supply chains and are outside their domain of control. Some important economic risks that can influence supply chains include:
• High levels of poverty in the host region
• Growing economic instability
• High rates of interest and depleting forex rates
• Lack of proper opportunities
• Economic recession
• Lack of proper labor
Social Risks
Social risks again vary across countries and often trouble global supply chains, since they operate at a global level. Some social risks that are of high importance here include:
• Discrimination against minorities or women in a region.
• Difficulties for all members of civil society to raise their voices and talk about integral social and cultural issues.
• Weak definition of land tenure.
Demographics and Labor Risks
The risks involved with the demographics and labor rights across different organizations can also pose a threat to organizations. These include:
• Internal migration in specific countries
• Presence of indigenous people
• Poor functioning of labor markets with no proper control over procedures
• Predominance of low-skilled employees
• Seasonal production patterns, where particular seasons prompt better productivity
• Dangerous production processes that can hinder efficiency
• Over reliance on female workers to get things done
• Dangerous production activities
Environment
Finally, there are a number of environmental risks as well that can be involved here:
• Water intensive drainage and production processes
• Energy intensive processes
• Processes leading to or producing toxic amount of wastes
These risk drivers and the information pertaining to them can be accessed from a number of sources. Information sources include UNDP and the ILO among many other agencies.
3. Understanding Supplier Profiles
The next thing to do in the assessment process is to drill down and understand the risk profile of the supplier you’re working with. Although certain suppliers might look high-risk due to the sector or the location they operate in, this doesn’t necessarily reflect in the specific behavior that they show. For instance, some suppliers might come from politically turbulent nations, but they strive to negate the impact through their consistent policies and decisions.
A typical supplier assessment should consider the following factors:
Location and Site
The first thing you should consider to assess a supplier is the location they work from and the site of their manufacturing center.
The information you should look to get here includes:
• The number of locations they operate from and whether they have an outlet or work remotely.
• The quality of buildings in their manufacturing facility.
• The provision of welfare facilities to workers and worker accommodation provided to employees.
• The use of security guards to guard against theft in areas with high crime rates.
Enterprise
The next thing to consider is the business entity or enterprise of the supplier. Obviously, the supplier you’re working with must operate as a business entity. With regards to that, there are a few things you ought to know:
• How long has the supplier’s enterprise been in business?
• What is the length and significance of their commercial relationships with other competitors?
• What are their financial resources? Are they financially sound enough to provide deliveries?
Production Cycle and Manufacturing Methods
Organizations should also consider the production cycles and methods followed by the supplier to identify the supply routine and pattern they would follow.
The production cycle and methods can include the following information:
• The seasonality of production followed by the supplier. Are supply and manufacturing levels the same all across the year, or do they keep going up and down?
• The use of out growers or remote home workers for goods
• The use of dangerous production processes and hazardous chemicals that harm the environment and are below par in quality
• The use of sub-contractors
Workforce
The workforce or employees working under the supplier of your choice should also be considered. The workforce can help indicate a thing or two about a supplier. The information you generate from here can come in handy.
The info to gather about a supplier’s workforce includes:
• The workforce profile for the supplier in terms of gender, age, position and language groups
• The number of permanent and contractual workers. This will also help you explore seasonality trends
• The method of payment
• The unions found within the workforce
• The grievance record
• The record of industrial relations with other suppliers and firms
Management
The management in place within a supplier’s firm should also be studied. The info to be studied here in the assessment includes:
• Quality of human resource protocols and processes
• The staff currently working for them
• The quality of all environmental management processes
• The number of inspection staff or internal audit members working for them
Recruitment and Relations
Finally, when performing your supplier analysis, you should also consider their recruitment and relations. These factors have to be given their due importance when finding out all you need to know about a supplier.
The info to gather here includes:
• Where they source their workers from
• The use of any labor providers. Do check these labor providers to ensure they’re verified, and the workers have authentic experience
• Study their community outreach efforts to determine their relations and reputation within the community. A supplier with a good reputation will uphold this reputation at all costs and wouldn’t let it slip by
• Relations with people of the local communities and a record of the complaints that have been submitted by residents, if any
While the information above deals with suppliers providing raw materials, supply chains should also assess suppliers providing services. There are two kinds of service providers here – staffing companies and security/cleaning service providers.
Labor Providers
Labor providers should be assessed based on the following info:
• The length of time they’ve been in business
• Where they get their workers from
• The worker profiles by age, nationality and gender
• The use of sub-agents
• Their record keeping abilities
• The skill level and the jobs most of their workers are asked to do
Contractual Provider
A contractual provider providing cleaning, security or any other contractual service to the supply chain should also be assessed here on:
• How they recruit workers
• The average median length in business and the age of their workers
• The types of contracts they offer
• Worker profiles by gender, nationality, age, skill levels and language groups
• Human resources staff
• The level of training provided to workers
• And, the use of labor providers
We will take a greater look at supplier management strategies in coming chapters.
Course Manual 5: Common Risks Involved in Global Supply Chains
Change is believed to be the only constant in the world. In the modern supply chain of today, practices and processes are changing by the day, and a perfunctory approach toward the subject matter will not get businesses through this time of difficulty. With the ever changing supply chain environment of today, there is even greater focus on businesses to keep up with the changing environment and expose themselves to risks in the process.
Risks in the supply chain have evolved to become even more prevalent and common with time. The risk management strategies that businesses implemented and followed in yesteryears have failed to stack up in this day and age. The policies of days gone by have failed to maintain their efficacy during these modern times, and businesses now have to improvise and adapt to the changing environment.
No type of provider can avoid the risks of a global supply chain today. Even with the growing addition of security across the supply chain, risks exist across ocean, land and air freight. These risks are often unavoidable and inevitable for global supply chain businesses, since there is no way around them.
A poor understanding of hazards and complications across your supply chain will diminish brand value and will land you in hot waters as far as your costs are concerned. Knowing the cost of negligence in this regard, it is in your best interest to not only understand the top global supply chain risks but also work on minimizing the impact that they carry for your business.
Through an understanding of the risks in the global supply chain sphere, supply chain stakeholders can work to mitigate the occurrence of disruptions across the board. In this chapter we will study the most common risk factors found in the global supply chain today and what can be done to minimize the impact. We will then follow these risk factors with metrics you can look at to track and manage the risk factors in your supply chain.
Political and Government Changes
Political instability is one of the top ranking factors when it comes to factors that can impact and risk a global supply chain. One of the imminent hallmarks of a global supply chain is that it operates across countries more than one. Expanding into such developed foreign markets comes at a cost, which is often associated with the growing risk of political instabilities globally.
Businesses that maintain a global supply chain have to be aware of possible causes of conflict in their operating countries, which are part of the supply chain. Political tensions between the United States and China escalated recently, leading to a trade war of sorts between the two. This negatively impacted Amazon sellers and major manufacturers in the United States, importing goods from China from wholesale producers. These political tensions even led to an increase in prices, as local manufacturers in the United States obviously charged a lot more for manufacturing and providing raw materials per unit.
The Brexit deal in Western Europe also led to a conflict of interest and an adverse impact on the supply chain and trade. The Brexit, officially known as Britain’s departure from the European Union, led to conflicts and trade wars in the Union. Supply chains suffered as a result, as both chains originating from and selling goods to the UK had to feed on alternative measures.
As a rule of thumb, global supply chain operators should look to mitigate and minimize the damages of political instability by relying on thorough procedures and systematic operations not linked to the political government of said country. Maintaining a strict level of compliance can help businesses enforce and reduce the risk of violations.
Economic Instability
After political instability, economic instability is the second biggest threat to the global supply chain model today. Economic instability isn’t just a threat to the global supply chain model, but it is also a threat to global trade across major avenues.
The recent COVID-19 crisis has put organizations and supply chains in an even bigger predicament through the economic instability and crisis that has stemmed as a result of it. While systematic lockdowns and route closures offer a different kind of risk, which we will follow later on, the rise in an economic crisis or period of instability can put businesses of all kinds in a state of bother.
Besides the economic instability experienced by countries and other global political powers, the financial crunch on shipping companies and other supply chain stakeholders can also damage the economic situation. To take an example, the bankruptcy of Hanjin Shipping, which is the 7th largest shipping organization in South Korea, led to a global impact of sorts. The global supply chain capacity fell by over 3 percent, and up to $14 billion of cargo wasn’t docked in time due to the bankruptcy.
These stats give an indication of just how volatile the market can be when it comes to economic downturns and other events of similar nature. Global supply chains should look at ways to monitor and keep an eye on economic metrics in all countries they operate in. Additionally, operators that work on a global level can increase employment rates within the nations they operate in, by promoting and launching apprenticeship programs, training programs and supply chain careers.
Extreme Weather Events
Extreme weather currently represents one of the biggest and most significant risks to ocean freight across the globe. The weather conditions across the globe tend to vary based on a number of factors. The diversity in weather makes it increasingly difficult for supply chain managers and key stakeholders to maintain a lookout on the happenings. A lack of proper control can lead to a number of different problems.
Tropical storms in the sea can wreck havoc to supply chain schedules and can toss ocean carriers and shipments aside like pieces of trash. Tropical storms can pose a major threat to operators, based on the route of the shipment and the weather conditions that they will meet on the way.
While tropical storms and cyclonic disturbances in the sea might not have been as significant a threat in the past, they have developed greatly in stature to become a force to reckon today. Global climate changes and other events linked to them make tropical storms a major threat for the global supply chain.
Global supply chain stakeholders now need to come up with ways to not only reevaluate their strategies, but also come up with separate plans for shipment and freight to avoid disturbances on the way. Studying the global weather conditions can help organizations maintain a close eye on figures and predict the course of shipments that are currently on route or will be passing through a tough path at a given time.
Environmental Risks
Impact on the environment is a key factor to consider in the global supply chain ecosystem. The impact left on the environment, hence, forms another major risk for global supply chain operators. Organizations are given a defined list of statutes to follow in a bid to ensure optimal efficiency and complete adherence to the law. As countries and organizations amp up their compliance procedures, the onus now lies on organizations to ensure that they’re adhering to these strict rules and aren’t letting them slip by without taking any prompt action.
As more laws are passed concerning ocean freight carriers and others of the sort, there is going to be additional scrutiny of ocean freight carriers and how they impact the environment. The scrutiny will be focused on the impact these carriers have on our marine life, and whether they disrupt natural patterns or spill oil into the sea.
These regulations make it even more important for supply chain operators to be on the right side of the law and follow practices that are environmentally friendly. Besides just complying with rules during freight, organizations also have to take care of environmental factors in their manufacturing processes and other reclamation centers. With the sword of compliance hanging on top at all hours, it is necessary that businesses follow the required rules and also take care of their dumping patterns.
