Supply Chain Risk

Clare Brindley, Clare Brindley

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351896894
• Edition: 1
• Topic: Economía
• Subtopic: Teoría económica

The impact of technological change, globalization, information and communication technologies and international governmental intervention has radically altered supply chain strategies, operations and risk profiles for most organizations. The challenge facing business and researchers alike is how best to address risk management in this new context. This collection, written by international scholars from the UK, US and Scandinavia, addresses this need by providing the first topical review of these developments and the latest research findings. The findings represent a robust cross-disciplinary view of supply chains, articulating policies and strategies for organizations. The research studies are based on empirical case studies within services and manufacturing in both large and SME organizations. This work is intended to provide the foundation for future research in this expanding area and the impact it has on managing risk within the supply chain.

PART I
RESEARCH FRAMEWORKS

Chapter 1
Introduction

Dr. Clare Brindley and Prof. Bob Ritchie

Introduction

Supply chain operations, their management and the incidence or risk are not new phenomena, although they may have taken on a new level of significance. The reality of the supply chain has a long and important history, as any form of bartering or exchange of goods, would represent a supply chain in its simplest form. Medieval communities and economies were developed around such simple models of the supply chain, typically operating in a localised marketplace. Presumably many of the structures, processes and systems evident in today’s supply chains were in existence then, albeit in a rudimentary form. This text addresses these issues in the context of present day supply chains and more specifically the uncertainties and risks that pervade supply chains and the effectiveness of managing these.

There are a number of developments which have caused primary stakeholders such as organizations, markets, consumers and governments to address supply chain issues and their management with increasing urgency. Three key developments illustrate the nature and scale of the impact and the consequential responses of these stakeholders:

1. Information and Communication Technology (ICT) developments have revolutionized the availability and exchange of information between all stakeholders in the supply chain. Consequently, competitive advantage has become more short-lived as entry barriers and niche markets have rapidly been eroded, through increased information and knowledge to all stakeholders.

2. ICTs have facilitated the development of global competition, impinging on almost every marketplace and organization size (Ritchie and Brindley, 2000). Product markets as well as service markets have been affected. Arguably services are more amenable to on-line delivery, although the impact of online promotional, ordering and payment systems for products has revolutionized many areas of retailing. It should be recognized that this enhancement of global competition has required many other developments (e.g. government policies and actions to reduce trade barriers) in addition to ICT innovations.

3. Interactions and relationships within the supply chains themselves have resulted both as a consequence of ICT developments and the increasing competition in the marketplace. The supply chain itself has now become a significant weapon in the competitive arsenal, capable of delivering reduced costs, higher quality, faster and more reliable delivery and other dimensions of added value to the consumer. Such changes have the capacity to enhance the performance of the individual members in the supply chain and the supply chain membership as a whole.

The consequences of these three primary developments and the associated responses of members of the supply chain and indeed, parallel competitive supply chains clearly signal a potential increase in both uncertainty and risk. Added to this rapidly changing context is the increasing complexity of structures, strategies and systems emerging in response to the new competitive challenges. These provide further sources of uncertainty and risk. It is important to note that the identified sources of uncertainty and risk pervade every stage in the supply chain and not just the final stage of the product/service delivery to the consumer. In essence, the aims of this text are: the examination of the issues of increasing uncertainty and risk in the context of the supply chain, investigation of the sources and reasons for the increase, assessment of the potential approaches to managing such risks and the evaluation of the consequences for the performance of the individual member organization and the supply chain as a whole.

Risk management within supply chains is one of the most significant challenges facing every organization by virtue of the fact that all organizations are a member of at least one and more probably, multiple supply chains. There is an absence of research and texts on the specific dimension of risk management in supply chains, although many studies on supply chain management in general make reference to the issue. The authors contributing to this text are all actively researching different dimensions of the risk management phenomenon which reflect the multi-functional and multi-disciplinary nature of the issues involved. The collection of papers seeks to provide the initial platform for further research and development in this field. The authors recognize that as with any emerging field of study there is a need for improving the clarity of definitions, frameworks and models etc. and would see this text as providing the basis for this.

