25
2 Supply Chain Risk Management The As- Is Landscape
In.this.chapter.we.provide.an.overview.of.the.growth.of.supply.chain.risk. management. (SCRM). during. the. last. few. years. and. provide. additional. insight. into. who. is. talking. about. SCRM,. what. they. are. saying,. and. the. tone.of.the.dialogue..We.will.provide.a.summarized.view.of.SCRM.top- ics,.announcements,.articles,.reports,.and.survey.results.that.help.define. the. state. of. SCRM. today.. We. will. also. share. a. perspective. on. SCRM. through.a.different.prism:.the.Four.Pillars.of.SCRM..We.will.then.provide. a.maturity.level.for.each.pillar..The.chapter.concludes.with.discussion.of. SCRM.adoption.
a ChROnOlOgy Of Supply Chain RiSk ManageMent
Let’s.start.by.providing.a.sense.of.the.growth.of.SCRM.in.terms.of.aware- ness,. discussions,. articles,. papers,. surveys,. solutions,. tools,. and. more.. During. our. research. for. this. book. we. compiled. hundreds. of. reference. works. in. order. to. provide. a. comprehensive,. end-.to-.end. perspective. of. SCRM.. Using. these. reference. works. and. our. experience,. we. have. com- piled.a.chronology.of.the.growth.we’ve.witnessed.and.the.tone.and.tenor. of.the.dialogue.
While.many.risk.management.studies.and.surveys.were.conducted.dur- ing.2000–2010,.our.focus.starts.with.the.latter.part.of.that.decade..Most. supply. chain. executives. became. interested. in. SCRM. after. the. financial. meltdown.of.2008..Company.after.company.watched,.almost.helplessly,.as.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
26 • Supply Chain Risk Management: An Emerging Discipline
customer. orders. were. canceled,. suppliers. entered. bankruptcy,. and. com- modity. markets. became. increasingly. volatile.. For. many,. 2008. was. the. genesis.of.their.risk.management.efforts.
2009
Most.operations.management.and.supply.chain.management.profession- als. are. familiar. with. the. International. Organization. for. Standardization. (ISO).Group.and.its.set.of.standards.that.revolve.around.quality.control. and.process.reliability,.such.as.ISO.9000..In.2009,.the.ISO.Group.delivered. its.first.set.of.standards.directly.relating.to.supply.chain.risk,.which.was. a.major.recognition.of.the.importance.of.SCRM..These.standards.include. ISO. 73. and. ISO. 31000.. ISO. 73. profiles. the. vocabulary. and. taxonomy. of. risk.within.the.supply.chain,.and.ISO.31000.provides.insight.into.the.prin- ciples,.practices,.and.guidelines.to.effectively.identify,.assess,.mitigate,.and. manage.supply.chain.risk.
A.key.report.during.this.period.was.Accenture’s.2009.Managing Risk for High Performance in Extraordinary Times.1This.global.report,.which.sur- veyed.260.CFOs,.chief.risk.officers,.and.other.executives.across.21.coun- tries,.came.right.after.the.2008.financial.meltdown..This.report.explored. the.details.of.what.was.going.on.around.the.globe.relative.to.risk.and.its. impact. on. businesses. and. supply. chains.. It. was. one. of. the. first. compre- hensive. analyses. of. the. cause. and. effects. of. risk. to. global. supply. chains.. This. report. revealed. that. 85%. of. executive. respondents. said. their. com- pany.needed.to.overhaul.its.approach.to.risk.management;.40%.said.their. companies.already.had.increased.or.would.increase.their.investments.in. broader.risk.management.capabilities;.41%.stated.their.risk.management. costs. increased. by. at. least. 25%. over. a. three-.year. period;. and. only. 27%. said.their.risk.management.function.was.involved,.to.any.great.extent,.in. objective.setting.and.performance.management.
Accenture. concluded. that. steps. needed. to. be. taken. to. manage. supply. chain.risk.to.protect.a.company’s.competitive.advantage,.reputation.and. branding,. and. credit. ratings;. to. maintain. positive. comments. by. ana- lysts;.and.to.ensure.access.to.capital.over.time.at.a.reduced.cost..Overall,. Accenture.reported.that.many.companies.had.a.long.way.to.go.before.they. should.feel.comfortable.about.their.company’s.state.of.risk.management.
AMR.released.a.report.on.risk.in.U.S..manufacturing.to.get.a.sense.of. how.businesses.feel.about.the.future.and.what.they.saw.in.terms.of.risk..The. top. three. concerns. of. U.S.. manufacturers. were. supplier. quality. failures,.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 27
commodity. price. volatility,. and. intellectual. property. infringement.. In. particular,.supplier.solvency.was.a.key.concern..Furthermore,.respondents. said.that.doing.business.with.Chinese.suppliers.was.contributing.the.most. to.overall.risk,.scoring.the.highest.in.11.out.of.15.risk.categories.evaluated.
2010
In.2010,.we.began.a.course.for.a.master’s.of.business.administration.degree. by.explicitly.profiling.the.emerging.elements.of.supply.chain.risk.manage- ment.. The. initial. courseware. was. made. up. of. articles,. survey. outcomes,. reports.from.the.insurance.industry,.and.the.basics.of.good.risk.manage- ment.. As. the. course. grew. in. maturity,. a. Supply. Chain. Risk. Assessment. Tool.emerged.that.codified.the.effects.of.supply.chain.maturity.as.it.relates. to.mitigating.risk..The.basic.premise.was.that.as.the.supply.chain.matures,. the.inherent.risks.faced.by.that.supply.chain.diminish.
The.Supply.Chain.Risk.Assessment.Tool,.featured.in.Figure 2.1,.encom- passes.about.100.questions-.of-.discovery.about.a.company’s.supply.chain. across.10.tenets.of.the.entire.supply.chain..It.is.a.perception-.based.tool.that. captures.the.complexion.of.a.company’s.operating.environment.relative.to. a.maturity.model.and.then.develops.an.inherent.risk.factor.for.every.tenet.. Risk.factors.are.then.plotted.inside.a.spider.diagram.for.visual.presenta- tion.using.a.red,.yellow,.and.green.designation..There.will.be.more.discus- sion.about.this.tool.later.in.the.book.
