Development of a risk assessment tool for the proactive management of Supply Chain risk
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Ferrer J, Julien D (2014) Development of a risk assessment tool for the proactive management of Supply Chain risk.
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Development of a risk assessment tool for the proactive management of Supply Chain risk
- 1. Development of a risk assessment tool for the proactive management of Supply Chain risk. Email: d.m.julien@cranfield.ac.uk Address: B50, Manufacturing Department, Cranfield University, Cranfield, Bedfordshire, MK43 0AL www.cranfield.ac.uk/sas/manufacturing AIM To develop a Supply Chain risk-profiling tool to allow organisations to be more proactive in the identification and management of risk in their supply network STAGE 1. LITERATURE REVIEW VULNERABILITY RESILIENCE EFFICIENCY PROCESS 1 RISK IDENTIFICATION 2 RISK ASSESSMENT Development of the risk profiles for each generic element Identification of risk categories Individual Risks Supply Chain Elements The risk level is given according to the number of high risks HIGH MEDIUM-HIGH MEDIUM LOW-MEDIUM LOW 1 Identify Supply Chain Elements 4 Graphic display of elements’, group of elements’ and categories’ risks 2 Risk assessment for each element FOCAL COMPANYCLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK Environmental Political Political stability Environmental Economy Environment financial situation Environmental Legal Change in government policies Environmental Social Attitude towards changes Environmental Natural Earthquake, volcano, floods Internal Disruptions Experience Internal Disruptions Labour & Equipment availability Internal Disruptions Raw materials availability Internal Inventory Inventory holding cost Internal Inventory Storage requirements Internal Inventory Rate of product obsolescence Internal Management IT systems integration Internal Management Forecasting system / visibility Internal Management Capacity cost and flexibility Internal Management Number of suppliers Internal Management Number of customers Internal Management Financial strength of customers Internal Security IT security Internal Security Theft A CUSTOMER CLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK Environmental Political Political stability Environmental Economy Environment financial situation Environmental Legal Change in government policies Environmental Social Attitude towards changes Environmental Natural Earthquake, volcano, floods Internal Product Variations in quality Internal Product Variations in product requirements Internal Product Availability of substitutive goods Internal Market Market risk Internal Market Location Internal Market Variations in demand Internal Market Brand reputation Internal Management Culture Internal Management Relationship level Internal Management Information sharing Internal Accounting Bankruptcy Internal Accounting Number of customers Internal Accounting Payment delays Internal Accounting Financial strength of customers A LINK CLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK Network Nodes Density Network Nodes Criticality Network Nodes Complexity Network Logistics Logistics Providers Network Logistics Carrier Capacity Network Logistics Quantity of transfer points Network Logistics Channel Overload Network Logistics Ports issues & Infrastructure Network Legal Border crossing & Custom regulations Network Management Long-term vs. Short-term contracts Network Management Relationship level 1 SUPPLIER CLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK Environmental Political Political stability 1 4 LOW Environmental Economy Environment financial situation 3 1 LOW Environmental Legal Change in government policies 2 5 MEDIUM Environmental Social Attitude towards changes 2 3 MEDIUM Environmental Natural Earthquake, volcano, floods 4 4 HIGH Internal People Experience 1 1 LOW Internal People Culture 5 3 HIGH Internal Management Change in prices 4 1 LOW Internal Management Intellectual property 5 5 HIGH Internal Management Information sharing 4 4 HIGH Internal Management Bankruptcy 2 4 MEDIUM Internal Product Quality: Defects/Million 4 5 HIGH Internal Product Value of product 4 5 HIGH Internal Product Product uniqueness 5 4 HIGH Internal Product Criticality of product 1 2 LOW Internal Process Storage requirements 5 5 HIGH Internal Process Delays in production 4 3 MEDIUM Internal Process Flexibility 4 3 MEDIUM Internal Process Standardisation 3 1 LOW A HIGH 3 Summary of the elements’ risks SUPPLIER RISK HIGH MEDIUM LOW A HIGH 8 5 6 B MEDIUM-HIGH 5 9 5 C LOW-MEDIUM 3 10 6 D LOW-MEDIUM 3 7 9 E LOW 1 11 7 CUSTOMER RISK HIGH MEDIUM LOW A LOW 2 10 7 B HIGH 7 3 9 C HIGH 6 8 5 D MEDIUM 4 11 4 E LOW-MEDIUM 3 9 7 F.COMPANY RISK HIGH MEDIUM LOW A MEDIUM 4 8 7 LINKS RISK HIGH MEDIUM LOW 1 LOW-MEDIUM 1 5 5 2 HIGH 4 3 4 3 LOW 0 9 2 4 MEDIUM-HIGH 3 5 3 5 MEDIUM-HIGH 3 3 5 6 MEDIUM-HIGH 3 6 2 7 MEDIUM-HIGH 3 2 6 8 MEDIUM 2 7 2 9 LOW-MEDIUM 1 4 6 10 MEDIUM 2 4 5 5 Supply Chain Risks’ Map Tier 2 Suppliers Link Tier 1 Suppliers Link Focal Company Link Tier 1 Customer Link Tier 2 Customer C 1 LOW-MEDIUM LOW-MEDIUM A 4 6 A 8 C D 2 HIGH MEDIUM-HIGH MEDIUM-HIGH LOW MEDIUM HIGH LOW-MEDIUM HIGH A MEDIUM 9 D E 3 B 5 7 B LOW-MEDIUM MEDIUM LOW LOW MEDIUM-HIGH MEDIUM-HIGH MEDIUM-HIGH HIGH 10 E MEDIUM LOW-MEDIUM STAGE 3. RISK ASSESSMENT TOOL STAGE 2. CONCEPTUAL FRAMEWORK FOR RISK MANAGEMENT OBJECTIVES • Conduct a comprehensive literature review on Supply Chain Risk. • Develop the risk management framework for Supply Chains. • Develop a Supply Chain risk assessment tool. METHODOLOGY STAGE 1 LiteratureReview STAGE 3 Developmentof the risk assessment tool STAGE 2 Developmentof the framework “The tool identifies the weaknesses of the supply chain and enables managers to prioritise the mitigation strategies” Juan Ferrer Supervisor: Dr Denyse Julien