Since a supply chain is an organically combined set of different businesses and related activities, even a very trifling incident can be huge risk which makes a serious problem in it.
Guest article by : Shailendra Gupta, Bharti Retail
SCRM: Supply Chain Risk Management
A supply chain is a set of individual and cross-functional business processes from upstream to downstream, which can also be thought of as combined value chain for the whole optimisation of the processes. It usually involves R&D, procurement production, distribution and retail, and offers various opportunities to optimise the organically combined business processes. For the optimisation to be possible, a supply chain management (SCM) has a key step for a risk control.
It is a fact that the supply chain cannot be optimised unless the risk is controllable. However, in recent years, the types of risks have been extremely diversified due to the complicated SCM and rapidly changing business environment, such as the diversity of customer needs, the shortened product life-cycle, globalisation, the complexity of a production system, and so forth.
A source of the uncertainties inherent in a supply chain is an unbalance of a supply and demand that focuses on how to timely meet the unpredictable customer demand based on stable supply reliability. And a lot of potential factors, called risk drivers like fluctuating customer demand can never be exactly forecasted which not only causes an oversupply or shortage in supply, but also interrupts optimal operations of the supply chain.
Overview of a Supply Chain Risk
The types of risks in a supply chain have been excessively diversifying in a rapidly changing business environment these days. Specifically, new risks that require new skills and knowledge to manage effectively are introduced from a diversity of customer needs, complexities of production, short life-cycle of a product and globalization.
Furthermore, since a supply chain is an organically combined set of different businesses and related activities, even a very trifling incident can be huge risk which makes a serious problem in it. However, most of the risks, except in case of non-controllable risks such as a natural disaster, can usually be removed or mitigated, if the cause is cleared.
It is a fact that the risk mostly comes from not knowing what the main causes are.
The Supply Chain Risk and their Classifications
There exist different types of supply chain risks, according to how its realisation impacts on a supply chain. And criteria for classifying risks are also extremely diverse. The supply chain risks can be categorised into nine types: Disruptions, Delays, Systems, Forecast, Intellectual property, Procurement, Receivables, Inventory and Capacity.
The Final Summary and Discussion
The SCM in a modern business environment brings many advantages such as the creation of a new value-addition of manufacturing and consumption through collaboration, an integrated management of information and material as well as a cash flow from a global and holistic view, and a possibility of quick response to customer needs.
Furthermore, to respond to new needs that erupt from rapidly changing norms of IT, it becomes more and more complicated in various transformation processes in which new concepts are introduced: E-SCM, Global SCM, Green SCM and Intelligent SCM.
However, companies have been facing a new operating crisis due to the complicated SCM. An advent of the SCM causes new types of risks which we have never experienced before. For more effective collaboration, one of the key concepts of the SCM, for instance, secrets of business or technology can unavoidably be exposed to a business connection in the same supply chain. That is, information sharing to achievement of the ultimate collaboration can conversely lead to the worst results, as an unpredictable new risk. Therefore, for an establishment of a reliable supply chain and effective management, identifying and assessing the risks and core is very important.
Live: People Reading Now