Risk Gradient Low Risk 1 to 4
Medium Risk 5 to 7
High Risk 8 to 10
Heat Map Color Key
Leadership 10.00 8.00 6.00 4.00 2.00 0.00 1.00 3.00 5.00 7.00 9.00
Balanced Scorecard
S&OP Processes
Information Systems
Integrated Supply Chain
Customer Demand
SCRM Risk “Heat Map” Assessment
Industry
Manufacturing
Supply
Logistics
figuRe 2.1 Tools:.supply.chain.risk.assessment.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
28 • Supply Chain Risk Management: An Emerging Discipline
During.2010,.the.Massachusetts.Institute.of.Technology.(MIT).Center. for.Transportation.and.Logistics.produced.its.preliminary.findings.from. the.Global.Supply.Chain.Risk.Management.research.project..The.survey. collected. 1,400. usable. responses. from. companies. in. 70. countries.. The. project’s. primary. goal. was. to. understand. if. regional. and. cultural. differ- ences.affect.how.people.think.about.and.manage.supply.chain.risks..This. survey.was.a.seminal.point.in.the.birth.of.SCRM..The.final.report.covers. differences.in.attitudes.about.risk,.differences.in.risk.frequencies.(internal. and. external. events). and. priorities,. and. differences. in. practices. across. countries.and.industries.2.It.is.one.of.the.few.reports.that.approached.risk. from.a.cross-.cultural.perspective.
The. MIT. report. concluded. that. respondents. showed. a. marked. prefer- ence. for. risk. prevention. as. opposed. to. planning. and. response,. but. that. was.influenced.by.national.culture..Furthermore,.most.respondents.indi- cated. that. risk. planning. and. prevention. should. be. carried. out. centrally. in.an.organization,.while.actual.responses.to.most.risk.events.should.be. managed. locally.. Respondents. were. also. asked. to. rank. the. top. supply. chain.disruptions.for.which.their.company.should.prepare..A.breakdown. in.supply.quality,.supplier.financial.failures,.and.internal.process.failures. topped.the.list.
Aberdeen. Group. also. produced. a. comprehensive. report. on. SCRM.. Their. findings. further. supported. the. notion. that. SCRM. is. evolving. as. a. concept.3. One. of. the. key. findings. from. this. study. was. an. analysis. of. the.reasons.behind.pursuing.an.aggressive.risk.management.agenda..The. top.reasons.include.protecting.the.organization.and.its.brand,.safeguard- ing. against. an. unpredictable. global. economic. environment,. a. corporate. mandate. to. institutionalize/.improve. risk. management,. complying. with. new. and. changing. regulations,. and. maintaining. and. improving. share- holder.value.
And. what. did. the. Chief. Procurement. Officers. (CPOs). plan. to. do. to. manage. risk. according. to. Aberdeen?. The. CPOs. expected. to. develop. clearly. defined. metrics. for. supply. performance. and. risk,. develop. con- tingency. plans. for. supply. disruptions,. use. external. information. services. to. monitor. and. assess. supply. risk,. and. define. ownership. of. risk. within. the.organization.
This.groundbreaking.report.was.one.of.the.first.times.a.research.orga- nization. put. together. a. comprehensive. profile. in. an. effort. to. codify. the. elements.of.a.good.SCRM.journey..Figure 2.2.illustrates.the.actions.items,. capabilities,.tools,.and.techniques.that.will.help.ensure.success.within.the.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 29
risk.management.arena..The.bulk.of.Aberdeen’s.findings.about.and.jour- ney.toward.good.SCRM.hold.true.today.
Also.in.2010.PRTM.(now.part.of.PricewaterhouseCoopers).released.its. Global Supply Chain Trends Report.4. A. few. of. the. novel. themes. emanat- ing.from.this.study.were.that.almost.75%.of.all.the.respondents.believed. that. demand. and. supply. volatility. will. become. the. biggest. roadblock. to. capturing. profits. in. the. economic. upturn,. and. more. than. 80%. expected. complexity.in.their.supply.chains.to.increase.dramatically,.partly.due.to. an. increase. in. product. proliferation.. The. PRTM. study. produced. several. important.takeaways:
•. Demand.and.supply.volatility.is.here.to.stay. •. Supply.chain.complexity.will.be.with.us.for.many.years. •. End-.to-.end. supply. chain. cost. optimization. will. be. critical. mov-
ing.forward. •. Risk. and. opportunity. management. should. span. the. entire. supply.
chain,.including.with.key.partners.
This. research. concluded,. and. this. has. certainly. been. borne. out. by. subsequent. experience,. that. supply. chains. will. become. more. volatile.
Pressures Actions – Protect the organization and its brand/ competitive advantage – Unpredictable global economic environment
Aberdeen Group CPO Survey Report & SCRM Report 2010
– Implement processes aligning risk management with compliance/governance – Develop supply risk mitigation strategies – Build risk aware culture throughout the organization
– Standard risk management policies and procedures across the enterprise – Management accountability for risk management activities within overall governance framework – Transparency in communication of risk information (i.e., policies including escalation criteria, procedures, practices & thresholds) – Risk information integrated into core decision-making (i.e., strategic planning capital allocation and performance management)
– Enterprise Risk Management (ERM) platform/software – Enterprise governance, risk, and compliance (GRC) platform/Software – Event management (triggers/alerts) – Question Assignment & reporting tools – Enterprise BI platforms – Heat maps/dashboards/ balanced scorecard tools re�ecting risk – Predictive analytics/process modeling tools for measuring and monitoring risk
Capabilities Enablers
figuRe 2.2 Best-.in-.class.SCRM.framework.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
30 • Supply Chain Risk Management: An Emerging Discipline
and. complex.. The. researchers. also. concluded. that. most. companies. are. ill-.prepared.to.manage.this.complexity.and.that.risk.management.will.be. a.critical.success.factor.affecting.corporate.success.