Catastrophes
Catastrophes include all natural disasters or human made problems that do not really come in the category of weather-related events. Catastrophes can include famines in an operating country or a debilitating earthquake that damages infrastructure and leads to a number of other problems.
According to leading supply chain executives today, almost 50 percent of supply chains don’t have a continuity plan ready to deal with a catastrophe when it arrives. The recent COVID-19 pandemic was a catastrophe of sorts in the health sector. The catastrophe wrecked the very way of living that we had been following for as long as we can remember. Many people were forced to keep to their homes and there was a new normal that humans were suddenly supposed to follow. Businesses, especially those involved in the supply chain, suffered the most during this period, and had to put up with additional restrictions in trade.
The lack of a continuity plan meant that many businesses were left out of possible customers. Only businesses that had remote connection plans in view could take their dealing to the remote world almost immediately, and comply with the restrictions in place.
Since we’ve all suffered equally from this experience, this presents a chance for businesses to develop a robust strategy and develop a continuity plan following catastrophes. The plan should work as a means of continuing business during certain catastrophes resembling the repercussions of COVID-19.
Connectivity
The use of technology in supply chain has opened a number of avenues for businesses to interact and communicate with each other. As lucrative as this opportunity sounds, it does pose a problem for businesses as well. When all activities are taken online or to the cloud, there are increased chances of shutdowns that can damage productivity and minimize the output that organizations make over a period of time.
As all systems and networks are linked to the same connection, even a minor shutdown can lead to downtime across the supply chain. There is a major risk of connectivity for businesses across the world today. Since businesses rely heavily on the one connection they have, there is always the chance of errors in that connection, leading to significant problems.
This risk never escapes the supply chain, and the best way to deal with it is to use even more technology and have a backup data resource available. A single or centralized data setup is a recipe for disaster, which is why it is highly necessary for businesses to have multiple resources in play.
Cyber Attacks
This is another problem that businesses have to deal with when they take their processes online to the internet. Cyber attacks online can really wreck havoc to your supply chain. The global supply chain requires smooth processing and unhindered connectivity to generate the right rewards.
Ever since organizations made the move online, a number of malicious threat actors have jumped in and come up with a number of ways to scam organizations. If your data is present online as well, there is a significant chance that your resources will be subjected to such cyber crimes. Many global supply chain players have incorporated measures to minimize the damage caused through these cyber attacks and to also ensure that the errors are basic or minimal.
The only way out of this conundrum is to have stringent security systems that protect your resources. A security team can also come in handy here, as it will protect your resources.
Data Quality and Integrity
Ever since the data transformation, both data quality and integrity requirements have significantly improved. As a matter of fact, organizations that previously enjoyed a data-free supply chain have also resorted to data analysis and analyzing key supply chain characteristics through the use of data. Data usage also comes with its own perils, as the wrong freight procurement data can leave shippers at risk of failure and can also reduce profitability significantly. Also, there is another risk of being non-compliant with recent compliance regulations such as GDPR. The GDPR and other data regulations are in place today to prevent organizations from consuming or forwarding data without prior permission from employees.
The lack of compliance with this specific regulation comes at a cost and can derail the progress of an organization. There are heavy fines to pay as well as customers don’t react well to their data being used by marketers without their permission.
Supplier Consistency
Only 45 percent of all suppliers can keep continuing their operations in the case of issues with their suppliers. Supplier issues result because a number of reasons. They can either happen because of the reasons we mentioned above or because of the lack of proper intent being shown by suppliers.
In any case, global supply chain players are always at risk of being thrown under the bus by their suppliers. A good supplier relationship can improve understanding and do a lot of wonders, while poor and neglected supplier relations will haunt you at times.
Transport Loss
Risk also exists in the probability of losing transport goods during the transit phase. Even logistic carriers with strong networks can suffer major setbacks when it comes to global supply chain carriers. These risks can often come in the form of extra expenditures in transit, spoiled goods, unverified carriers and much more.
Global supply chains can minimize this through the simple process of benchmarking. Benchmarking can help build and set comparison models that new entrants or struggling supply chain providers can follow.
Risk Mapping
Risk mapping is a process used to show key areas and concerns of risk for organizations in terms of the size of exposure and the danger offered by particular risks. The aim is to provide all policymakers within the organization data to enable an informed and strategic decision making process. The informed process is concerned with the allocation and integration of the rick capacity hosted by an organization.
When it is deemed necessary, risk mapping should also include benchmarks for different kinds of risks. This is ideal for market-oriented risks, as discussed in the previous section (including, interest rate fluctuations, foreign currency changes and rises in commodities from global markets and so on).
Against each risk category mentioned earlier in the chapter, mapping requires thorough analysis and examination, probing the qualitative and numeric information associated with the way. It is necessary to also identify instruments that can trade or shift risks during this stage.
Mapping a supply chain is the first step to take in a global risk assessment process. The objective behind the mapping process is to get a clearer and full picture of business operations and where they come from. Supply chain mapping includes a detailed understanding of where all operations and business partners like retail customers and suppliers are located, and where the sourced products and raw materials come from. This information, once found out, can then be used to assess the risks associated with these factors and the locations/activities pertaining to them.
Better information of suppliers can come in handy in processes other than just risk assessment. For instance, in-depth information on your suppliers can also help you build an understanding of supply chain resilience.
There is no single and approved way of supply chain mapping. The process and its intricacies can change with the industry that organizations operate in. In some sectors and industries, such as the food sector, where traceability is of paramount importance, getting the information required for supply chain mapping is easier. Regulations such as the Modern Slavery Act in the United Kingdom require all organizations to thoroughly report risks in their business. A number of businesses today are now going beyond the first-tier to identify sub-suppliers for their suppliers and validating their supply of goods.
Mapping can also involve requesting information from suppliers about their own suppliers. Effort should hence be made to gather as much information as possible from the chain. Another thing to identify about the mapping process is that it does take time. Businesses shouldn’t look to hurry it, as that might lead to a loss of strategic information.
Risk Metrics to Manage
Even with a better understanding of risk, procurement teams continue to suffer when it comes to shipping capacity and finding the suppliers available to them.
A peer research in the Harvard Business Review mentions, “vital information is often not available or accessible across their global teams, as a result, their response to disruptions has been reactive and uncoordinated, and the impact of the crisis is hitting many of their companies’ full force.”
The top metrics that global supply chain players should keep an eye on to measure and mitigate risks in the supply chain include:
1. General Carrier Performance: This metric will help unearth the general performance of carriers in the supply chain. It will also determine carrier adherence to timely deliveries and if they encounter any delays.
2. Percent of Carriers with Lower than Average Capacity: Maintaining control over inventory and ensuring optimal delivery standards is still a major problem for carriers. In lieu of this, this metric can help determine carrier capacity risks and avoid major ones.
3. Total Landed Cost for Procurements: During a disruption or event of that nature, total landed costs will significantly increase. This can cause damages to the supply chain and increase costs. The landed cost for procurements metric hence prepares organization for discrepancies and minimizes damages.
4. Number of Backup Suppliers: Disruption or no disruption, this is another metric that should ideally be maintained. The number of backup suppliers determines the readiness of a supply chain to manage and stop processes from getting out of hand if a supplier fails to deliver.
5. Compliance to Routes: The routes determined by a supply chain should be managed to the letter. Non-compliance to these routes should be investigated and the reasons behind them found out.
These are just some metrics that can reduce common supply chain risks and make management easier across the board.
Course Manual 6: Understanding Supply Chain Risk Management Practices
Supply chain risk management is more than just a helpful addition to the operations of a global supply chain operator. Global supply chain operators today understand the importance of supply chain risk and the way it can impact their global operations. Keeping this in mind, operators ensure that risk is not just minimized, but also mitigated in a way that limits disruptions and errors.
Supply chain risk management is necessary for the success of measures to minimize the impact of natural disasters, transport disruptions, unpaid bills and a lot more. The purpose of supply chain risk management strategies is to prevent issues and disruptions from turning big and to provide all operators with a mitigation strategy if risks do occur in the first place.
Global supply chain operators realize the impact that a poor risk management strategy can have on their plans, which is why they are in the process of not just redefining their strategy, but also ensuring that all forms of supply chain risks are minimized and mitigated in a thorough manner.
What Is Supply Chain Risk Management?
The need for supply chain risk management has never been felt more than it is being felt today. Organizations realize this and are handing over their manufacturing processes to supply networks operating externally. These supply networks form a completely different chain of their own, and ensure optimal delivery across the chain for best results. However, working with a 3PL or third party logistics provider ensures better production cycles, new technology, timely strategies and a number of other benefits.
With a growing network of prospects and global dependencies, organizations today realize that a slip in supply chain efficiency can eventually lead them to a stage of chaos and panic, where they lose customers left, right and center.
Risks including the shortage of raw materials, miscommunications with clients, plant failures as a result of negligence or natural disasters can be debilitating for any organization. The process that organizations today come up with, to not only minimize the perils of the risk but also to ensure the perfect output for everyone involved, is known as the supply chain risk management strategy.
The Benefits of Supply Chain Risk Management
Supply chain risk management obviously comes with a unique set of benefits. Before we discuss management strategies and the policies you can follow, let us first shed some light on the benefits of supply chain risk management in the modern global supply chain of today.
Ignorance Isn’t Bliss
Organizations that do not actively approach the topic of risk management in their supply chain processes form the equivalent of a person driving with a blindfold on their eyes. Ignorance toward important problems is not bliss in this case, and it is time operators took the blindfold off their eyes and saw the situation on ground zero.
You cannot manage aspects of the supply chain you cannot see. Obviously, if you want to exercise your control over the entirety of the supply chain, it is necessary that you manage aspects that were previously hidden from you.
Study the routes that you have drafted for your logistics and look at all the processes in detail. Where do your raw materials come from? What locations do they pass through before arriving at your facility? Where are your distributors located and how efficiently do they perform? Are there any complaints being given by the end customer or the retailer that you need to deal with, with regards to the service provided by distributors? These are all questions that you need to know answers to.
Supply chain risk management allows global supply chain operators to maintain a keen eye on all happenings across the supply chain. Not only are risks identified, but concrete measures are also taken to minimize the damage that they might cause. Analyze the supply chain in detail. Simplify it. Criticize it. If you don’t, you’ll always be the blind person driving the car with a blindfold on their eyes. The devil almost always lies in the details, and can only be unearthed when you jump deep into the details related to a particular project and find everything that is troubling you or deserves immediate attention.
Weak Supply Chain Processes Can Break Under Pressure
The strength of a global supply chain model lies not at its strongest point, but at its weakest point. It is the weakest link in the chain that is often infiltrated during a disruption or the subject of major risk events. Organizations should create a risk profile that helps them identify areas where they are the most vulnerable and the chances of risk are highest. An example of this would be identifying weak links in logistics and trying to limit the exposure at these risk points.
