Tag Archives: supply chain risk

SCRIM is the new SCRM

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Revised on: 2015-11-23

Does supply chain risk management SCRM need another model? Perhaps. That’s what a group of academics from Tunisia and France thought when they presented their conference paper this autumn. In it they suggest a new integrated conceptual model called “SCRIM”that incorporates the characteristics of the supply chain in the risk management process, thus allowing for a better understanding of the dynamics of different risk management strategies.

A tip-off

A couple of weeks I was given a heads-up by one of the authors that they had written a paper called Towards an Integrated Model of Supply Chain Risks: an Alignment between Supply Chain Characteristics and Risk Dimensions and would like my opinion on it. Written by Arij Lahmar, Francois Galasso, Habib Chabchoub and Jacques Lamothe, the paper turned out to be more interesting than I first thought, and the more I read it the more I liked it.

Virtual Enterprises revisited

What also intruiged me into taking a closer look at the paper was not so much the title, but the place where it was presented, namely the IFIP WG 5.5 Working Conference on Virtual Enterprises. Observant readers of this blog may remember that I 5 years ago wrote a book chapter titled A Conceptual Framework for Risk and Vulnerability in Virtual Enterprise Networks, where I extended Supply Chain Risk Management into the realm of Virtual Enterprise Networks. I’ve seen that chapter mentioned as a reference in some of the papers presented at IFIP conferences earlier, and I first thought this would be such an example, too. It was not; it was something quite different.

SCRM versus SCRIM

As the title implies, at the heart of the SCRIM model is the alignment of risk dimension with suply chain characteristics. Here risk specifics and supply chain specifics are used to develop key risk indicators that lead to the design of  a response that is specific to the supply chain and the risk in question. The possible response is then checked against capabilities to decide the best risk mitigation strategies and actions, in a sort of Plan-Do-Check-Act manner:

From my point of view this conceptual model appears sound. The left side is the traditional SCRM and ISO 31000 process, the right side is the new concept. The figure could have been a bit more descriptive, though, because the steps on the right side did not become fully clear to me until I saw the other figure in the paper. That figure  is a class model detailing the parameters identified through the literature:

However, agin, this figure too has a few shortcomings. While the model claims to be taken from an extensive literature review – and judging from the extensive reference list it indeed is – the paper does not explicitly state which references that have contributed to which part of the figure.

For one instance, as risk strategies they suggest the classic four: Reduce, Retain, Avoid and Transfer, but where does this idea come from? For another instance, capability is seen as important part of the risk treatment process, and I agree, but the concept of capability is poorly described in the paper.

Conclusion

Essentially this is a good paper that needs some revision of references and citations and consistent use of the terms involved. It also needs fuller definitions of the concepts that are introduced.

That said, this paper does develop a new conceptual model that brings SC in more direct contact with RM, and SCRIM is indeed a fitting name for the model. The model and parameter description is perhaps still not complete in all parts, but with some more refinement this could definitely bring SCRM a huge step forward.

Reference

Lahmar, A., Galasso, F., Chabchoub, H., Lamothe, J. (2015) Towards an Integrated Model of Supply Chain Risks: an Alignment between Supply Chain Characteristics and Risk Dimensions. In: L. Camarinha-Matos, F. Bénaben, W. Picard (Eds.) Risks and Resilience of Collaborative Networks, Proceedings of the 16th IFIP WG 5.5 Working Conference on Virtual Enterprises, PRO-VE 2015, Albi, France, October 5-7, 2015 DOI: 10.1007/978-3-319-24141-8_1

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Supply Chain Risk redefined?

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Revised on: 2015-10-10

What is supply chain risk really? That is what Iris Heckmann, Tina Comes and Stefan Nickel try to answer in their article titled A critical review on supply chain risk – Definition, measure and modeling, published in 2015. In this paper, existing approaches for quantitative supply chain risk management are reviewed by setting the focus on the definition of supply chain risk and related concepts. What they found may actually surprise you. Or not.

