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.

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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

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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