Stimulates Supply Chain Best Practices
Risk management is ideal for reducing and eliminating inefficiencies from your supply chain. Wasting resources and inefficiently going about processes can add an element of risk to any organization with a global supply chain presence. Organizations looking to maintain and uphold their global stature need to build their risk profile and keep a check on it for early detection of risks across the supply chain.
Ability to Respond to Unexpected Events
Supply chain risk management can help organizations with a global supply chain presence respond easily to risks and unexpected events across the supply chain. Such unexpected events warrant a quick response with appropriate solutions being generated and passed around the supply chain. The first step in the process is to identify the risks that might cause unexpected delays in the delivery of products to customers. Once that is done, organizations may find themselves in a better place to mitigate undue delays and respond to errors in the supply chain.
Guide to Supply Chain Risk Management
Natural disasters, sanctions, fires, insolvencies, strikes and a number of other events can cause disruptions to the supply chain. The global supply chain model is flourishing today and the effective means of communication around us have meant that organizations can effortlessly communicate and reach out to each other. However, this progress comes at the cost of enhanced risks and other problems. Most global supply chain organizations today are in the way of harm and need to come up with risk management strategies that help manage complex solutions and reduce problems in communication.
In any risk based scenario, managers and entrepreneurs have three possible strategies; control, transfer and complete avoidance. Risk avoidance can best be explained as refusal to partake in any action or move that you may find too risky. Supply chain managers assess information and decisions before partaking in them. If you adopt a risk avoidance strategy, you will be avoiding all risky moves altogether. This might kill possible sources of revenue, but will save you from the additional burden of risk. This is known as risk avoidance and supply chain managers avoid the revenue potential altogether, just to avoid risk.
Risk control requires taking control of all risky actions and ensuring that all kinds of damages are minimized and kept to a minimum. As you will learn over time, in a supply chain, running a global business is all about taking calculated risks and backing yourself through them. While risk avoidance does sound like a decent strategy for supply chains just building their presence, it is not the recipe you want to follow for success. Hence, rather than avoiding risks, some businesses try to take control over the process in a bid to minimize and mitigate all damages that could be caused by this risk. For a manager of a global supply chain, this includes conducting regular inspections of the supply chain and completing communication standards.
Risk transfer, which is the final strategy for combating risk, deals with handing over the responsibility of the risk onto someone else. Shifting responsibility over to someone else can minimize damage and can also make life easier for supply chain managers. For instance, a supply chain might shift responsibility of overseeing certain risks to insurance companies. This is a decent strategy to minimize risk and the burden of damages on your shoulders.
The answer to the problem of enhanced supply chain risk in the global industry is to have a successful and comprehensive supply chain risk management program that helps secure relationships with suppliers, ensures that your company is operating in a completely legal and ethical manner, and also prevents supply and delivery bottlenecks from harming your services and product standards.
To do this, it is necessary that you fully understand the risk management procedure and identify, assess and mitigate all forms of risk, based on the threat that they pose to your organization. In this section, we will walk through the phases of risk management and look at it as an integral process for supply chain operators today.
Risk Identification
Risk identification is the very first, and perhaps the most important, step in the risk management process. The only way you can properly address risk in the global supply chain is by identifying it and knowing all there is to know about it. The very first process that you should embark on during the risk management process is the establishment of risk profiles for all elements you believe are risky in your current global supply chain model. Once you have established risk profiles for your supply chain, you should come up with ways to monitor and keep an eye on these profiles on a regular basis. Constant checks and balances on these profiles will help you incorporate a successful risk avoidance strategy.
Remembering risk identification systems can only be implemented through active monitoring. Active monitoring is important to this stage, as it is through active monitoring and implementation that businesses are able to identify all areas of risk. Just a simple risk assessment of a supplier or distributor at the time of onboarding them on to your supply chain isn’t enough when it comes to keeping a vigilant eye on your supply chain. Circumstances keep changing with time, and a successful risk identification process must account for that.
What Is a Risk Profile?
A risk profile is an assessment of all threats faced by an organization toward particular assets in position of the firm. The goal of a risk profile is to ensure that all assets based in the organization are relatively safe and don’t carry any untoward threat toward them. For instance, all of your suppliers, ports and the locations they operate from should have a separate risk profile. These separate risk profiles help you identify the weak points in your supply chain, and also help you prepare a successful risk mitigation strategy that you can follow to improve processes related to that specific risk.
Identify What to Monitor
A lot of the risk identification process is about identifying what should be monitored in the supply chain. It is necessary for organizations and supply chain managers to group their supply chain on the basis of segments and sub-tiers to actively monitor and implement a risk management process. Typically, global supply chain operators monitor the following attributes in partners as part of their risk management program; purchasing volume, scarcity, effect on sales, ownership structures, geography, custom requirements and patents.
At a minimum, supply chain operators should know all of the above information related to their tier 1 direct material suppliers. But it is recommended that the due diligence should expand beyond the first tier as well. It is necessary that supply chain managers also consider the suppliers of their direct supplier and identify whether there are any risk factors that should be minimized or mitigated.
Besides the tiers in your supply chain model, it is necessary to also monitor logistics routes and supply paths. From the routes taken by suppliers to the routes available to the distributors, all factors related to the supply chain should also be discussed in detail as well.
Know How to Measure Risk
Even with a better understanding of risk, procurement teams continue to suffer when it comes to shipping capacity and finding the suppliers available to them.
A peer study in the Harvard Business Review mentions, “vital information is often not available or accessible across their global teams, as a result, their response to disruptions has been reactive and uncoordinated, and the impact of the crisis is hitting many of their companies’ full force.”
The top metrics that global supply chain players should keep an eye on to measure and mitigate risks in the supply chain include:
1. General Carrier Performance: This metric will help unearth the general performance of carriers in the supply chain. It will also determine carrier adherence to timely deliveries and if they encounter any delays.
2. Percent of Carriers with Lower than Average Capacity: Maintaining control over inventory and ensuring optimal delivery standards is still a major problem for carriers. In lieu of this, this metric can help determine carrier capacity risks and avoid major ones.
3. Total Landed Cost for Procurements: During a disruption or event of that nature, total landed costs will significantly increase. This can cause damages to the supply chain and increase costs. The landed cost for procurements metric hence prepares organizations for discrepancies and minimizes damages.
4. Number of Backup Suppliers: Disruption or no disruption, this is another metric that should ideally be maintained. The number of backup suppliers determines the readiness of a supply chain to manage and stop processes from getting out of hand if a supplier fails to deliver.
5. Compliance to Routes: The routes determined by a supply chain should be managed to the letter. Non-compliance to these routes should be investigated and the reasons behind them found out.
These are just some metrics that can reduce common supply chain risks and make management easier across the board.
Capture Risk Data
There are a number of problems that supply chains have to face today while capturing risk data. These problems relate to relevance, standardization and volume. The primary challenge in this process relates to performing and maintaining a constant check on data – which is necessary for a supply chain risk management program to flourish.
In addition to the risk measurement process, volume and relevance are also factors that matter here. The volume of data being measured can put data systems to shame and can challenge their efficiency. While data management systems have come a long way in the past, there still is some progress for them to make before being considered able enough to monitor tons of supply chain data.
The evolution and emergence of risk management methods has helped organizations overcome these challenges and develop a Risk Intelligence program. Such programs zero down on the lack of risk measurement and use technology as a driver to achieve static results from data.
Uniformity is also important here as it is necessary that businesses implement uniform procedures for risk measurement. Uniform policies help improve the results generated from the risk measurement process and make standardization easier.
Once standardization is achieved in this process, global supply chains will find it easier to keep an eye on all facets of the supply chain and incorporate a program that helps increase risk measurements. The modern supply chain will hence become even more efficient at risk identification, as remote processes would be mapped and monitored through the use of technology and data measurement tools.
Course Manual 7: Understanding Supplier Profiles
In a global supply chain, the supplier is defined as the person or organization that provides a service or product to another business. Supply chains with a global presence are dependent on positive supplier relationships as part of their risk mitigation strategy. A number of strategic risks can be avoided by maintaining a positive relationship with suppliers, and minimizing the chances of miscommunication between both parties.
This chapter studies the concept of risk while dealing with supply chain and looks at all avenues of the interaction to give you tips on what can be done to avoid or minimize that risk in full.
How to Choose the Right Supplier
Choosing the right supplier for your business is highly necessary. Global supply chain operators cannot put their trust on suppliers that aren’t reliable and cannot be trusted with the service standard they provide. Your company will definitely struggle to achieve and meet long term goals if the supplier you’ve shortlisted cannot be trusted and is not the right fit for you.
Global supply chains can base their selection of suppliers on the following directions:
Set Your Criteria
The very first thing to do is to set a list of criteria that your chosen supplier should preferably meet. A defined list of criteria can help you streamline the selection process of your supplier and can also ensure that you find someone who works as the ideal fit for you.
Some of the things you should consider during this process include:
• Ideal Lead Time: Ideal lead time is the time a supply chain would have to wait to receive their goods after placing an order. The lead time should be as short as possible, as global supply chains need immediate replenishment to meet global demand trends.
• Maximum and Minimum Quantity: The maximum and minimum order quantity limit is an important parameter in the process, which allows organizations to settle on what their possible maximum and minimum order limits would be. A low-scale supplier will not be able to meet your limits, which is why it is best to clarify these limits right at the start, rather than leaving them for later.
• Dropshipping Capabilities: Dropshipping is a growing supply chain model today that requires suppliers to directly drop ship products to the end consumer. This takes the retailer or the seller out of the picture and builds communication between the supplier and customer. Dropshipping, however, can only be possible if you have a supplier that you trust.
• Quality Assurance Processes: The customer base you enjoy is a direct result of the quality of the products you provide. The steps suppliers take to ensure quality assurance will eventually be replicated in your end products as well.
• Payment Terms and Conditions: The payment terms are also best discussed during the start, since confusion can arise with payment issues later down the line. Appropriate payment terms and conditions should be decided.
• Return Policy: Many suppliers operate with a strict no-return policy, which is often a red flag of its own. Deal with suppliers that are a bit relaxed when it comes to the return policy and don’t operate under any strict obligation.
• Communication Standards: This is something that you can gauge throughout the discussion and selection process. Look at their communication standards and decide whether they match with your own or not. Your communication standards should be the same as the supplier’s if you want effective communication to develop and prosper with them. Language barriers can often be a problem when dealing with foreign or overseas suppliers.