Supply Chain Risk is still undefined

Supply chain risk is still a very new field of research in a historical perspective, still lacking some common ground and still taking off in different directions, still not having a universal and agreed-upon definition of supply chain risk. From that point of view the authors boldly state that “This review overcomes a hole in the literature which regards the lack of a clear definition of risk within the context of supply chain risk management.” Having dealt with supply chain risk one way or the other for a decade now I first thought they might have bitten off more than they can possibly chew, but as I read on I realised that they are on the way to something, definitely yes.

Deja-vu

In parts this paper reads like a cross-section of this blog, citing articles and reports I am quite sure they must have found here. That said, they also have a vast number of references that are completely unknown to me. What I can see though is that the authors have done an extremely thorough job in collecting and reviewing not only the core literature on supply-chain risk, but they have also managed to link and connect more peripheral literature that deals more indirectly with supply chain risk. What I think this papers shows is how the combined strength (i.e. research interests) of three authors can work together in creating the fullest possible overview of supply chain risk literature.

Risk – a historical recap

Something  I really enjoyed reading was the historical recap of how risk was used and understood from the very beginning, starting with the old Greek rhisikon, describing the need to avoid difficulties at sea. Already then, more than two thousand years ago, risk had some connection to (sea-faring) commercial activities. In the 14th century Northern Italian traders adopted the term for describing the danger of losing their ships, and here

risk expresses the fear that economic activities lead to the loss or devaluation of an important asset or a decrease in the performance of the business.

Risk in today’s supply chains is perhaps not very far from this century-old definition of risk? That may be, but, along with the advancement of mathematical theories in the 17th century, risk became increasingly connected to probability theory and the probability of events and outcomes. That is how we most often understand risk today, in mathematical numbers. However, supply chain risk literature seems to be very little concerned with probability theory. Perhaps that is why what the authors lament most of all is “a lack of a clear and adequate quantitative measure for supply chain risk that respects the characteristics of modern supply chains”. My counter-question is, why do we need that? The answer is in my last paragraph below.

Supply Chain Risk – analysed, analysed and analysed

The authors do an excellent job in research, classifying and sorting the past and present supply chain risk literature, really giving new insights into where some of literature fits in. Going into details here would take it to far. All I can say is that the literature is reviewed and scrutinised from every possible angle I can think of, and more. I must say that I now have a much fuller understanding and wider perspective of all facets of supply chain risk.

Supply Chain Risk

Towards the end the authors come of with this definition of supply chain risk:

Supply chain risk is the potential loss for a supply chain in terms of its target values of efficiency and effectiveness evoked by uncertain developments of supply chain characteristics whose changes were caused by the occurrence of triggering-events.

Is this a good definition of supply chain risk? It seems to comprise everything, but at the same time it appears a bit abstract and perhaps even a bit akward, i.e. academically correct, but difficult to understand in practice.  That said, it’s not any worse than ISO 31000 that defines risk as “the effect of uncertainty on objectives”, which is even more abstract.

Conclusion

What this paper does show, and I must commend the authors on their efforts, is that the supply chain risk literature has a great number of vastly different definitions and modelling approaches, and reviewing all of them must have been a daunting task.  Given this diversity it is no wonder then that supply chain risk still lacks a common ground for research. Perhaps then we should just let supply chain risk be what is, complex, and not fit for quantifying?

Giordano Bruno Revisited

I’m reminded of what I wrote 10 years ago, in a discourse on reliability and vulnerability in transport networks, where I discussed my proposed PhD topic and my intention to quantify reliability and vulnerability so that it could be used in a cost-benefit decision. In the end I found out that quantitative research was not my cup of tea and I decided to go with Giordano Bruno instead.

Giordano Bruno (1548-1600) was a philosopher who took the current ideas of his time and extrapolated them to new and original vistas. Bruno advocated the use of conceptualising, that is to think in terms of images. He said that to think was to speculate with images. Complex scientific correlations are often better explained in pictures than in mathematical formulae. Rather than spinning his ideas from the yarn of algebra, the cobweb of modern science, Bruno moulded pictures and manipulated visual images to interpret complex ideas.