We.also.saw.two.more.reports.explicitly.targeting.supply.chain.disrup- tions. and. their. financial. impacts.. Chainlink. Research. and. Hendrick. &. Singhai.had.been.working.on.attempting.to.codify.the.financial.impacts. of.supply.chain.disruptions.on.company.bottom.lines..According.to.these. resources,. a. publicly. traded. company. that. experiences. a. moderate. to. severe.supply.disruption.should.expect.to.realize.a.107%.drop.in.operating. income.on.average,.114%.drop.in.return.on.sales,.93%.drop.in.return.on. assets,.7%.lower.sales.growth,.11%.growth.in.cost,.14%.growth.in.inven- tories,. and. a. 10%. reduction. in. shareholder. value.. This. is. one. of. the. first. reports.that.linked.risk.events.to.tangible.performance.shortfalls.
Finally,. a. report. from. the. Business. Continuity. Institute. (BCI). in. the. United.Kingdom.revealed.serious.levels.of.supply.chain.failures.and.dis- ruptions. around. the. globe.. This. study. found. that. weather. disruptions. affected.more.than.half.of.all.companies.in.2010,.up.from.29%.the.previ- ous.year..Unplanned.IT.and.telecommunication.outages.were.second.on. the. list. of. most. frequent. disruptions.. More. than. one. third. of. companies. mentioned.service.failures.by.outsourcer.providers,.up.from.20%.the.pre- vious.year..More.than.50%.of.the.respondents.stated.that.their.disruptions. led.to.a.loss.of.productivity.and.20%.of.the.respondents.admitted.they.had. suffered.damage.to.their.brand.or.reputation.as.a.result.of.a.disruption.
The.report.concluded.that.the.serious.levels.of.supply.chain.disruption. experienced. by. organizations. around. the. globe,. coupled. with. the. wide. range.of.threats,.underscores.the.business.case.for.investment.in.business. continuity.planning.(BCP)..We.will.go.into.more.detail.later.about.BCP.. For.now,.consider.BCP.to.be.an.internal.insurance.policy.or.risk.response. plan.that.identifies,.assesses,.mitigates,.and.manages.risk.scenarios.
2011
During. 2011. Accenture. began. to. talk. about. the. “new. normal”. of. global. supply.chains..The.new.normal.featured.more.global.sourcing.and.manu- facturing,. hyper-.demand. requirements,. longer. supply. chain. lead. times,. more.potential.points.of.failure,.and.managing.supply.chains.in.far-.flung. corners.of.the.world.5.With.these.elements.of.supply.chain.risk.coming.to. the.surface,.Accenture.produced.a.set.of.principles.that.support.the.birth.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 31
of. supply. chain. risk. management. as. a. discipline.. These. six. principles. include.the.following:
. 1.. Integrate.risk.management.practices.across.all.business.functions.to. ensure.understanding,.commitment,.and.alignment
. 2.. Identify,.measure,.and.prioritize.risks.by.mapping.out.the.complete. supply.chain.“ecosystem”
. 3.. Emphasize. operational. flexibility,. global. visibility,. and. diversified. supplier.portfolio.to.blunt.the.impact.of.supply.chain.calamities
. 4.. Use. probability. modeling. to. identify. unknown. risks. and. develop. contingency.plans
. 5.. Insist. that. suppliers. and. business. partners. perform. up-.front. due. diligence
. 6.. Hedge.risk.by.making.prudent.choices.about.insurance
We.will.dig.deeper.into.every.one.of.the.six.tenets.throughout.the.book. AMR. surveyed. more. than. 500. executives. worldwide. during. 2011. and.
asked.questions.about.supply.chain.risks,.disruptions,.effects.of.those.dis- ruptions,.and.methods.to.mitigate.and.manage.risk..Supply.failures.were. the. most. cited. disruption. noted. by. executives.. Quality. failures,. natural. disasters,. and. commodity. price. volatility. were. also. cited. by. almost. one. third. of. respondents.. In. terms. of. the. most. common. risk. management. approaches,.executives.said.they.relied.on.(in.order.of.mention).meetings/. discussions.with.external.partners.and.suppliers,.predictive.analytic.tools,. staying.current.with.supplier.business.continuity.plans,.utilizing.reports/. data.from.third-.party.sources,.and.utilizing.performance.risk.dashboards.
In.October.2011.SCM.World,.the.global.institute.for.supply.chain.learn- ing,.training,.and.development.at.Stanford.University,.released.its.annual. Chief Supply Chain Officer.(CSCO).study.6.The.survey.involved.750.global. executives.of.which.over.50%.were.vice.presidents.or.higher..The.report.was. conducted. during. the. immediate. aftermath. of. the. Japanese. earthquake. and. tsunami,. creating. an. interest. in. understanding. how. supply. chains. were.reacting.to.these.disruptions..The.report.highlighted.the.disruptions. due.to.the.tragic.events,.how.many.companies.had.suffered.shortages.in. supply. and. capacity,. lost. sales,. inventory. write-.offs,. and. plant. closures. across. many. industries.. Even. though. the. report. didn’t. examine. supply. chain. risk. specifically,. it. did. talk. at. length. about. how. the. supply. chain. is.a.critical.success.factor.and.a.driving.force.for.competitive.advantage..
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
32 • Supply Chain Risk Management: An Emerging Discipline
Another.key.theme.throughout.the.report.was.that.supply.chain.sustain- ability.is.critical.in.terms.of.driving.value.for.the.corporation,.especially. in.times.of.demand.and.supply.volatility.
During.this.period.we.also.picked.up.on.definitions.of.a.resilient.supply. chain.from.the.Supply.Chain.Council.7.While.the.Supply.Chain.Council. was. updating. its. SCOR. Model. and. risk. definitions. and. frameworks,. the. importance.of.resiliency.in.the.supply.chain.came.to.the.surface..Essentially,. the.council.concluded.that.in.a.world.of.technical.change,.financial.risk,. political.turbulence,.and.mounting.regulatory.pressures,.industry.growth. does. not. always. proceed. smoothly.. Risk. management. is. especially. chal- lenging. when. threats. are. unpredictable. At. the. same. time,. corporations. are.accepting.broader.responsibility.for.social.and.environmental.impacts. of.their.supply.chains..A.resilient.enterprise.has.the.capacity.to.overcome. disruptions.and.continually.transform.itself.to.meet.the.changing.needs. and.expectations.of.its.customers,.shareholders,.and.other.stakeholders.