When you are setting the list of criteria and identifying what you require under each, it is also necessary to identify which criteria are flexible, and which are a must-have. For instance, many supply chain managers can compromise on communication barriers, even if they are dealing with foreign suppliers. However, not many are able to compromise when it comes to deciding maximum or minimum quantities. Judging suppliers based on this list of criteria will easily help you separate the cream from the milk and get in touch with the best suppliers for the job.
Browse Your Options
Supply chains with a better idea of what they require can hit supplier directories like AliBaba or others related to specific industries. Such directories help link you up with a number of different suppliers offering the product variety you’re looking for. Assessing a supplier director can really open up your options and give you a chance to really find the crème de la crème and get a chance to work with the best suppliers.
You can use the abundance of suppliers to evaluate them on the following basis:
1. Reputation: The very first thing you should consider when selecting a supplier for your business is the reputation that they carry. You should identify whether the supplier is reliable and can, in fact, be trusted or whether they’re just like the other crop of suppliers with not much to offer. Certain suppliers with not much prior experience often end up stealing global supply chain ideas and business models, which is why you should remember to discuss your model only with the right supplier.
2. Business Type: Depending on the business model you follow, you will have to choose a different type of supplier. Suppliers are often grouped into wholesale suppliers, raw material suppliers, dropshipping suppliers or private label manufacturers. You should know your business model in full detail and should select the right kind of supplier based on that understanding.
3. Security: Good suppliers with a reputation to maintain will definitely offer you the security you need during the transaction. Decent suppliers will offer you fraud protection and insurance among a number of other benefits. Avoid working with suppliers that aren’t interested in protecting your business or interests.
It is also necessary that you look at and consider reviews mentioned online during this process. Reviews from customers that have previously dealt with a supplier can act as a good way to evaluate your options.
Call for Bids
Once you have shortlisted the legitimate vendors, wholesale providers, raw material suppliers or dropshipping providers you want to work with, you can take the process forward with a call for bids. The bid can be initiated through a Request for Proposal or a Request for Quotation form. The RFQ or RFP form is of particular importance and will require you to input all details related to the products or services you require, the delivery dates you expect, the quantities you require and the quality standards you want the supplier to meet for your order.
During this process, you can maintain contact with the vendor about the policies and procedures they follow. We recommend talking to the supplier about their suppliers. Obviously, the end product offered to you by the supplier does not come out of thin air, and they have a supply chain of their own. With this in mind, you should jump into second tier and third tier suppliers as well to fully determine the volatility of your supplier. Try to identify all risky practices that you find during this process. Vendors that use risky reordering processes in their supply chain should best be avoided. Unreliable suppliers with volatile suppliers of their own will damage your integrity. The vendor you select or work with should have a reliable supply chain that won’t break down all of a sudden.
Evaluate Answers to Bid
Once you’ve finalized your bids, you will receive the right response or quotation from the employees in question. Evaluate your options now and compare suppliers with each other to identify the best one for the job. Suppliers that best meet your quality standards and your budget should be preferred over others. A supplier that charges too much or does not provide the kind of quality you require is best avoided.
In short, you should look for a supplier that gives you the best of both worlds or creates a balance between quality and pricing. At this time, it is best to validate the bid through a mini order of sorts. Get to know the quality of the product they offer through a prototype. Once that is done, you can ensure the legitimacy of the product by assessing the product sample.
Once the bid is closed, you should talk with your supplier to negotiate the right contract terms. Your contract should guarantee you a favorable outcome that protects both, your profit generation and margin. Contract negotiations can further be honed through the presence of a capable lawyer.
Monitor Supplier Performance
The process doesn’t stop here, as you have to constantly monitor and ensure the performance of your suppliers. You would want your suppliers to perform well and to keep giving you the service quality and standard you’re looking for. You can terminate your supplier and terminate the contract with them if the processes they follow are a clear violation of the contract.
You should also monitor and manage the cost efficiency of your deal. Just because the deal you negotiated sounded good a year back, doesn’t automatically make it good right now. Always discuss your needs with your supplier and follow the other guidelines we mention in this chapter.
Building Supplier Relationship Management
Supplier relationship management processes operate with one goal: to not only improve, but streamline the processes between a buyer and supplier in a global supply chain. In its true essence, budding relationships with your supplier can help you in ways more than one. For starters, supplier relationships help improve camaraderie and help you understand each other’s goals and objectives.
The very first reason to invest in supplier relationships is that stable relationships with your suppliers can help you avoid stock outs across the supply chain. Stock outs can lead to downtime and discontinuation of the product line, which isn’t in the best interest of any partner.
There are two approaches that analysts follow when approaching supplier relationship management:
• Reactive: As per this process, the management only reacts to situations after they’ve occurred and tries to minimize damage by focusing on relationships with suppliers.
• Strategic: Strategic supplier relationship management is obviously a lot better than the reactive approach. Strategic management is based on planning in advance with contractual agreements and further mutual understanding to mitigate and stop negative events, stock outs and downtimes from occurring.
While most new businesses and enterprises fall into the trap of the reactive process, the strategic process is the go-to and more efficient option for global supply chain operators. Following a reactive approach, supply chains get the time and effort to not only nurture but also develop relationships with their suppliers without any further ado.
Factors Affecting Supplier Relationships
A number of factors can affect relationships between suppliers and global supply chain operators. These factors include:
Trust and Loyalty
Aside from the financial aspect of things, developing trust and loyalty through mutual stakeholder relationships is just as important. Perhaps the most effective manner to deal with your suppliers is to make them feel like they’re part of the business. Once they feel like strategic partners and stakeholders in your business, they will automatically up their game and give you the best services they can provide.
To make sure that this happens, you can start by informing them about ongoing strategies and processes, and the role they play in them. You should talk to your suppliers about product releases, promotions and other factors of the nature to give them an idea of demand spikes, and how they come into the picture.
Listening to the pain points and strategic demands of your suppliers can also help you solve trust issues and the hassles associated with it.
Information Sharing
Information sharing is another factor that can impact and affect the development of a decent relationship with your suppliers. The sharing of information across the supply chain with your suppliers is bound to make them feel connected with your organization.
Information sharing enhances the coordination between all stakeholders in the supply chain and also leads to better levels of integration. Global supply chains with better communication standards happen to have better efficiency and can save on a number of business costs that are otherwise avoided. In fact, many studies focused on this concept have found out that information sharing is highly integral to the success of an SRM implementation process.
With the right information sharing processes, businesses can implement and follow the right protocols. A sufficient level of communication can connect all stakeholders together and add a much needed boost to the supply chain.
Risk and Reward Sharing
Within a partnership, all suppliers in an organization should be intimated and assured that the rewards, benefits and risks associated with different transactions would be shared equally. This risk and reward sharing protocol can help in the establishment and maintenance of strong relationship ties between all partners, including suppliers.
Risk sharing is an essential supply chain risk mitigating strategy that we discuss in further detail within this coursework. Risk sharing is used as a strategy to save costs and improve quality across the supply chain. This helps reduce losses. On the flip side, reward sharing adds as an incentive to bring suppliers toward the risk sharing program.
The sharing of risk and reward can also help create good camaraderie within all partners of a supply chain. This newfound camaraderie is especially important if the supply chain has multiple partners involved and needs better negotiation between them. Risk sharing also helps develop better long-term relationships between all partners. Such arrangements come with many benefits.
Commitment
It goes without saying or proving that the promise of commitment in a partnership can do wonders for everyone involved. Committed partners are more than willing to sustain and maintain their relationship with the organization. Suppliers should be reminded and guaranteed from time to time that the organization is committed to working with them. This promise of commitment will definitely ring in their ears and will help them perform their best.
Suppliers or any other strategic partner involved in the supply chain will not perform well unless and until they’re lured through the promise of commitment. The commitment between partners and the security of long term work goes well for suppliers and other stakeholders as well.
Benefits of Investing in a Supplier Relations Management Strategy
Supplier Relationship Management or SRM is a growing field of interest in the market today and many suppliers and organizations are concerned with it. The interest in SRM does not come without any benefits for global supply chain players, as they get to benefit in ways more than one. Some of these benefits include:
Formation of Mutually Beneficial Partnerships
According to the Chartered Institute of Procurement and Supplies or the CIPS, being aligned with suppliers and treating them as you would treat your partners has many benefits of its own. The Institute believes, “both businesses will experience higher success rates, decreased risks and enhanced collaboration and innovation.”
As a relationship that mutually benefits all parties, everyone should experience enhanced efficiency and results through an SRM approach. Once this relationship develops, there is bound to be better communication and an increase in efficiency rates across the supply chain. Supply chain partners would be able to better communicate with each other, and will also be able to handle and mitigate the impact of problems as they occur in the chain.
Stronger Relationships
Another benefit of investing in your SRM strategy is the creation of stronger relationships with suppliers. All global supply chain retailers today require and crave stronger relationships with their supply chain partners. These stronger relationships do not only aid in better problem solving skills, but also help implement contingency plans whenever the need be.
By choosing not to invest in SRM practices, global supply chain models run the risk of being affected by supply chain issues and other problems of the sort. This can haunt supply chain operators in the long run, whenever they oversell to customers and aren’t able to meet demand patterns.
Supplier relationship management also helps in the use of better metrics and methods to evaluate efficiency of the supply chain. All stakeholders can be involved in the process to evaluate the supply chain in a better manner, and to take out any inefficiencies present in it.
Reduce Business Cost
Business expenditure toward undue supplier problems is a major cause of concern for global supply chain providers. Generally speaking, the process of negotiating and talking through new deals with suppliers can be really taxing and can drain your resources. This entire process can be an unnecessary burden on your budget, which you can easily avoid through the right means.
By establishing strong relationships, businesses identify that they can save a number of costs in the long run. For starters, businesses do not have to worry about finding new suppliers every once in a while. Secondly, since downtimes and stock-outs are reduced through effective communication and management, the supplier is able to cover all demand spikes. In general, there are fewer issues with the quality of products, product availability and delays in the supply chain after the initiation of an SRM.
Big Opportunities Brought to Light
Successful relationships with suppliers can help bring a number of new opportunities to the forefront. Stronger relationships help suppliers improve the quality of their inventory and to also enter new markets without any issues with supply patterns. Effective communication between supplier and organization can ensure that they’re strategically involved in every move forward and get a say in the processes.
SRM also results in the acceleration of the supply chain, with better innovation in company ranks. Suppliers are more involved after the use of SRM and rest their loyalties with the organization.
A capable SRM program can help cut all supplier risks from the supply chain and can ensure the smooth continuity of operations without delays or stock outs. With a stronger SRM in place, businesses are able to ensure better continuity along with faster time to market. This eventually places you ahead of the market and gives you the head start you require.
