Handbook for Supply Chain Risk Management

Kahn, Omera, and George Zsidisin. Handbook of Supply Chain Risk Management: Case Studies, Effective Practices and Emerging Trends. J. Ross Publishing, 2011, http://ebookcentral.proquest.com/lib/uva/detail.action?docID=3319464. ProQuest Ebook Central.

Chapter 1

“The consequences of supply chain risk include not just financial losses but also interruption to operations, reduc- tion in product quality, damage to property and equipment, loss of goodwill with customers and suppliers, damaged reputation with the wider public, and delivery delays. “

Handbook of Supply Chain Risk Management, pg 9.

Chapter 3 discusses global sourcing and risk (pg 9).

Chapter 6 discusses Performance-Based-Logistics in health care (pg 10).

Chapter 16 provides some approaches to supply chain continuity (pg 11).

Chapter 3: The Supply Chain Risks of Global Sourcing by Josef Oehmen

Case study of 3 Swiss small to medium enterprises (SMEs) evaluating supply chain risk of China (pg 29)

Four categories of risks: Total Cost Too high, Delivery Reliability, Insufficient Quality, Damage to company reputation

Risk Scenario 1: Total Cost Too High (pg 30)

Total Cost Too High:

  • Loss of Sales:
    • Loss of Intellectual Property: Corporate and Government Espionage were main concerns of the three companies (pg 31)
    • Insufficient Delivery Reliability, Insufficient Quality, Damage to company reputation
      • Chinese Judicial system, while improved after joining the WTO, will be unreliable in making sure contracts are upheld (pg 32)
  • Increased Inventory:
    • Caused by an increase in necessary safety stocks due to insecurity about deliveries from China: delivery lead times, availability, etc.. (pg 32)
  • Unplanned Coordination And Travel Expenses
  • Increased Transportation costs:
    • Influenced by transportation capacity demand and oil prices (pg 33)
  • Increased Price of Procurement Object:
    • Quotas, taxes, custom regulations, etc in Europe and China (pg 33)
    • Currency Exchange rate fluctuations/Chinese wage increase (pg 34)
Risk Scenario 2: Insufficient Delivery Reliabilty (pg 35)

Insufficient Delivery Reliability:

  • Breakdown/Loss of Supplier
    • Difficult Supply Market Research:
      • It is difficult to monitor suppliers without out having physical employees in China. A balance between the costs of keeping employees there and the transparency of information desired must be found. (pg 37)
    • Loss of Bargaining Power:
      • If company losses bargaining power, supplier can swing agreements in their favor (or stop selling to the company altogether) (pg 37)
Risk Scenario 3: Insufficient Quality (pg 38)

Insufficient Quality:

  • Lack of Design adaptations:
    • Could lead to high scrap rates if there is a disconnect between supplier intention and company wishes (pg 39)
  • Insufficient Supplier Skill level:
    • A rapidly growing supplier will likely have large number of under experienced or untrained employees (pg 39)
Risk scenario 4: Damage to Reputation (pg 40)

Damage to Reputation:

  • Risks in dealing with Chinese suppliers on the ground of environmental issues, political issues (Uyghurs, Hong Kong, Taiwan) and social unrest. (pg 42)

Chapter 6: Performance-Based Logistics in Contingency Health Care Operations by Jerry D. VanVactor

Contingency theater of operations: geographical region where a situation could involve military forces (pg 68)

PBL management is a “capabilities-based approach” to SCM

  • Better assessment of costs in SCM
  • PBL is “telling people what has to be done and letting their knowledge and experience make it happen” rather than “telling people what they have to do and how they should do it” (pg 69)

“PBL management describes supply chain management as a complete package of services and support; an integrated, affordable, performance package designed to optimize readiness through long-term support arrangements.”

Jerry VanVactor, Handbook of Supply Chain Risk Management (pg 69)

Contingency-based logistics are unique due to the inherent uncertainty in available modes and avenues of transportation (e.g. haphazard roads) (pg 70)

Communication among all parties is crucial, especially to be able to react to demand surges following a contingency-creating event (pg 71)

Communication is also crucial when evaluating costs (i.e. choosing a generic brand drug over a preferred but significantly more expensive name brand version). (pg 72)

Critical aspects of the logistic footprint include distance/transportation networks (e.g. are there usable roads), capacity (warehouses rarely have extra room for the arrival of contingency supplies), and time (pg 74)

Performance-based logistics man- agement cannot involve a myopic view of processes and practices from any singular perspective because effective health care supply chain management involves multifac- eted perspectives and methods for achieving common goals.

Jerry VanVactor, (pg 76)

Data that are shared should be choose carefully: for example, choosing to show demand accommodation rates instead of sales data a very expensive drug so that there is a better representation of demand and the importance of the drug (pg 78)

Chapter 16: Practical Approaches to Supply Chain Continuity: New Challenges and Timeless Practices by Cliff Thomas

Business continuity involves the planning and resource utilization required to recover critical functions following a business disruption. “

Cliff Thomas (pg 191)

Significant disruptions to business continuity include: natural disasters, economic disturbances, technology failures, epidemics, etc… (pg 191)

Response to a significant disruption (pg 192-193):

  1. Prioritize operations based on pain that will be felt if they are not performed
  2. Identify and Mitigate sources of pain
  3. Develop recovery procedures for critical functions
  4. Validate effectiveness

Supplier disruptions can be especially costly: lost revenue, lost jobs, damaged brand reputation, lawsuits (pg 194)

Proactive measures (pg 194):

  • Minimize number of single-source suppliers
  • Geographically diverse suppliers
  • Maintain emergency stock of essential equipment
  • Monitor supplier health indicators
  • Sound communication procedures with suppliers during a crisis

Gives several case studies on disruptions (either from hacking, in the case of the Heartland Data Breach, and poor quality suppliers, in the case of the wheat gluten incident for Menu Foods) (pgs 195-203).

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