2012
Another.study.by.the.Business.Continuity.Institute.addressed.the.impact. of.the.Great.East.Japan.earthquake.and.Christchurch.earthquake.in.New. Zealand..The.key.take-.away.from.this.research.was.the.wide-.ranging.dif- ferences. in. an. important. SCRM. metric,. time-.to-.recovery.. BCI. assessed. how. long. it. took. supply. chains. to. recover. from. the. impact. of. the. earth- quakes..The.compelling.statistic.is.that.almost.50%.of.all.the.respondents. needed.more.than.five.weeks.to.recover.
Aberdeen. Group. released. a. report. on. risk. from. a. financial. perspec- tive.8.Coming.off.the.heels.of.the.Japanese.disasters,.the.report.attempted. to. understand. the. risk-.adjusted. strategies. actually. operating. inside. the. CFO’s.office..The.report.concluded.that.whether.a.company.is.looking.to. reroute. a. supply. source. away. from. a. natural. disaster. or. seeking. to. miti- gate.the.risk.associated.with.tax.audit.exposure,.it.is.clear.that.companies. with. processes. and. tools. that. enable. clear. visibility. to. risk. entities. and. a. means.to.react.quickly.are.going.to.be.the.ones.that.hold.the.key.to.effec- tive.budgeting.and.profitability.
Zurich,.one.of.the.largest.insurers.in.the.world,.published.a.set.of.sup- ply.chain.risk.statistics.and.some.revealing.numbers.associated.with.supply. chain.business.interruptions.9.The.insurer.released.a.report.that.profiled. the. causes. behind. supply. chain. disruptions. derived. from. an. analysis. of.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 33
insurance.claims.over.a.several-.year.period..Clearly,.this.analysis.addressed. primarily.hazard.risk..The.insurer.found.that.85%.of.organizations.expe- rienced.at.least.one.supply.chain.incident.that.caused.disruption.to.their. business.. More. than. 50%. of. supply. chain. disruptions. occur. because. of. adverse.weather,.and.just.over.40%.occur.because.of.unplanned.IT.or.tele- com. outages.. Other. significant. disruptions. occurred. because. of. loss. of. talent/.skills,. product. quality. incidents,. civil. unrest/.conflicts,. and. cyber- attacks..Of.the.disruptions.that.occurred,.nearly.40%.originated.below.the. tier-.one.supplier.level.
A.research.article.titled.Researcher’s Perspectives on Supply Chain Risk Management presented.a.study.of.the.diversity.of.perspectives.surround- ing.supply.chain.risk.management.10.This.study.identified.three.gaps.in.the. body.of.knowledge:
•. Definition gap—there. is. no. clear. consensus. on. the. definition. of. SCRM. because. many. limit. the. scope. of. SCRM. to. rare. but. large. events,. while. others. believe. that. SCRM. is. about. supply–.demand. uncertainties..(Hopefully,.the.definitions.we.presented.in.Chapter 1. help.to.clarify.this.term.)
•. Process gap—there. is. a. lack. of. research. on. an. important. aspect. of. the.risk.management.process,.namely,.the.response.to.supply.chain. risk.incidents.
•. Methodology gap—there.is.a.shortage.of.empirical.research.in.the. area.of.SCRM.
During. this. period. an. important. study. on. supply. chain. risk. was. con- cluded.by.Deloitte.and.Forbes.Insights..This.survey.covered.192.U.S..exec- utives,.CEOs,.CFOs,.SVPs,.and.directors.across.multiple.industries..One. finding.that.stands.out.from.this.work.is.that.91%.of.respondents.said.they. planned. to. reorganize. and. reprioritize. their. approaches. to. risk. manage- ment.during.the.subsequent.three.years.
A. disconcerting. aspect. of. this. survey. was. the. completely. scattered. approach. toward. risk. responsibility.. Fully. one. quarter. of. respondents. indicated.the.CEO.is.primarily.accountable.for.risk.management;.almost. a.quarter.said.the.said.the.CFO/.treasurer’s.office.is.primarily.responsible;. almost. 20%. said. the. chief. risk. officer/.treasurer. is. responsible;. and. fewer. than.15%.said.legal/.compliance.is.responsible..The.remaining.respondents. were. spread. across. various. other. groups.. Future. risk. management. plans.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
34 • Supply Chain Risk Management: An Emerging Discipline
include. more. than. half. of. respondents. saying. their. company. planned. to. elevate. risk. management. within. their. organization,. while. almost. 40%. said.they.will.reorganize.to.support.enterprise.risk.management.(ERM),.a. framework.introduced.in.Chapter 1..Almost.40%.of.respondents.said.they. will.provide.more.staff.training,.while.almost.one.third.planned.to.incor- porate.more.technology.into.their.risk.management.efforts.
And. finally,. SCM. World,. which. we. referenced. previously,. released. its. annual.Chief Supply Chain Officer.report..This.report.surveyed.more.than. twice.the.number.of.companies.as.in.2011.and.explored.five.main.topics,. one.of.which.was.risk.management..A.novel.aspect.of.this.survey.involved. SCM.World.asking.respondents.what.they.were.doing.to.identify,.assess,. mitigate,. and. manage. risk. and. profiled. the. impact. of. risk. events. from. both. demand. and. supply. disruptions.. From. this. study. we. learned. that. the.highest.impact.from.supply.and.demand.disruptions.over.a.two-.year. period.was.a.loss.of.sales/.revenue..In.order.of.impact,.subsequent.impacts. included.lower.profits,.delays.in.product.launches.and.growth.plans,.loss. of. customers,. higher. cost. of. capital,. damage. to. image. and. reputation,. and.lower.share.price/.shareholder.value..This.research.revealed.the.many. damaging.effects.of.supply.and.demand.disruptions.