Course Manual 8: Mitigating Transport and Logistic Risks in a Global Supply Chain
Transportation and logistics are two of the most risk-prone processes out of the entire global supply chain. While there are risk mitigation strategies that can reduce the risk factors involved in the industry, organizations often have to put up with risky schedules and a lot more to get their job done. Even in cases where deliveries are made in time, there is a significant risk factor that cannot be neglected.
According to the Federal Highway Administration in the United States, “Risk management is a process of analytical and management activities that focus on identifying and responding to the inherent uncertainties of managing a complex organization and its assets.”
Top Risks in Transportation
The risks faced by global supply chains in transport activities do vary, but they usually include the following suspects:
Regulatory Oversight
The safety and regulatory compliance of transportation workers falls under the jurisdiction of the OSHA, with the only exception being that FAA has control over the treatment and regulations of workers in the airline industry. In this regard, organizations have to make sure they comply with compliance policies not only within American borders, but beyond as well.
One of the greatest areas of focus for supply chains today is driver fatigue during road transportation. Ever since 2019, there has been greater focus on ensuring that all trucks are equipped with monitoring devices that can determine just how long the vehicle has been on the road for.
As per the new hours determined in most countries, truck drivers should not be driving for more than 11 hours in a 24 hour day. Drivers must take adequate rest of 10 to 12 hours after every 11 hours of driving. Flight crews are subjected to similar instructions as well, as they are limited to only 10 hours of flying on any given day. Train crews are limited to 12 hours of vigilance on the tracks. Hence, the hours and regulations are more or less the same for all logistics industries.
Cyber Attacks
Cyber liability is definitely not the first thing that comes to mind when assessing risks in transportation and logistics, but the industry is at greater risk of cyber attacks and other attacks of such nature. Due to the current role and implementation of automation in the transport industry, cyber attacks pose a financial and logistical risk to all stakeholders. The risk isn’t just limited to the transportation process but can impact all stakeholders linked to the supply chain, including partners such as suppliers and vendors, and third party contractors and retailers.
Threat actors can use sources such as phishing attacks to change destination locations and receive orders without confirmation. Supply chain stakeholders should hence have a contemporary and detailed response plan in place to be ready to the risk of cyber attacks.
Deteriorating Infrastructure Globally
The road network and infrastructure across the globe isn’t as well maintained as it is in the United States. When supply chains decide to step out into the global market, they have to realize and account for the slightest discrepancies in timings and the fluctuation in input. The infrastructure in most developing nations leaves much to be desired and isn’t at par with what supply chains expect.
The infrastructure can increase lead times and can also add a lot more delays due to wrong routes and vehicle problems, without access to technicians.
Weather
Supply chain businesses can never make plans for logistics and transportation without accounting for weather. While it is impossible to accurately predict weather for the year to come, organizations can work on buffer windows and other contingency situations for weather issues. Temperature and weather conditions vary drastically across the globe, which is why proper monitoring can only come in handy here.
Transport Risk Management
Transport risk management is a growing industry today and is inundated with a number of options. Risks faced by supply chains when it comes to transport include fleet integrity and management, driver return, compliance issues and others that we have mentioned. Some of these risks can be influenced by the supply chain executives, but there are others that are out of their control and are dependent on external factors, such as the weather.
With so much on the line for the business, every transport and logistics company needs to touch base and determine a risk management solution for their transport business. These risk management practices should guide their operations and policies. A transport risk management solution can help organizations mitigate risk, and can also ensure that your goods always remain safe and reach where they’re intended to be at times.
When a global supply chain does not prioritize risk management in transportation and logistics, they communicate this to their employees and stakeholders. This announcement has a detrimental impact on morale and can push a number of key employees away. Many shippers today are incorporating and integrating policies that reduce risk.
Supply chain members often use third party transportation services for goods shipment and delivery, and they can get in touch with them to ensure the smooth delivery and provision of goods.
Transport Risk Management Strategy
A transport risk management strategy may not be the same for every industry, organization or department. There are, however, a number of foundational and fundamental elements that should be present in the policy that is implemented. Some of the directions that help in the creation of a transport risk management strategy include:
• Defining the leadership and organizational responsibilities related to risk management.
• Developing support for risk management solutions to truckers and employees on-the-go.
• Using a holistic approach to formalize risk management. This holistic approach can help support decision making processes and also improve the progress toward strategic objectives and goals.
• Risk management can be used to reexamine all existing standards, processes and policies.
• Risk management should be embedded in existing business processes so that all factors can be combined to make successful decision making.
• Identifying all risk owners.
Modern solutions in place within organizations today enable supply chain operators to analyze the severity of risk involved and automate the task of finding lower-risk alternatives.
Course Manual 9: Practical Approaches to Build Risk Resilience
The world of supply chain right now is more turbulent and volatile than it has ever been in a long time. Supply chain plays an exponentially important role today and is affected by a number of events and disturbances occurring around us on a daily basis. There are a number of risks that we have discussed in this coursework, with potential to not only disrupt, but also derail the progress that supply chains make over a given period of time. Efficiency is a major consideration for organizations in the supply chain today, and all obstacles that hinder or obstruct that efficiency are nothing but roadblocks that need to be effectively minimized at the first chance.
These events include both, natural disasters and man-made complications. From labor disputes to equipment failures, natural disasters, political instabilities, terrorist attacks and supplier errors, organizations are faced by a number of road blocks on their way to an efficient supply chain management process.
Each of the risk factors we have discussed in this coursework can debilitate the functioning of a supply chain and can have a lasting impact. Disruptions caused by common risk factors in the supply chain go on to disrupt a number of manufacturing and procurement processes followed in a typical supply chain. Besides the operational issues, the financial damage caused by a sudden shut down or a stock out can lead to downtime that disturbs operations in the organization.
Since the risk factors and the causes of turbulence are an inevitable part of operating a global supply chain, organizations have to be careful and build resilience. While supply chains are exposed to these risks on a regular basis, the threat can grow even further, if the supply chain has a global stature and is faced by a number of global risks.
The disruptions caused by supply chain mismanagement and risk factors have led to a number of supply chains failing to succeed at a global level and falling down to their feet. The failure supply chains meet in the global industry are often replicated in their performance across local industries as well. A supply chain that decides to step out of the United States, for instance, to either meet new suppliers in China or open new retail avenues in Europe, will have to be careful of the risks and the chances of failure involved. Failure to secure a positive deal with a Chinese supplier or failure to reach a decent agreement with retail outlets in Europe will make the expansion futile. As a result of this failure, the organization is now unable to maintain the same standard of efficiency that they enjoyed in their own grounds. The domino effect is in play, and markets are falling one after the other.
These disruptions have also led to the increased dependence on resilient supply chains and the benefits they carry. Supply chain managers realize the importance of resilient and strong supply chains that can withstand the pressures exerted on them by external markets.
While many organizations and managers are on the same page regarding the importance of realization, and the need to implement it, there is often significant dispute and arguments between stakeholders over the processes and the techniques they should follow to implement this resilience in the supply chain. Supply chain resilience takes time to build and is crafted through clever design and not just by chance or accident. Rome wasn’t built in a day, and similarly, resilience takes time and effort.
During a risk analysis strategy, it is necessary for businesses to understand and analyze the resilience of the supply chain they operate in. Organizations should specifically step into resilient supply chains with the objective of standardization and consistency. A resilient supply chain is not an overnight achievement; in fact, it takes an in-depth understanding of pillars behind resilience and what can be done to integrate strength into them.
Pillars of Resilience
The supply chain is built out of a set of defined pillars, which also make up the pillars of resilience. These pillars, when studied in detail, can significantly help organizations improve their resilience and also rank well against competitors. These pillars can help organizations ace risk management and can also help them stand tall and maintain their operations through tough times of turbulence.
Procurement
Procurement is not only a vital cog in the wheel of production, but it is also a significant pillar to build resilience. Production is bound to suffer, if you don’t have the right procurement strategy. Companies align their production facilities in line with their procurement needs, because procurement needs determine just how efficiently an organization should go about production.
Resistance capacity is the ability of a system to minimize the impact caused by a major turbulence or disruption. This is achieved by avoiding the disruption entirely through a dual supplier contract or by minimizing the disruption through regular supplier audits and analysis of the procurement strategy. Moving on, the recovery capacity is the ability of a manufacturing system to return back to optimal functional levels once the disruption occurs. The stabilization phase should be brief and should assist the business return back to their original production levels. This is dependent on numerous factors including the severity of the disruption and competitors.
Operational Efficiency
Operations are an important part of the supply chain process. For supply chain processes to continue effectively even in times of turbulence, a resilient plan is needed to continue operations and ensure optimal efficiency while at it.
Organizations today aren’t well prepared for fluctuations in operational efficiencies. Preparedness for disturbances can be amped up through a holistic integration of mitigation strategies. Companies can start by investing in dual/multiple suppliers within the manufacturing process. The supply chain for both these suppliers should be different, so that localized global events don’t cut you off from your supplier(s).
Organizations also maintain additional risk inventory above buffer levels to help with continuing production even in times of jeopardy. Organizations can procure 21 to 40 days of additional inventory and maintain it for longer periods. This investment can come in handy during times of turbulence.
Besides this, organizations can also opt for classic strategies such as cycle time, production shifting and overtime with subcontracting. All of these policies should be incorporated together to create an optimal emergency response.
Vulnerability
A supply chain should cover vulnerable aspects to continue operations throughout disruptions and times of turbulence as well. A disruption in certain areas where suppliers of a certain product or raw material come from can actually end up affecting all players within the industry.
Product quality incidents, export/import restrictions and demand shocks have been noted by many organizations as the top three vulnerabilities currently facing it. The impact of these vulnerabilities is faced in the form of a decrease in revenue, increasing customer dissatisfaction and a loss of productivity in general, which is hard to recover from.
Management Culture
The management culture and the attitude top management has toward resilience management can play an important role in deciding just how resilient a supply chain truly is. Resilience should be a high priority for the top management if they’re serious about building a production and supply chain network that is safe from all interruptions.
There has been a palpable need for resilience of late due to lockdowns and restrictions across the globe. Organizations without any clear plans have had to halt operations and operate at a loss. On the flip side, competitors with more resilient supply chain structures have continued operations and have taken their cause even further.
Demand and Visibility
When it comes to the demand side of things, companies are focused on risk mitigation strategies through visibility-related analysis. EDI technology and data sharing are commonly used here. A number of companies do not have high visibility on the safety inventory and stock levels carried out by their distribution partners.
An analysis of resistance would tell that further visibility is needed to ensure optimal demand fulfillment on the distribution and customer side. Commercial teams underrate the importance of resilience in demand visibility, as it isn’t about business continuity, but about gaining a competitive advantage. Once a disruption impacts the entire industry that you operate in, you can pull ahead of your competitors through a resistance plan that includes all 5 of these pillars in their entirety.