The reason for researching supply chain risk is to make better supply chain management decisions. With Bruno in mind, decisions should not be determined by numbers alone; decisions should be fully envisioned and comprehended by the decision makers. This is only possible by speculating with images what the outcome of the decision will be. Following Bruno’s lead, leaving the mathematical world of risk and probability behind, perhaps supply chain risk research should stay as it is, diverse and rich in images and concepts, but poor in formulae. From my point of view I hope it does so,

Reference

Heckmann, I., Comes, T., Nickel, S. (2015) A critical review on supply chain risk – Definition, measure and modeling. Omega (52), 119-132 DOI: 10.1016/j.omega.2014.10.004

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28 Global Risks in 2015

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Revised on: 2015-09-29

The  World Economic Forum Global Risks Reports. I first came across them in 2008, when the hyperoptimisation of supply chains was a major issue, particularly, if coupled with a potential economic downturn. This was again highlighted in 2011, in the Supply Chain and Transport Risk Initiative, bringing together a range of leading experts to explore the most critical threats facing supply chain and transport networks. And now, in 2015, supply chains are again part of the global risk picture. This time, supply chains are at risk for getting too lean, highly effective, but also highly vulnerable.

Lean supply chains = risky supply chains?

The Global Risk Report 2015 does not spend much ink on supply supply chains specifically, but the make the case for supply chain risks being interwoven with many other risks that in turn make supply chains vulnerable, and vice versa:

The far-reaching global supply chains set up by multinational corporations are more efficient, but the complexity and fragility of their interlinkages make them vulnerable to systemic risks, causing major disruptions. These comprise natural disasters, including those related to climate change; global or regional pandemics; geopolitical instability, such as conflicts, disruptions of critical sea lines of communication and other trade routes; terrorism; large-scale failures in logistics; unstable energy prices and supply; and surges in protectionism leading to export/import restrictions.

This reminds me of a post I made in 2009 where I reflected on the upsides and downsides of lean supply chains, based on a couple of articles I had read, and my conclusion was quite simple:

Is lean logistics the same as risky logistics? No, lean does not necessarily make you more vulnerable or less robust towards supply chain disruptions. Lean implies agile, and agile is what is needed to overcome supply chain disruptions.

The only problem, and the Global Risk report 2015 highlights this, is that world is no longer peaceful and quite for the most, it’s a rather unstable place with an uncertain future.

Global risk at a glance

At the heart of the Global Risk report 2015 is the overall risk picture. The Global Risks Landscape, a map of the most likely and impactful global risks, puts forward that, 25 years after the fall of the Berlin Wall, “interstate conflict” is once again a foremost concern. For those of us who have lived long enough to see and feel the rise and fall of the Cold War, that is not the 2015 world we expected in the early 1990s.

In 2015, on one hand, the most likely risks are Interstate conflict, Failure of national governance, State collapse or crisis, along with Failure of climate change adaptation and Extreme weather events. On the other hand, the most average risks, i.e. what the respondents fear most, are Food crisis and Profound social instability, along with Large-scale involuntary migration, the latter making much of the news in Europe this summer.

An interesting feature of the 2015 report is what trends that contribute to what risks:

It is clear that Profound social instability is THE risk that is driven by a number of trends, alongside Interstate conflict and Failure of national governance.

Looking at how risks are interconnected, a similar picture emerges:

Again, Profound social instability, Interstate conflict and Failure of national governance are at the heart of all other risks.

Conclusion

In summary, the Global Risk report 2015 highlights and reflects upon a wide range of cross-cutting challenges that can threaten social stability. These risks are additionally aggravated by the legacy of the global economic crisis in the form of strained public finances and persistent unemployment. So basically, things have not improved since the inception of the Global Risk Reports in 2005, they have in fact turned worse. Local risks have now gone global.

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Supply Chain and Transport Risk

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Revised on: 2012-03-07

In our interconnected world, safety, reliability and efficiency can only be secured through collaboration between industries and government. This is the theme of a recently published report titled New Models for Addressing Supply Chain and Transport Risk. Written in collaboration with Accenture and published as an initiative of the Risk Response Network with the World Economic Forum, the report highlights the urgent need to review risk management practices to keep pace with rapidly changing contingencies facing the supply chain, transport, aviation and travel sectors.