2013
The.start.of.2013.featured.the.release.of.a.report.from.the.World.Economic. Forum. (WEF). in. Davos,. Switzerland.. The. sponsors. of. the. report. were. Zurich.Insurance,.Accenture,.Partners.against.Corruption.(PACI),.and.the. World. Economic. Forum.. The. report,. titled. Building Resilience in Supply Chains,. was. an. outcome. of. WEF’s. initial. Supply. Chain. Risk. Initiative. started.in.2011..A.clear.finding.in.this.report.is.the.need.for.organizations. to. shift. from. reactive. to. proactive. risk. management.. Another. relevant. finding.is.that.more.than.80%.of.companies.are.now.concerned.about.sup- ply.chain.resilience..Study. participants.also. indicated.there. is.a.need.for. a.common.risk.vocabulary.and.that.cyber.risk.may.have.the.greatest.risk. implications.for.supply.chains.
The. World. Economic. Forum’s. report. touched. on. what. it. will. take. to. make. SCRM. a. bona. fide. business. discipline.. Perhaps. most. importantly,. risk. management. must. become. an. explicit. and. integral. part. of. supply. chain. governance.. Other. high-.level. suggestions. for. moving. SCRM. to. a. business.discipline.include.the.following:
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 35
•. Institute. a. multistakeholder. supply. chain. risk. assessment. process. across.the.enterprise
•. Mobilize. international. standards’. bodies. to. further. develop. resil- ience.standards
•. Incentivize.corporations.to.follow.agile,.adaptable.supply.chain.strategies •. Expand. the. use. of. data-.sharing. platforms. for. risk. identification.
and.responses
A. RIMS.org. article. mentioned. the. Risk. Maturity. Index. developed. by. AON.Insurance.and.the.Wharton.School.of.Business..The.index.suggests. that. companies. with. the. highest. level. of. risk. maturity. (a. measure. that. gauges.the.development.of.an.organization’s.risk.strategy.and.framework). experience. 50%. lower. stock. price. volatility. than. less-.developed. counter- parts.. Over. a. two-.year. period. (2010–2012). companies. with. higher. risk. maturity. ratings. saw. greater. annual. stock. price. returns.. This. was. espe- cially. apparent. when. the. only. companies. to. see. positive. returns. during. that.volatile.period.were.those.with.the.highest.risk.maturity.levels..Those. lower.on.the.maturity.scale.saw.losses.between.17%.and.30%..This.work. again.pointed.out.the.critical.relationship.between.risk.management.and. financial.outcomes.
Lloyd’s. of. London. released. several. statistics. in. 2013. associated. with. the.Japanese.earthquake.and.tsunami.and.Thailand.floods..The.first.sta- tistic. they. shared. was. the. combined. property. and. business. interruption. losses,.which.reached.a.record-.breaking.$240.billion,.with.just.$47.billion. of.the.losses.covered.by.insurance..The.insurance.industry.provides.sup- ply. chain. interruption. products. called. contingent. business. interruption. (CBI).. However,a. large. majority. of. companies. impacted. only. had. asset-. based.property.damage.insurance..Some.of.the.elements.covered.by.CBI. include. getting. workers. in. and. out. of. damaged. facilities,. working. to. get. power.to.facilities,.and.shipping.and.receiving.goods.into.and.out.of.facili- ties..Chapter 5.will.reexamine.the.floods.in.Thailand.from.a.risk.quanti- fication.perspective.
An. interesting. report. from. the. Association. of. Insurance. and. Risk. Managers. in. Industry. and. Commerce. (AIRMIC). titled. Supply Chain Failures: A Study of the Nature, Causes, and Complexity of Supply Chain Disruptions,. identified. seven. underlying. factors. that. tend. to. be. present. whenever.supply.chains.go.wrong:.off-.shoring,.increasing.complexity,.cost. pressures,.geographic.clustering,.modern.communications,.modern.pro- duction. methods,. and. increasing. dependency.. The. report. also. estimated.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
36 • Supply Chain Risk Management: An Emerging Discipline
that.economic.losses.from.supply.chain.disruptions.have.increased.465%. between.2009.and.2011.
And.finally,.Ernst.&.Young.interviewed.more.than.420.CFOs.and.heads. of. supply. chains. at. technology,. automotive,. manufacturing,. aerospace,. and.defense.companies..The.report.concluded.that.when.CFOs.and.supply. chain.leaders.form.a.closer.business.partnership.within.a.company,.they. report.better.results.in.a.number.of.areas,.including.the.company’s.finan- cial.position..The.study.found,.for.example,.that.70%.of.CFOs.and.63%.of. supply. chain. executives. said. their. relationship. had. become.more. collab- orative.over.the.past.three.years..The.merger.between.finance.and.supply. and.supply.chain.professionals.appears.to.be.an.inevitable.one.
The.intriguing.outcome.from.this.survey.is,.because.CFOs.take.a.long-. term. approach. to. formulating. business. strategy,. they. are. in. a. unique. position.to.manage.risk.and.plan.for.business.continuity,.something.that. challenges.supply.chain.managers.who.tend.to.think.in.terms.of.shorter. time. horizons..The.CFO.also.has.the.opportunity. to.work. with.the.pro- curement. and. treasury. groups. to. determine. the. extent. to. which. risk. is. owned.and.managed.by.the.company.and.the.extent.to.which.it.is.pushed. down.through.the.supply.chain.
In. 2013. the. authors. of. this. book. published. several. articles. on. SCRM.. One.key.article.was.SCRM: The New Discipline of Supply Chain Excellence. After.several.years.of.teaching.in.the.classroom.and.conducting.workshops. around.the.globe,.we.became.thoroughly.convinced.of.the.need.for.SCRM. to.become.a.discipline..The.article.identified.what.was.emerging.from.the. classroom.and.from.the.practical.application.of.the.body.of.knowledge.in. the.field..This.article.was.a.major.impetus.for.this.book.
fOuR pillaRS Of Supply Chain RiSk ManageMent
We.would.like.to.finish.up.our.“as-.is”.discussion.by.providing.an.assess- ment.of.the.state.of.supply.chain.risk.management..This.will.involve.some- thing.we.call.the.Four.Pillars.of.SCRM..These.pillars.include.supply.risk,. process. risk,. demand. risk,. and. environmental. risk.. Each. pillar. encom- passes.its.own.set.of.tools,.techniques,.tactics,.metrics,.people,.processes,. and.program.issues..The.complexion.of.each.pillar.is.below.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 37
Supply Risk
The. complexion. of. this. pillar. encompasses. areas. such. as. supplier. conti- nuity,. strategic. sourcing,. supplier. viability. and. capability,. raw. material. pricing,. supplier. assessments,. inbound. logistics,. fraud,. corruption,. and. counterfeiting..Inherent.risks.here.are.disruptions.caused.by.the.inability. of. suppliers. to. deliver. on. time,. quality. failure,. financial. failure,. compli- ance.failure,.channel.complexity,.and.communication.failure.