Investing in Supply Chain Resilience
Supply chain risk resilience is achieved through strategic investments in your organization over a period of time. Supply chain managers need to take concrete measures for insurgency planning and to signal improvements in supply chain patterns for the time to come.
Resilience oriented investments can be divided into eight basic categories, with each category demanding continuous improvement and money to be invested into the business from time to time.
Discovery
The first investment in the endeavor for resilience goes toward discovery. In this investment category, you evaluate and implement investment strategies that allow your firm to identify potential problems present within the supply chain and to come up with quick resolution methods. Supply chain disturbances can often have a subtle impact, which needs to be discovered and monitored for a resilient strategy to develop.
An organization can initiate their investment in discovery by improving the information technology and information sharing system they have in place. These systems can work as an early warning mechanism to alert supply chain stakeholders about possible insurgencies in the future. Additional investment can be put into demand sensing, forecasting and into monitoring the performance of different areas in the supply chain. Investments here would help in the discovery of emergencies.
Information
The second category is of information, where businesses invest money to improve the speed, quantity and quality of the information making rounds across the supply chain. This is done to minimize informational downtime during the course of a supply chain emergency.
Investments in information are initiated by improving the information technology mechanism. Additionally, businesses can also invest in an effective communication model that hears from all stakeholders present within the firm. This can help streamline opinions and can open doors for enhanced communication between organizations. Investments can also be made to improve the visibility of information in and around the supply chain.
Supply Chain Design
Altering the supply chain design is perhaps the most important area of investment for achieving resistance in the purest form. This investment is meant to create and implement supply chain models that can be quickly configured in response to certain changes in the political and the general environment involving stakeholders. These changes in environment could either come through a supplier that you work with or through a specific market that you sell in. Regardless of the source of this environmental uncertainty, the supply chain should be equipped with flexibility and design to quickly respond to all such changes.
Investments here are focused on supply base management, where suppliers go through a rigorous process of training and information, before a proper agreement is created. Additionally, investments can also relate to supply base configuration for more flexibility in choosing supply chain partners and suppliers.
Buffers
Maintaining buffer stock is one of the more important parts of building resilience and keeping your production up to track with average levels, even during tough times of insurgencies or turbulence. Buffer stock is basically the creation of an extra cushion for inventory. For instance, a firm issues a notice to keep buffer stock levels at 50,000. This means that there should always be enough stock in store to manufacture 50,000 units of the product manufactured by the firm. Once stock levels near 50,000, another order is placed.
Multiple investment options are included here, with investment required in:
• Human resources capacity
• Experienced and capable human labor
• Extra cost of owning inventory
• Excess operating capacity
• Safety lead time
Operating Flexibility
Operating flexibility can equip businesses with a strategy to change supply chain flows or other important product specifications at the time of turbulence or a disruption. Supply chain problems require out of the box solutions, which is why flexibility in operations can keep the wheel moving even at times of panic.
The amount invested to achieve operating flexibility would be eaten up by payments to build transportation alternatives and by variable bills of material. Additionally, supplier analysis needs to be done as well to find possible alternatives to expected disruptions.
Security
Security is another category that requires investment for a fully resistant supply chain model. Firms invest in security to protect systems from shocks in the supply chain process. These shocks include damage to goods, theft of necessary items and even counterfeiting from dubious suppliers. Security also requires a stronger presence online than in the physical world. The digital world is host to a number of security attacks, which can hack into supply chain processes and cause disruptions. If you want a resistance plan, investments in the following are necessary:
• Better security across storage units
• Firewalls online
• Insurance to reduce risk
Preparedness
Writing things on paper can be different from the actual implementation process. Hence, organizations can truly prepare their resilience plan by investing in plans to test contingency preps. The money put in this category is necessary for designing and planning contingency approaches.
Since planning is just half the job done, the investment can also come in handy for rehearsing and training the steps you will follow once disaster of any kind strikes your firm. Additionally, organizations also run an annual risk assessment through this test to minimize all risks and get insurance where necessary.
Indirect Investments
Many of the investments we have looked at above are directly related to building resistance. However, there are also some indirect investments that organizations have to make to ensure their supply chain is well protected and is just as resilient as it should be.
Typically, these indirect investments work to create a positive impression. It also shows a firm’s willingness to address some of its supply chain problems and dedication toward creating a unified problem resolution strategy.
Steps and investments that are made here include:
• Brand equity through marketing
• Supplier loyalty
• Customer loyalty
• Relationship with suppliers
• Relationship with customers
• Designs for innovation
• Revenue management
• Support for dynamic partnering
These investments build the risk resilience of organizations in the supply chain and also help amp up the core processes implemented within the supply chain. With structural upgrades, organizations can ensure that the progress is maintained for longer and shows the rewards that are expected out of it.
Course Manual 10: Best Practices for Supply Chain Risk Management
Supply chains are volatile to disruptions and risks that can change the efficacy and efficiency that they host. Supply chain disruptions and risks materialize from inside and outside the supply chain, and vary based on the effects they carry, magnitude and the attributes. As a result of these differences, the impact and nature of these risks can be highly divergent. Consequently, different types of risks have different kinds of impacts on the market. For instance, a delayed shipment of a non-critical material, which is already in supply within your factory, may have a less serious impact than a labor strike organized by labor workers inside a supplier’s main production facility. The latter can obviously halt your production and send management into a frenzy.
Risks in the supply chain market are broken down into either internal or external risks. Internal risks are related to happenings within your own organization, whereas external risks are related to conditions outside of your organization. We look through both these risks in greater detail within this chapter.
Internal Driven Supply Chain Risks
Internal driven supply chain risks are easier to tackle and handle, because of how they originate from within your premises. Internal risks come under the direct supervision of managers and require prompt action to ensure that risk mitigation is finalized in a proper manner.
Internal risks include:
• Manufacturing Risks: Manufacturing risks are caused by basic disruptions to the internal processes and operations in your organization. These risks basically include unplanned stops and disruptions in the manufacturing process. Manufacturing is a key part of every product’s supply chain, and proper supply can best be ensured through the flawless production of goods without a stop. Once manufacturing stops, the entire supply chain is bound to come to a halt as well.
• Business Risks: Business risks are risks caused due to the change in key management personnel, business processes, reporting structures and other business coordination methods. Once things are streamlined in a supply chain process, it is necessary that they continue in the given order. Every disruption or change in the order of things will be greeted with a certain amount of downtime and lack in efficiency.
• Planning and Control Risks: Planning and control risks are caused by an inadequate standard of planning and assessment inside an organization. These risks are also initiated by the change in management or key business processes. Once these key business processes are changed, the planning and control standards previously in place all go to waste. Ineffective management can lead to a drop in efficiency across the board.
• Cultural Risks: Cultural risks are a result of the culture in place within an organization. Most organizations have a toxic culture to hide and delay negative information that can impact workflow processes. Such businesses are never able to build resilience and are slow to react when they are impacted by unexpected delays and events. Cultural risks can only be averted through a shakeup of the entire management system.
• Mitigation and Contingency Risks: These risks are caused due to the lack of contingency or mitigation planning. As we have studied earlier in this chapter, businesses can achieve a competitive advantage through their resilience.
External Driven Supply Chain Risks
External risks are related to conditions outside of your organization. These risks are influenced by upstream or downstream events in the supply chain.
• Demand Risks: Demand risks are caused due to unpredictable fluctuations in end-customer demand. These can lead to unpredictability and wastages.
• Supply Risks: Supply risks are caused by undue expectations in the delivery of materials. From raw materials to parts, delays in supply can lead to delays in the entire supply chain model.
• Environmental Risks: Environmental risks come from outside the supply chain and are usually related to the social, governmental, climate and economic factors in your country. These risks also include the threat of terrorism and can negatively impact the procurement and delivery of products. These are beyond your control and cannot be managed.
• Business Risks: There are external business risks as well such as the instability at a supplier’s firm. Suppliers with an unstable business structure or those unable to continue an uninterrupted flow of goods, can often lead to irreversible problems in the supply chain. The sale and purchase of supplier companies can also negatively hinder the chain.
• Physical Plant Risks: Physical plant risks usually relate to risks at the supplier’s physical facility. Lack of regulatory compliance or lack of proper measures at their plant can lead to disruptions within your supply chain.
The understanding of internal and external risks is important to form strategies for supply chain risk assessment and strategizing.
Supply Chain Risk Management Strategies
Risk mitigation strategies in the supply chain can be difficult to implement due to the highly globalized structure of most supply chains. However, with different unique and inspiring strategies in the market, supply chain stakeholders can make their entry with a bang.
The following techniques can be followed to reduce your business’s exposure to risk through the supply chain:
1. Leverage the PPRR Model: The PPRR model is a combination of Prevention, Preparedness, Response and Recovery. The first step should be to look for preventive measures that safeguard you from the threat of the risk. The second step is to be prepared for it, so that whenever risk strikes, your guard is ready. The third step is to give an appropriate response through a contingency plan. Contingency planning can save you during such hours of trouble, which is why it is best to have a response strategy ready. The final step is recovery, which deals with going back to normal without any other flaws. The PPRR model has also saved a number of supply chains from falling prey to the risks posed by COVID-19 restrictions and global lockdowns.
2. Manage Environmental and Social Risk: There is no way for businesses to completely eradicate environmental risk from the supply chain, but it can be managed. The current COVID-19 virus left many businesses that were sourcing only from China with no supplier to turn to. As a rule of thumb, you should source your goods from multiple suppliers and shouldn’t put all your eggs in one basket or your hopes on one supplier.
3. Improve Cyber Security: Ever since organizations made the move online, a number of malicious threat actors have jumped in and come up with a number of ways to scam organizations. If your data is present online as well, there is a significant chance that your resources will be subjected to such cyber crimes. Many global supply chain players have incorporated measures to minimize the damage caused through these cyber attacks and to also ensure that the errors are basic or minimal. The only way out of this conundrum is to have stringent security systems that protect your resources. A security team can also come in handy here, as it will protect your resources.
4. Know Your Supplier’s Financial Stability: All organizations should look deep into the financial stability and preparedness of their suppliers. The perfect supplier should be prepared at all times, and should be financially stable. A supplier that isn’t financially stable can do extensive damage to the supply chain and can cause downtime as well during times of emergencies.
5. Track Freight Metrics: Supply chain operators today rely on their shipped goods to reach the right place at the right time in order to keep retailers and their customers happy. This can only be done by delivering consistent results, without any errors in the process. Even a single late delivery can harm the process and can cause undue challenges to the chain. When looking at freight, businesses should consider the transit time, the average loading time, the number of stops, stop time on the way and the total lead time.