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Supply Chain Risk 2011

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Revised on: 2015-09-05

What is supply chain risk? What are typical supply chain risks? This is the 2011 version of my annual lecture on Supply Chain Risk for the MSc in Supply Chain Management and Industrial Logistics at Molde University College, Norway, held today, and this is the fourth consecutive year that I am giving this lecture. The lecture is meant to highlight some of the current literature on supply chain risk and to suggest further reading materials. It is a selection- quite an extensive selection, actually – of the more than 400 articles, books and book chapters I have piled up in my office shelves, and in a way this lecture is a broad literature review of anything connected to supply chain risk. While the main topics are the same, there are always new things I include, so even if you have seen the 2008 lecture and the 2009 lecture and the 2010 lecture on supply chain risk, this year’s is a bit different…again.

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Managing supply chain risk

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Revised on: 2015-09-08

In September and October 2009 the Economist Intelligence Unit surveyed 500 company executives with responsibility for risk management, and selected from companies across Asia-Pacific, North America and Europe, in order to understand how companies are being affected by supply-chain risk, and how they are responding to it. While colored by the them still lingering recession, and perhaps already as old as the proverbial water under the bridge,  the report titled Managing supply chain risk for reward nonetheless paints a good picture of what supply chain risks these executives think thought are were the most pressing issues in their industry. This post will highlight some of the findings from the report, even though things may have changed in the meantime…

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Supply Chain and Transport Risk

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Revised on: 2015-09-10

We are living in a new world of risk that is making this world unprecedentedly complex and challenging for corporations, institutions and states alike. Supply chains are no exception, and in our quest for greater efficiency and greater choice, are we really developing robust global transport networks or simply building a house of cards?  That is what the Supply Chain and Transport Risk Initiative, nested within the Risk Response Network (RRN) of the World Economic Forum is trying to answer. The aim is to develop better international risk management mechanisms and improved crisis response across the public and private sectors to deal with the major risk of disruption in transport and supply chains. This post takes a closer look at this initiative and what it is up to.

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Creating the resilient supply chain

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Revised on: 2011-06-16

This blog is about supply chain risk, business continuity and transport vulnerability, and while I have blogged profusely about supply chain resilience in a vast number of posts over the last 3 1/2 years, citing journal articles, book, papers and research reports en masse, one major reference – perhaps the major reference – has so far been omitted:  Creating Resilient Supply Chains: A Practical Guide, published by the University of Cranfield in 2003. Commissioned by the UK Department of Transport, with Helen Peck as the principal researcher, the objective  of the report is to increase awareness, understanding and thus the ability of UK industry to cope with disruptions to its supply chains. To that end it provides insight and practical tools, which will assist managers in improving the resilience of their organisation’s supply chain networks.

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Supply Chain Risk 2010

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Revised on: 2015-10-04

What is supply chain risk? What are typical supply chain risks? This is the 2010 version of my lecture on Supply Chain Risk for the MSc in Supply Chain Management and Industrial Logistics at Molde University College, Norway, held today, and this is the third consecutive year that I am giving this lecture. The lecture is meant to highlight some of the current literature on supply chain risk and to suggest further reading materials. You will not know everything there is to know about supply chain risk after the lecture, but you will know where to find it. Each year the lecture is improved from the previous year, and while the main topics are the same, there are always new things I include, so even if you have seen the 2008 lecture and the 2009 lecture on supply chain risk, this year’s is very different…again.

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Toy stories: lessons to be learned

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Revised on: 2015-09-08

Christmas. Toys. Two things that belong together. But it isn’t always a happy story. Not only do seasons play a big role in supply and demand, so do fads; what is popular today may not be so anymore tomorrow, and as if that wasn’t enough to cope with, product safety issues are probably keeping more CEOs up at night than the unpredictability of sales figures. The year 2007 will be particularly remembered as the year the toy industry was shaken by a seemingly endless stream of recalls. Way ahead of this, in 2001, M Eric Johnson wrote Learning From Toys: Lessons in Managing Supply Chain Risk from the Toy Industry. Here he shows that how the toy industry handles supply chain risk is applicable to many other industries as well.

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German Autos at risk? Perhaps not.