process Risk
This. pillar. includes. IT. systems,. mergers. and. acquisitions,. marketing. strategy,.organizational.structure,.frameworks.and.metrics,.supply.chain. strategy. and. execution,. manufacturing. and. quality,. organizational. risk. assessment,. heat. maps,. and. war. rooms.. The. inherent. risks. here. include. disruptions.caused.by.quality.problems,.inventory.shortages,.late.deliver- ies,. capacity. shortages,. equipment. breakdowns,. IT. outages,. poor. overall. execution,.and.misalignment.of.strategy.and.metrics.
demand Risk
The.complexion.of.this.pillar.covers.areas.such.as.new.customers,.market. trends,. consumer. interest/.spending,. demand. management/.forecasting,. distribution. requirements. planning,. product. integrity,. customer. service,. and.scenario.planning..Inherent.risks.here.are.disruptions.caused.by.prob- lems. in. distribution,. actions. by. competitors,. product. reputation,. brand. management,.social.media/.trending,.logistics,.and.customer.sentiment.
environmental Risk
This.final.pillar.encompasses.areas.such.as.government.regulations,.taxes,. economic. volatility,. currency. exchange,. natural. disasters,. and. compli- ance.. Inherent. risks. are. natural. disasters,. geopolitical. and. energy. risks,. port.security,.logistics.and.facilities.security,.currency.exchange.fluctua- tions,.global.economics,.war,.pandemics,.and.civil.disobedience.
We. have. compiled. a. profile. of. the. maturity. and. activity. level. for. each. pillar..Figure 2.3.depicts.our.assessment.of.the.maturity.and.activity.level.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
38 • Supply Chain Risk Management: An Emerging Discipline
for.each.pillar..On.the.left.or.y-.axis.is.the.maturity.level.of.each.pillar..The. horizontal. x-.axis. depicts. the. Four. Pillars,. and. the. size. or. length. of. each. “box”.is.an.indication.of.the.activity.level.within.each.pillar.
From.a.maturity.point.of.view,.we.feel.the.supply.pillar.is.by.far.the.most. mature.of.the.four,.positioned.at.about.70.out.of.100..Why?.Procurement. professionals. have. been. dealing. with. supplier. uncertainty. and. risk. for. more.than.50 years..This.discipline.has.become.a.profession,.supported.by. member-.driven.organizations.who.are.providing.certifications.to.demon- strate.that.these.professionals.have.a.command.of.the.body.of.knowledge. and.best.practices..Tools.such.as.supplier.relationship.management.(SRM),. spend.management,.credit.and.financial.reporting.by.public.credit.orga- nizations,.and.more.have.matured.over.the.years..And.the.present.activ- ity.level.of.new.techniques.such.as.supplier.risk.assessment;.supply.chain. mapping;.and.fraud,.bribery,.and.corruption.identification.supported.by. new. cloud-.based. software. systems. is. providing. the. procurement. profes- sionals.with.a.host.of.new.tools.and.techniques.to.leverage.in.an.effort.to. identify,.assess,.mitigate,.and.manage.supplier.risk.
The. next-.highest. level. of. maturity. and. activity,. in. our. opinion,. is. the. demand. pillar.. Positioned. at. about. 50. out. of. 100,. demand. management. solutions,. such. as. sales. forecasting. and. many. other. deterministic. tools. have.been.around.as.long.as.the.supply.tools..So.why.then.do.we.feel.this.
100 100 100 100
70
40
50
30
0
20
40
60
80
100
120
Supply Process Demand Environment
M at
ur ity
In de
x
�e di�erence between the top & bottom of each box indicates the scope of activity
figuRe 2.3 Four-.pillar.SCRM.maturity.and.activity.level.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 39
pillar.is.at.a.lower.maturity.level.than.supply?.The.tools.utilized.in.this.pil- lar.have.been.developed.to.support.processes.that.are.purely.forward.look- ing. and. one-.dimensional,. such. as. sales. forecasting,. and. do. not. involve. any.element.of.uncertainty.or.risk..Another.tool,.collaborative.planning,. forecasting,. and. replenishment. (CPFR),. does. provide. some. coverage. of. risk.because.it.attempts.to.support.information.sharing.between.supplier. and. customer. in. an. effort. to. minimize. demand. surprises. and. shocks. to. the. supply. chain.. New. techniques. and. tools. such. as. probabilistic. plan- ning,. discrete-.event. simulation,. and. digital. modeling. are. emerging. to. Help.demand.managers.and.sales.and.operations.planning.(S&OP).pro- cess. owners. to. run. “what-.if ”. scenarios. that. will. demonstrate. how. their. supply.chains.will.act.when.a.risk.event.shocks.their.organization..These. new. tools. overtly. handle. uncertainty. and. risk. and. will. take. some. time. to.mature.
Next.in.the.maturity.and.activity.level.is.the.process.pillar..A.tremen- dous. number. of. tools. and. techniques. support. all. the. processes. we’ve. highlighted.in.this.pillar..Many.have.been.around.for.more.than.40 years. and.are.supported.by.professional.organizations.such.as.APICS,.CSCMP,. ASQC,. ISSSP,. and. others. and. also. include. professional. certifications.. Again,.our.reasoning.for.the.pillar’s.positioning.is.that.many.of.the.tools. do.not.embrace.uncertainty.and.risk..They.support.discrete,.linear.func- tions,.such.as.planning.inventory,.planning.capacity,.production.schedul- ing,.quality,.logistics,.and.more..These.functions.are.driven.by.solid.supply. chain. management. metrics. such. as. maximizing. service,. reducing. cost,. and.improving.asset.utilization,.not.mitigating.risk.