6. Have a Logistics Contingency Plan: A logistics contingency plan prepares supply chain operators for emergency situations and helps them come up with a plan to minimize damages during hours of turbulence. The need for a solid contingency plan was felt even more during the COVID-19 crisis.
7. Have Internal Risk Awareness Training: Earlier in this chapter we studied the internal risks involved inside a supply chain. It is, hence, a responsibility on organizations to conduct internal risk awareness training sessions and to ensure that employees don’t make mistakes during simple processes.
8. Monitor Risk: A key strategy of risk management is to consistently monitor elements of risk. This might sound like a given, but consistently monitoring risk can help prepare a response strategy against the risk and can also help give you an early heads-up before it strikes. Many organizations assume they’re secure in the face of risk when they’re not. The easiest way to monitor risk is through a scalable digital supply chain solution that looks at all aspects of your supply chain model.
9. Use Data for Modeling: Predictive maintenance is already an important practice in the manufacturing industry and can be used by supply chains as well. Supply chains can study data from a number of data points to identify risks and disruptions before they happen. This can help set contingency plans.
10. Consolidate Data: The presence of too much data in your ecosystem can slow down the works. Data science capabilities can better be leveraged through a solution that consolidates your data and keeps it within a well-organized and unanimous repository.
Supply chain management has become even more complicated today. With the global shift, organizations are now prone to a number of external and internal risks. These strategies might, however, prepare them for what’s to come.
Course Manual 11: Mining for Potential Global Supply Chain Threats
In the competitive global supply chain environment of today, an effective and flawless supply chain is considered a major competitive advantage for enterprises. A flawless supply chain is only created through frequent oiling of your resources and through regular updates and changes to the model.
An enterprise that conducts robust activities to create a strategy focused on reducing cost elements, delivering increased efficiency and providing end-to-end visibility, can benefit from a cost and competitive advantage in the industry. Supply chain professionals are always on the lookout for strategies and techniques they can follow to ensure a competitive edge for their company. However, due to the volatile nature of the market, it is seemingly hard for professionals to determine whether their changes and efforts have actually helped improve their supply chain operation. There is also the off chance that these changes derail your smooth operations and eventually end up hampering the supply chain process rather than boosting it.
Many companies today aim to create a best-in-class supply chain model that competitively sets them apart from others in the industry. However, with the growing stature of supply chains globally, companies need to complement their usual efforts with regular comparisons against industry peers and other best-in-industry organizations. These comparisons will help organizations mine for threats and reduce errors in the process.
Benchmarking for Threat Management
Benchmarking is relevant in supply chain for measuring the processes, products and services a company has to offer and comparing them against the metrics currently in place by other prominent competitors.
Previous research conducted on supply chain benchmarking has proven that it can lead to increased productivity in the supply chain and can motivate organizations to get the best possible outcomes from the process. The benchmarking scheme usually considers and covers four basic areas of performance in the supply chain process; delivery performance, logistics cost, asset management and flexibility and responsiveness.
The Supply Chains Operation Reference or SCOR is the first industrial framework in place for improving and evaluating enterprise-wide management and performance through the use of measurement and comparison tools. The process provides a standard path, definitions, terminology and other metrics that help organizations measure their performance and benchmark or compare it against that of other providers. The results of this process can eventually help the business grow exponentially and make real progress.
The metrics used in benchmarking include key areas such as delivery performance, production flexibility, cash-to-cash cycle time and order fulfillment. Benchmarking processes have helped organizations identify their financial and operating advantages over the competitors in their respective industry or group.
Following the basic principles of benchmarking and the process of recording information in a coherent and cohesive manner, organizations today can also record their tech advancements. Top performers in tech benchmarking have a clear strategy as far as IT incorporation is concerned and have closely aligned their tech advancements and business objectives with customer requirements from major clients.
While there have been previous studies on the role of benchmarking in achieving operational and financial success, there has been little previous research on technological advancements and supply chain collaboration/communication within stakeholders of one supply chain. The collaboration and communication between chain members allow a supply chain to become even more responsive and customer centric. When all concerned parties in a global supply chain maintain close communication with each other, they are able to extract a number of key benefits for long term success.
Christopher (1998) has confirmed that the performance of a supply chain is heavily dependent on the quality of the relationships shared between downstream and upstream partners. Technology has greatly enhanced the possibilities in communication here and allows all participating members to come together and form a heightened atmosphere of collaboration. It is also essential for businesses today to run technology benchmarks that measure and compare the IT prowess of supply chains against those of competitors’ and help improve the strategic business objective of collaboration between all stakeholders in the supply chain.
Minimizing Potential Threats
Potential global supply chain threats can be minimized through the following steps:
Know the Risks of Each Supplier
Every supplier brings with them a certain set of risks. These risks often deal with the geographical distance between the customer and supplier, the lack of communication or any other related cause. Knowing the presence of risk in supplier relationships, organizations should understand what risks come up with all suppliers. They should also comprehend the significance of supplier risks, and the likelihood or chances of offsetting them. When organizations and global supply chains of today understand the common risks associated with global suppliers, they can take proactive measures to not only mitigate the damage, but to also make a stitch in time and save themselves from future predicaments.
Supply chain managers should drop the ‘tick-box’ mentality and go for a progressive and mature approach toward selecting suppliers. Your supplier should be capable of managing threats and counterproductive events, and should have multiple streams or passages to get your raw materials to you.
Talk to Suppliers
There is no way for suppliers to get a hold of your expectations without a proper communication channel. Set clear expectations from the very outset and encourage proper dialogue and communication with your suppliers. The presence of a communication channel can help build mutual confidence and trust within suppliers, while minimizing the chances of any surprises.
Also communicate your concerns to suppliers, where and when you detect a certain risk. Consult them on what can be done to improve the situation, without giving them the impression that you’re looking for means to bait out of the deal. Suppliers often hide certain risks in a bid to keep a contract. Give suppliers the confidence they need and work with them for the betterment of the deal.
Study the Long-Term
Supply chain planning and strategies have to be focused on the long-term. Reactive responses, inappropriate short term cash flow strategies and just-in-time procurement methods combine to form an increasingly short-sighted plan of progress. These short-term incentives do add a shiny layer of efficiency, but they also open organizations up to a heightened threat of risks.
You can flip this around by reviewing geo-political and global threats and also asking suppliers to deliver a transparent model. Keep reviewing possible threats in the supply chain and improving them for all parties involved.
Learn and Adapt to Evolve
Projects go wrong, technologies can backfire, disruptions can lead to downtime, but through all this, a resilient supply chain should continue to flow and evolve. Rome wasn’t built in a day and similarly, your resilient supply chain will take some time to shape up. However, you can start the process toward that overnight by implementing an attitude of learning, adapting and evolving.
Start by creating a knowledge base of best practices and benchmarks followed by others. Implement these changes across the organization and look at what can be done to drive the chances of future success.
Adopt Emerging Technologies
Organizations can also improve their supply chain resilience by adopting futuristic technologies with solutions for disruptions of the future. A remote supply chain collaboration model between all stakeholders, including customers, wasn’t implemented by many global supply chains. The implications of the COVID-19 pandemic have found all such organizations wanting and have clearly displayed the efficacy and preparedness of organizations with a remote model.
The use of tech solutions can enable businesses to survive during tough times, without disrupting their business reserves.
Always Look Ahead
Keeping the current scenario in perspective, sales and demand figures are bound to bounce back when the pandemic and its repercussions subside. Supply chains should already be picking up the pace to prepare for this surge in demand for when the pandemic ends. An increased demand will require the most out of the supply chain, which is why processes should be oiled and fine-tuned in time.
Risk has evolved drastically over time and is present at the center of all supply chains. However, better communication with suppliers and a decent understanding of your weak points can drive these processes forward.
Keeping this in mind, operators should also ensure that risk is not just minimized, but also mitigated in a way that limits disruptions and errors.
Supply chain risk management is necessary for the success of measures to minimize the impact of natural disasters, transport disruptions, unpaid bills and a lot more. The purpose of supply chain risk management strategies is to prevent issues and disruptions from turning big and to provide all operators with a mitigation strategy if risks do occur in the first place.
Global supply chain operators realize the impact that a poor risk management strategy can have on their plans, which is why they are in the process of not just redefining their strategy, but also ensuring that all forms of supply chain risks are minimized and mitigated in a thorough manner.
The stage is all but set for global supply chains to seize the day. In lieu of this, it is only justified that supply chain operators mine for threats at all times and minimize the damages they have on their global stature.
Course Manual 12: Risk and Compliance in the Global Economy
A more resilient and risk-free supply chain can only be built by re-thinking your organization’s approach to compliance in the global setting. Supply chains operating at a global level have to remain aware of the complications involved in the global economy. Complying with changing regulations is a must, as they have to maintain their brand’s reputation across the supply chain.
Even the best supply chain risk compliance management plans can exclude the violations that come from breaking regulations in different countries. However, the use of tailored and targeted measures based on risk assessments measured earlier in this coursework can provide better regulation and safe practices.
Any global supply chain operator with a better understanding of its risk profile and the processes that are associated with it will be better suited to perform well when the next crisis strikes.
Compliance Risks in the Supply Chain
A company’s supply chain can often be host to a number of compliance risks. Aspects that should be considered here include export controls and sanctions, corruption, fraud, environmental and governance requirements for compliance, health and safety laws, labor law compliance and much more.
The following compliance risks are studied in greater detail.
Corruption
Suppliers often act as gateways for the bribery and corruption of individual customers. For example, supply chain operators can often use suppliers, including business consultants, to illicit fraudulent payments.
The Foreign Corrupt Practices Act or FCPA prohibits the provision of bribes and other fraudulent payments to foreign subsidiaries of a business based in America. Organizations operating at a global scale can even be held under this law if the fraudulent activities do not directly relate to them. Thus, a supplier that bribes authorities in their host country can land you in hot waters.
Zimmer Biomet is an example of this, as they were recently fined a penalty of over $30 million due to the actions of third-party distributors and foreign subsidiaries.
Employee Behavior
Harassment and discrimination have no place in global supply chains. A rogue staff member violating laws related to both these acts can cause all sorts of problems in your business. The repercussions can be particularly massive if the actions of employees aren’t dealt with in a swift and decisive manner.
The United States Equal Employment Opportunity Commission or EEOC collected more than $500 million in one fiscal year as compensation to victims of workplace discrimination. Additionally, organizations had to pay a staggering $125.5 million for settlements relating specifically to harassment cases. Global supply chains operating on a tight budget can find these laws particularly troubling, especially since they can lead your organization into a financial crunch of sorts.
Workplace Health and Safety
Workers are the heart and soul of organizations today, and keeping them healthy and active is something that employers actively try to take care of. The Occupational Health Safety and Health Administration or OSHA directly covers cases of employee health and safety. Different countries have different rules pertaining to employee health and safety, and a global supply chain operator should preferably be aware of all these rules. Only once the supply chain operator is aware of them can appropriate measures be taken to minimize the impact such problems have on productivity and financials.
