Supply Chain Risk Management

Risks

- SC complexity

Outsourcing → loss of control （e.g. Boeing Dreamliner: 2 years delay = $ 2 billion costs）

- Supply base consolidation

Sole sourcing & supplier failure

- Natural disasters

- Forecasting difficulties

Aggregation can become more difficult

Qualitative knowledge of local MKT limited

E.g. using historical data the firm can characterize forecast error, mean time between machine failure and supplier lead-time performance.

- Infrastructure inadequacies

Worker skill and its performance expectations

Supplier: availability, reliability, contracts

Lack of local technologies

Inadequacies in transportation, communications infrastructure

- Cultural differences

Local rules & attitude to work

- Exchange rate uncertainties

Can affect selling price, costs of inputs, relative cost of inputs vs outputs

e.g. pay for inputs in Euros and sell finished goods in local currency

- Political issues

Tariffs and tax rates

Levels of government control

Stability of political systems and processes

E.g. Apple move manufactures back to the USA – era protectionism

With all of the changes and uncertainty, companies in a wide range of industries from autos and chemicals to electronics and appliances – are moving quickly to rethink supply chains and make them more resilient.

o Why focus on reshoring?

The cost gap between the US and other developing economies is decreasing

Higher raw material costs and decreased responsiveness and quality

Working capital tied up in slow moving steamers

Innovation

Intellectual Property Theft

Shortage of skilled labor

Energy Cost

https://www.inc.com/leigh-buchanan/how-american-manufacturers-are-reshoring.html

- Geographical distances

Transportation cost

● Example

- Boxing day Tsunami – role of SCM

SCM, as a significant component in construction material procurement, becomes increasingly important, especially within the context of broader cooperation, vertical disintegration and the viewpoint of a networked supply chain in the construction industry. The Boxing Day Tsunami in 2004, the procurement and supply of sustainable and legitimate construction material for the massive reconstruction became the first priority of almost every organization involved in this process in Indonesia. As a result, the competition for limited resources and the lack of effective coordination between reconstruction agencies has nearly tripled the cost. SCM has a significant role for construction material procurement including proposed procedures of local and international procurement of construction materials to streamline the supply.

- GFC & implications for SC (課上沒多說，research的)

In a supply chain context, the five action areas that are illustrated in Exhibit 2 are essential to cope with any type of crisis situation—individual as well as economic.

First, supply chain managers should gain a clear understanding of potential demand scenarios, as demand should be the basis of all supply chain planning.

Second, firms should safeguard their supplies to avoid any critical bottlenecks when suppliers go bankrupt.

Third, firms must accelerate all efforts to create flexible and breathing supply chains that can cope with all types of variability.

Fourth, managers should carefully reduce inventories to free up cash that is essential for turnaround actions. Finally, firms should also consider the light at the end of the tunnel and should begin to position themselves for the inevitable upswing.

Based on our experience, all five action areas must be considered in parallel, which will cause exceptional challenges for supply chain managers while also dealing with all types of operational glitches. In the end, they will not only benefit in the crisis but actions are also beneficial to the business from a long-term perspective.

● Humanitarian Logistics

Top 10 challenges facing an analyst after a disaster

- High uncertainty in demand

- High uncertainty in timing

- High uncertainty in location

- High uncertainty and challenges in supply

- Challenges in collaboration among the multiple players and decision-makers in a humanitarian supply chain

- Impact of political, cultural and socioeconomic conditions of the region

- Strong dependency of last mile operations on the location and disaster severity （災難后影響很大）

- Limited telecommunications and information infrastructure

- Long-term impact of the many activities carried out during humanitarian operations

- The success of humanitarian operations is hard to measure

● Who responds to disasters

- Governments

Military / Civilian

- NGOs

30000 international NGOs in existence

- Local volunteers

- Multilateral