And. finally,. the. environmental. pillar. is. very. new. and. continues. to. expand.because.of.new.industry-.specific.and.governmental.rules.and.reg- ulations..There.is.more.and.more.activity.in.this.area,.but.with.new.and. ever-.changing.regulations,.this.pillar.will.take.a.long.time.to.solidify.
the Supply Chain RiSk ManageMent adOptiOn
We’ll. finish. this. chapter. with. a. brief. discussion. on. what. we. call. SCRM. Adoption.. This. utilizes. a. categorization. scheme. revolving. around. lag- gards,.industry.average,.and.early.adopters..We.want.to.leave.you.with.a. sense.of.the.operational.complexion.for.each.category.in.terms.of.SCRM. along.with.a.few.salient.statistics.from.the.early.adopter.companies.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
40 • Supply Chain Risk Management: An Emerging Discipline
SCRM adoption
We.know.that.leading-.edge.companies.are.much.more.likely.to.integrate. and. align. risk. with. corporate. goals.. They. generally. have. more. visibility. into. their. organization. as. they. are. substantially. more. likely. to. perform. “what-.if ”. scenario-.planning. and. change. analysis.. On. average,. leaders. achieve.almost.95%.better.accuracy.of.cash.flow.forecasts,.which.is.clearly. better.than.what.their.peers.achieve..And.they.tend.to.mitigate.their.finan- cial.losses.down.to.3%.of.revenue.as.opposed.to.their.peers,.who.average. 10%. of. revenue. due. to. financial. loss.. What. characterizes. early. adopters,. industry.average,.and.laggards?
Early Adopter Companies.. Early. adopters. leverage. their. ERM. tools. and.technology.to.enhance.the.integration.of.risk.management.across.the. business.. They. continually. link. risk. management. to. company. goals. and. compensation..And,.they.are.improving.visibility.and.monitoring.of.Key. Risk.Indicators.with.new.business.analytic.tools.
Early.adopters.also.implement.processes.that.are.aligned.with.risk.man- agement. and. compliance,. build. a. risk. awareness. culture. throughout. the. organization,.and.secure.executive.commitment.for.risk.management.ini- tiatives..These.practices.are.being.driven.by.the.early.adopters.by.a.factor. of.two-.or.three-.to-.one.above.the.industry.average.and.laggard.companies.
Other.attributes.characterize.early.adopters..These.companies.maintain.a. senior.management.champion.of.risk,.segment.risk.duties,.cross-..functionally. coordinate.risk.management,.establish.roles.and.responsibilities.to.execute. risk,. and. establish. a. risk. committee. to. oversee. key. risks.. These. commit- ments.by.early.adopters.eclipse.the.industry.average.and.laggards.again.by. a.factor.of.two-.or.three-.to-.one.
Industry Average Companies. Average.companies.attempt.a.standard- ized. approach. to. communication. and. organizational. collaboration. rela- tive.to.risk..Some.of.these.companies.are.beginning.to.integrate.and.align. risk. with. corporate. goals.. Some. are. also. developing. and. measuring. risk. and.performance..Several.are.beginning.to.improve.the.time-.to-.decision. by.optimizing.risk.knowledge.management.activities.and.expanding.risk. visibility.throughout.the.organization..Senior.management.oversight.and. engagement.associated.with.risk.to.improve.executive.buy-.in.is.starting.to. occur.at.this.level.
Laggard Companies. Laggards.talk.about.supply.chain.risk.but.do.not. fund. projects. to. prepare. for. and. respond. to. risk. events. at. any. real. level.. Most. have. someone. in. the. CFO’s. office. reviewing. enterprise. risk. in. the.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 41
classical.financial.terms,.such.as.hazard,.financial,.and.strategic.risk..The. average.operational.and.supply.chain.professional.does.not.maintain.sce- nario.game.plans.for.risk.events;.therefore,.SCRM.is.an.event-.driven,.ad. hoc,. or. part-.time. experience.. Most. executives. in. this. category. assume. incorrectly.that.their.people.will.know.what.to.do.in.a.risk.event.
Figure 2.4.depicts.a.graph.encompassing.laggards,.industry.average,.and. early.adopter.companies.in.terms.of.the.adoption.rate.of.SCRM.concepts.. In.terms.of.the.as-.is.state,.it.is.safe.to.conclude.that.a.majority.of.compa- nies.are.still.considered.laggards.in.terms.of.their.SCRM.capabilities..This. suggests.that.we.have.more.work.to.do.to.move.companies.away.from.the. laggard.status..Subsequent.chapters.will.concentrate.on.how.to.do.that.
COnCluding thOughtS
The.purpose.of.this.chapter.is.to.help.us.understand.the.current.state.of. supply.chain.risk.management..From.our.analysis.we.can.reach.some.over- arching.conclusions..First,.the.negative.outcomes.from.supply.chain.risk. events.are.often.quite.severe..Only.a.fool.would.believe.otherwise..Second,. no. consensus. exists. among. companies. or. industries. concerning. how. to. organize. for. or. manage. supply. chain. risks.. The. ways. that. companies. approach.SCRM.are.varied..Third,.most.companies.are.ill-.prepared.from.
Laggards, 70% of Sample Size
Average, 20% of Sample Size
Early Adopters, 10% of Sample Size
0
0.5
1
1.5
2
2.5
3
3.5
0 0.5 1 1.5 2 2.5 3 3.5
M at
ur it
y Le
ve l –
L ow
to H
ig h
Adoption Rate – Low to High
figuRe 2.4 SCRM.adoption.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
42 • Supply Chain Risk Management: An Emerging Discipline
an.employee,.measurement,.organizational,.and.IT.perspective.to.operate. in.an.environment.characterized.by.increased.uncertainty.and.volatility.
Another.major.conclusion.is.that.most.companies.recognize.the.threat. of.supply.chain.uncertainty.and.understand.that.operating.in.a.condition. called.the.“new.normal”.will.not.be.as.enjoyable.as.operating.in.the.“old. normal.”.A.study.by.Zurich.Insurance,.for.example,.reported.that.75%.of. respondents. state. they. still. do. not. have. full. visibility. into. their. supplier. base..This.is.concerning.because.several.studies.have.concluded.that.sup- ply.disruptions.are.the.most.widely.cited.supply.chain.risk.event.