Organizations have been fined over $3 million for safety violations and the inability to look after employees in a manner that is required by law.
Pitfalls That Can Sink Your Compliance Program
With the increase in global supply chain operators, we have also seen a massive increase in the number of compliance frameworks in play today. Organizations have come up with all sorts of compliance frameworks that make management easier and help them pass through critical situations and crises.
Every established global supply chain operator has a compliance risk management framework in play already. However, this framework itself isn’t clear of all flaws and errors. A majority of all organizations have key flaws in their supply chain compliance management framework. Rather than developing a reactive approach and fixing these flaws once they have already led to financial errors, it is necessary that businesses fix the flaws before anything major pops up.
Compliance should be viewed as a means to develop competitive advantage rather than a means of being run over by competition. We’ve highlighted some of the common pitfalls and blind spots that organizations can look into, to avoid compliance risks.
Failure to Study the External Operating Environment
Market driven factors, including situational factors such as political developments and geo-political tensions, are very likely to elevate the risk of compliance programs in companies operating at a global level. Sometimes even major global players with strong frameworks find themselves in the wrong place at the wrong time. Due to the failure to plan for the situation, they’re often found lacking on different parts.
Considering Only Compliance Enforcement
Compliance failures or breaches in regulations have an impact far beyond the sanctions most people can see around them. Implications in compliance can create a number of obstacles and challenges for business, both locally and across the global supply chain.
Compliance related disruptions often lead to civil society actions against organizations, disruption to business operations and extreme regulatory pressure on the organization. These issues can eventually damage the reputation of the firm and lead to implications in other parts of the business as well.
Hence, global supply chain operators should look at compliance in a different light than before, and should also consider the broad-based impact it can have on the business. This approach enables compliance teams to raise awareness regarding the risks that can be activated through a rather simple compliance breach.
Failure to Use Resources in a Sustainable Manner
Resources are often scarce, and compliance teams have to ensure that they manage their work in the best manner possible, without letting the limited resources become a problem. Most organizations have a specific compliance budget at hand, and the failure to use that budget and other resources in a sustainable manner can lead to a number of repercussions across the board. Businesses should look to optimize their resources and minimize any wastage in the process. A frugal approach to resource management can work wonders for the organization.
Ways to Achieve Supply Chain Compliance
Supply chain compliance is among the biggest challenges facing procurement and supply chain organizations. Almost 45 percent of all executives in global supply chain say that they are experiencing enhanced pressure for internal compliance and regulatory compliance.
Compliance is a hot topic across the supply chain, as supplier management and other relative hazards come into the picture as well. Global supply chain manufacturers can also be sued over inabilities to maintain a strict check over supply chain practices.
Make Ethics a Factor When Qualifying a New Supplier
Every supplier brings with them a certain set of risks. These risks often deal with the geographical distance between the customer and supplier, the lack of communication or any other related cause. Knowing the presence of risk in supplier relationships, organizations should understand what risks come up with all suppliers. They should also comprehend the significance of supplier risks, and the likelihood or chances of offsetting them. When organizations and global supply chains of today understand the common risks associated with global suppliers, they can take proactive measures to not only mitigate the damage, but to also make a stitch in time and save themselves from future predicaments.
Supply chain managers should drop the ‘tick-box’ mentality and go for a progressive and mature approach toward selecting suppliers. Your supplier should be capable of managing threats and counterproductive events, and should have multiple streams or passages to get your raw materials to you.
Talk to Suppliers
There is no way for suppliers to get a hold of your expectations without a proper communication channel. Set clear expectations from the very outset and encourage proper dialogue and communication with your suppliers. The presence of a communication channel can help build mutual confidence and trust within suppliers, while minimizing the chances of any surprises.
Also communicate your concerns to suppliers, where and when you detect a certain risk. Consult them on what can be done to improve the situation, without giving the impression that you’re looking for means to bait out of the deal. Suppliers often hide certain risks in a bid to keep a contract. Give suppliers the confidence they need and work with them for the betterment of the deal.
Establish a Company Culture That Supports Compliance
Compliance with the laws and regulative measures is necessary, but it isn’t entirely the only thing organizations are required to do today. Organizations in the business world are required to also maintain a strict code of conduct, based on which they perform in a particular manner toward employees and the environment.
Most developing countries have concrete laws in place for risk management, but lack the steps that should be taken here. The lack of proper steps and decision making can lead to companies exploiting labor and not giving human rights the importance they should be given. Companies have a responsibility of their own as well, and should go beyond simple legal compliance to remain on the right side of ethics and the law.
This responsibility can only be set and identified through a company culture that supports compliance in the long run. Organizations should realize the impact of adding compliance to their culture and how it can help them get the kind of results they expect. In consideration of this, organizations should also further hone their abilities and make it a habit to mitigate risk and set risk management strategies across the supply chain. A global culture of ethics and values toward supply chain compliance can only be set when organizations standardize compliant processes across the firm.
Breaking Barriers to Cultural Changes
A number of organizations today face cultural barriers to change. These barriers are self-imposed and have become a norm in most organizations with the same old practices. As a rule of thumb, organizations in the supply chain should ensure that they break barriers to cultural changes and enforce a policy of acceptance and approval.
Global supply chain operators should make their services and corporate culture as efficient and flexible as possible. The flexibility can help them adjust to global changes and the other changes in regulations over time. A rigid corporate structure might be detrimental for the supply chain, as it would make it difficult for the organization to incorporate compliant and ethical principles in the culture.
Risk Management across the Board
The notion for risk management has particularly been felt in supply chain management, as managers and organizations have somehow tried their best to capture risk and reduce the complications involved in it. The global supply chain of today is based on modern principles of interrelationship, which makes risk management and mitigation even more complicated and difficult than first imagined. Due to this interrelation of the global supply chain, organizations are unaware of the type and nature of certain developments, and are unable to predict the repercussions that they might lead to.
Besides the unpredictability of impact, organizations also face complications in the form of major world events. Major disruptions like the current COVID-19 crisis, piracy attacks offshore, global economic crisis, European ash-clouds, flooding in Asia and earthquakes/tsunamis across the world have shown project managers’ lack of preparedness toward uncertain and unpredictable global developments in general.
Risk management is a single part of policy management and global success in a supply chain. It is an important element but can only work when it is put together in context with the other strategic requirements of a supply chain. In practice, risk is the consequence of impacts on different segments of the supply chain; hence its efficacy should also be discussed in context with policies in the organization, rather than in isolation.
It is fairly reasonable to believe that an organization indulges in risk management and mitigation strategies as a means to safeguard certain business processes. The performance evaluation process should hence include an understanding of the processes that were meant to be safeguarded and how they’ve performed under the pressure of the risk. This understanding can eventually lead organizations toward measuring the success of their risk management procedures and limiting the risk facing their global supply chain.
Workshop Exercises
Risk Analysis Exercises
01. Critical review of Global Supply Chain risk: Explain in your own words how this process will directly impact upon your department?
02. How Global Supply Chain risk has evolved over the years: Explain in your own words how this process will directly impact upon your department?
03. Core characteristics of Supply Chain risk: Explain in your own words how this process will directly impact upon your department?
04. Risk assessment process in Global Supply Chain: Explain in your own words how this process will directly impact upon your department?
05. Common risks involved in Global Supply Chains: Explain in your own words how this process will directly impact upon your department?
06. Understanding Supply Chain risk management: Explain in your own words how this process will directly impact upon your department?
07. Understanding supplier profiles: Explain in your own words how this process will directly impact upon your department?
08. Mitigating transport and logistic risks in a Global Supply Chain: Explain in your own words how this process will directly impact upon your department?
09. Practical approaches to build risk resilience: Explain in your own words how this process will directly impact upon your department?
10. Best practices for Supply Chain risk management: Explain in your own words how this process will directly impact upon your department?
11. Mining for potential Global Supply Chain threats: Explain in your own words how this process will directly impact upon your department?
12. Risk and compliance in the global economy: Explain in your own words how this process will directly impact upon your department?
SWOT & MOST Analysis Exercises
01. Undertake a detailed SWOT Analysis in order to identify your department’s internal strengths and weaknesses and external opportunities and threats in relation to each of the 12 Risk Analysis processes featured above. Undertake this task together with your department’s stakeholders in order to encourage collaborative evaluation.
02. Develop a detailed MOST Analysis in order to establish your department’s: Mission; Objectives; Strategies and Tasks in relation to Risk Analysis. Undertake this task together with all of your department’s stakeholders in order to encourage collaborative evaluation.
Project Studies
Project Study (Part 1) – Customer Service
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 2) – E-Business
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 3) – Finance
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 4) – Globalization
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 5) – Human Resources
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 6) – Information Technology
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 7) – Legal
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 8) – Management
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 9) – Marketing
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 10) – Production
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 11) – Logistics
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Project Study (Part 12) – Education
The Head of this Department is to provide a detailed report relating to the Global Supply Chain Development process that has been implemented within their department, together with all key stakeholders, as a result of conducting this workshop, incorporating process: planning; development; implementation; management; and review. Your process should feature the following 12 parts:
01. Critical review of Global Supply Chain risk
02. How Global Supply Chain risk has evolved over the years
03. Core characteristics of Supply Chain risk
04. Risk assessment process in Global Supply Chain
05. Common risks involved in Global Supply Chains
06. Understanding Supply Chain risk management
07. Understanding supplier profiles
08. Mitigating transport and logistic risks in a Global Supply Chain
09. Practical approaches to build risk resilience
10. Best practices for Supply Chain risk management
11. Mining for potential Global Supply Chain threats
12. Risk and compliance in the global economy
Please include the results of the initial evaluation and assessment.
Program Benefits
Management
- Performance Improvement
- Productivity Improvement
- Stakeholder Management
- Globalization Process
- Decentralized Approach
- International Engagement
- Strategic Alliances
- International Distribution
- Lean Management
- Project Management
Production
- Process Improvement
- Improved Options
- Logistics Management
- Procurement Excellence
- Supply-Chain Globalization
- Outsourcing Optimization
- Insourcing Optimization
- Lean Process
- Productivity Improvement
- Distribution Enhancement
Globalization
- Business Partnering
- Global Process
- Mergers Acquisitions
- Cost Reduction
- Product Improvement
- Quality Management
- Process Decentralization
- Supply-Chain Globalization
- Return On Investment
- Competitive Improvement
Client Telephone Conference (CTC)
If you have any questions or if you would like to arrange a Client Telephone Conference (CTC) to discuss this particular Unique Consulting Service Proposition (UCSP) in more detail, please CLICK HERE.