This introductory chapter seeks to establish some of the key definitions employed throughout the text, whilst recognizing that particular papers may explore these in greater depth. Initially, we seek to define the terms Supply Chain and Supply Chain Management. Secondly, a working definition of the terms Uncertainty and Risk are developed and their association with risk management in the supply chain context is outlined. The term risk is then integrated within the definition of business performance to establish the need to balance risk, effectiveness and profitability. This provides the basis for the discussion on metrics later in the chapter. Finally, some of the key strategies and tactics within risk management are identified and reference is made to where these are developed further in later chapters.

The Supply Chain

The difficulty with the term the supply chain is that there are almost an infinite number of definitions, most of which are not inconsistent with each other but rather choose to focus on particular perspectives or attributes. Christopher (1992) provides a reasonably generic definition, describing a supply chain as a network of organizations that are involved, through upstream (i.e. supply sources) and downstream (i.e. distribution channels) linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate consumers. This definition conceives of a multiple set of organizations operating upstream and downstream with often multiple organizations operating at each stage in the chain (e.g. alternative competing suppliers). More recent studies (e.g. Ritchie and Brindley, 2001) have suggested the inclusion of information flows and financial flows, reflecting the developments in ICTs mentioned earlier. They have also recognized the increasingly important dimension of relationships.

Within this generic supply chain definition there are further subsets. For example, the limited or basic supply chain typically focuses on the linkages between a single organization and its immediate supplier and/or immediate customer, although not always the final consumer. A large proportion of the research in the field focuses on these dyadic linkages or relationships. The term the extended supply chain encapsulates those organizations working further up or down the supply chain from the immediate suppliers and customers. This may involve multiple organizations at each of the successive stages. The ultimate supply chain refers to the complete set of stages from initial raw material through to final consumer, incorporating all the associated services that contribute to the ultimate added value received by the consumer.

Supply chains may be considered from a variety of perspectives, structural, systems, strategic and relationship. The structural perspective has probably been the most enduring though even this is undergoing radical transition with developments of more amorphous structures with multi-faceted relationships replacing the previous linear structures and often uni-directional relationships (e.g. Ritchie and Brindley, 2001). An alternative perspective is the systems perspective which focuses on the efficiency of the system in terms of the transition of resources from raw materials through to consumption (e.g. Cooper et al, 1997). In many respects this systems perspective fits with the application of logistics, seeking to ensure maximum efficiency in processing, storage, transportation and communications. The strategic perspective concerns itself primarily with developing and sustaining competitive advantage, often through positioning of the organization in relation to its supply chain members and seeking to maximize the value added to the eventual consumer (e.g. Porter, 1985). More recent developments in the field of supply chains suggest a new relationship perspective (e.g. Ritchie and Brindley, 2001), one that focuses on building and managing relationships at both the strategic and operational level. Each of these perspectives is mutually compatible, providing different insights into the same set of issues, often suggesting differing solutions which in themselves may not necessarily be incompatible.

Supply Chain Management

The differing perspectives of the supply chain outlined in the previous section, indicate the range of activities and decisions that represent the roles and responsibilities of supply chain management. For example, logistics at the strategic level (e.g. single source supplier) and the operational level (e.g. progress chasing particular orders) are an essential element of supply chain management, although by no means the only ones. The sharing of commercial information, cooperation in product development and the full integration of key manufacturing processes, are all examples of strategic dimensions of supply chain management. The commitment to enhancing customer value and satisfaction represents a further dimension, one which may be shared by all members of the ultimate supply chain, as this should collectively enhance the aggregate performance of the supply chain. This all-embracing commitment to generating value to the consumer and the members of the supply chain is being termed supply chain orientation. All of these management activities and others are underpinned or will result in changes in the relationships between the members of the chain. Terms such as co-operation, collaboration and partnering are becoming increasingly prevalent in the literature associated with the management of supply chains. Supply chain management is therefore, a multi-disciplinary and multi-functional set of activities, which deals not only with the more physical and tangible attributes and activities (e.g. logistics) but equally the more behavioral and intangible dimensions (e.g. relationship building and management).

Emerging from this brief description of the supply chain and supply chain management, should be the recognition that the nature, scale and rapid...