Finally,.most.SCRM.efforts.rely.on.heroics.rather.than.planning.and.pre- vention.. In. terms. of. SCRM. maturity,. most. companies. are. considered. lag- gards.with.some.movement.toward.average..Minimal.proactive.supply.chain. risk.management.appears.to.be.occurring..Growth.along.the.maturity.curve. needs. to. accelerate,. especially. when. we. consider. that. almost. 75%. of. risk. managers.believe.that.supply.chain.risk.levels.are.higher.than.just.a.few.years. ago.and.that.risk.will.continue.to.increase..More.than.70%.of.risk.manag- ers. say. the. financial. impact. of. supply. chain. disruptions. has. also. increased. compared.with.just.a.few.years.ago.11.As.a.sign.of.the.times,.the.Allianz.Risk. Barometer.in.2013.ranked.for.the.first.time.ever.business.interruption.and. supply.chain.risks.as.the.top.concerns.of.businesses.globally..One.of.the.main. objectives.of.this.book.is.to.prepare.us.to.manage.in.this.“new.(ab)normal.”
Summary of key points
•. Most.supply.chain.executives.became.interested.in.SCRM.after.the. financial.meltdown.of.2008..For.many,.2008.was.the.genesis.of.their. risk.management.efforts.
•. In. 2009,. the. ISO. Group. delivered. its. first. set. of. standards. directly. relating. to. supply. chain. risk,. which. was. a. major. recognition. of. the. importance.of.SCRM..These.standards.include.ISO.73.and.ISO.31000.
•. The. Supply. Chain. Risk. Assessment. Tool encompasses. about. 100. questions-.of-.discovery. about. a. company’s. supply. chain. across. 10.tenets.covering.the.entire.supply.chain..The.basic.premise.is.that. as.the.supply.chain.matures,.the.inherent.risks.faced.by.that.supply. chain.diminish.
•. The.new.normal.of.global.supply.chains.features.more.global.sourc- ing.and.manufacturing,.hyper-.demand.requirements,.longer.supply. chain. lead. times,. more. potential. points. of. failure,. and. managing. supply.chains.in.far-.flung.corners.of.the.world.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Supply Chain Risk Management: The As-Is Landscape • 43
•. Over.a.period.of.several.years,.Zurich.found.that.85%.of.organiza- tions.experienced.at.least.one.supply.chain.incident.that.caused.dis- ruption.to.their.business.
•. The. Risk. Maturity. Index. suggests. that. companies. with. the. highest. level. of. risk. maturity. experience. 50%. lower. stock. price. volatility. than.less-.developed.counterparts.
•. The.Four.Pillars.of.SCRM.are.supply.risk,.process.risk,.demand.risk,. and.environmental.risk..The.supply.pillar.is.by.far.the.most.mature. of. the. four. because. procurement. professionals. have. been. dealing. with. supplier. uncertainty. and. risk. for. over. 50 years.. The. demand. pillar.ranks.second.in.terms.of.maturity,.followed.by.the.process.pil- lar.and.finally.the.environmental.pillar.
•. SCRM.Adoption.utilizes.a.categorization.scheme.revolving.around. laggards,.industry.average,.and.early.adopters..In.terms.of.the.as-.is. state,.it.is.safe.to.conclude.that.a.majority.of.companies.are.still.con- sidered.laggards.in.terms.of.their.SCRM.capabilities.
endnOteS
. 1.. “Managing. Risk. for. High. Performance. in. Extraordinary. Times.”. Accenture 2009 Global Management Study. 2009.
. 2.. Arntzen,. Dr. Bruce,. Prof.. Maria. Jesus. Saenz,. and. Isabel. Agudelo.. “The. SCALE,. Supply. Chain. &. Logistics. Excellence. Network.”. MIT’s Global Scale Risk Initiative,. MIT’s.Center.for.Transportation.&.Logistics,.March.2010.
. 3.. Accessed.from.Aberdeen.Group.CPO.Survey.Report.&.SCRM.Report,.2010.
. 4.. Burson,. Patrick.. “PRTM’s. Global. Supply. Chain. Trends. 2010–2012. Survey.”. Supply Chain Management Review,.(June.2010).
. 5.. Pearson,.Mark..“Inoculate.against.Supply.Chain.Risk.”.Logistics Management,.April. 2011:.20–21.
. 6.. Lee,. Hau,. PhD,. and. Kevin. O’Marah.. “Chief. Supply. Chain. Officer. Report.”. SCM World,.October.2011.
. 7.. Pettit,.Timothy.J.,.Joseph.Fiskel,.PhD,.and.Keely.L..Croxton,.PhD..“Can.You.Measure. Your. Supply. Chain. Resilience?”. Supply Chain and Logistics Journal, Canada, Spring.2008.
. 8.. Catellina,. Nick,. and. William. Jan.. “Leveraging. Risk-.adjusted. Strategies. to. Enable. Corporate.Accuracy.”.Adapted.from.Aberdeen.Group,.April.2012.
. 9.. Accessed.from.Zurich.Re’s.Knowledge.Vault.on.Risk,.July.2012.
. 10.. Sodhi,. Manmohan. S.,. Byung-.Gak. Son,. and. Christopher. S.. Tang.. “Researcher’s. Perspective. on. Supply. Chain. Risk. Management.”. Production and Operations Management,.(2011),.Accessed.from.Jan.Husdal’s.SCRM.blog.(www.husdal.com).
. 11.. Favre,.Donovan,.and.John.McCreery,.“Coming.to.Grips.with.Supplier.Risk.”.Supply Chain Management Review,.12,.6.(September.2008):.26..Citing.statistics.from.Marsh,. Inc..and.Risk & Insurance.magazine.
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
Schlegel, G. L., & Trent, R. J. (2014). Supply chain risk management : An emerging discipline. Taylor & Francis Group. Created from apus on 2022-03-18 01:03:05.
C o p yr
ig h t ©
2 0 1 4 . T
a yl
o r
& F
ra n ci
s G
ro u p . A
ll ri g h ts
r e se
rv e d .