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Revised on: 2015-09-22

The German automotive industry. Volkswagen, Mercedes, Porsche, Audi, BMW. The embodiment of craftsmanship, functionality and reliability. Cars that work and an industry that knows how to make it work. But how about supply chain risk management? Does that work equally well? That is what Jörn-Henrik Thun and Daniel Hoenig set out to investigate in daptive Fit Versus Robust Transformation: How Organizations Respond to Environmental Change. Interestingly, the results show that the group using reactive supply chain risk management seems to do better in terms of disruptions resilience or the reduction of the bullwhip effect, whereas the group pursuing preventive supply chain risk management seems to do better as to flexibility or safety stocks.

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Supply Chain Logistics Risk in Germany

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Revised on: 2015-09-12

What are the most common supply chain and logistics risks that businesses and logistics providers have to deal with? Here is a study that provides the most complete answer to that question that I have seen to date. Risikomanagement in der Supply Chain – Status Quo und Herausforderungen aus Industrie-, Handels- und Dienstleisterperspektive by Hans-Christian Pfohl, Philipp Gallus and Holger Köhler is a meticulous study from Germany that speaks for itself in describing which risks that have which probability and which impact among businesses and among logistics providers. Note that I use supply chain and logistics risks. That is because this study separates business risks from logistics providers risk, and that is a novel approach I haven’t seen too often.

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Can your business take a blow?

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Revised on: 2015-10-06

Are you prepared for whatever mishaps your business throws at you? If you’re not, you better start learning Dutch and you will be able to find out how you can better your resilience. Why? Because today’s post is based on a Dutch book I found the other day. Published in 2009, and written by Bart Lammers, Walther Ploos van Amstel and Pascal Eijkelenbergh, Risicomanagement en Logistiek translates as “Risk Management and Logistics” and is a short and succinct handbook that I wish will be translated into English  soon. Why? Because this book contains an excellent new framework for logistics resilience and how to achieve it. I’ve done my best in translating the essential parts, but I could still use some help from my Dutch readers.

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A grounded definition of supply risk

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Revised on: 2015-09-09

Risk has many facets and has been studied widely in many settings for many decades. But risk in a supply chain management context is a rather new field of study, just as supply chain management is a new field of research. At least it was in 2003, when George Zsidisin decided to write his definition of supply risk. In A grounded definition of supply risk he discusses several existing definitions, investigates how purchasing organizations define their own risk, and develops a holistic definition that encompasses both the causes and the consequences of supply risk.

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Supply Chain Risk Insights

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Revised on: 2015-09-12

Today’s title serves two purposes: Firstly, it describes what I take back from the ISCRiM 2010 seminar I attended this week, where I had the chance to meet a small selection of who’s who in supply chain risk research. Secondly, it is the name of a fascinating new website I learned of at the seminar. Set up by Zurich Insurance, the website is aimed at helping senior managers and directors in finance, supply chain, operations and risk develop a deeper understanding of the tactical considerations and strategic approaches to minimize impacts of disruptions to the supply chain. And this is a site that is definitely worth having in your bookmarks.

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State of the art in SCRM?

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Revised on: 2015-09-12

A severe supply chain disruption has hit my own blog: More than a month without a post. It’s not that there is so little to write about, it’s just that there is so little time to do it, which is why I’ve decided to reurn to a once weekly posing schedule. Nonetheless, what better occasion could there be to resume my posting than the discovery of an article proclaiming to provide a review of the state of the art in supply chain risk management? The literature review and conceptual framework developed by Hans-Christian Pfohl, Holger Köhler and David Thomas clearly identifies the main principles of SCRM and develops a framework and definitions for disturbance, disruption, security, resilience and risk. Supply chain risk management, so they say, is a process with evolutionary steps, involving no less than 17 underlying principles. Phew…

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Risk and Vulnerability in Virtual Enterprise Networks

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Revised on: 2014-07-30

A month ago I posted on my first publication, a book chapter on A Conceptual Framework for Risk and Vulnerability in Virtual Enterprise Networks in Managing Risk in Virtual Enterprise Networks: Implementing Supply Chain Principles, edited by Stavros Ponis from NTUA in Athens, Greece, and published by IGI Global. A month ago, the book was merely announced on the publisher’s website, now it is fully present. Not only do I have the honor of opening the book by being the first chapter, but  – as I just found out – I also have the honor of having the free sample chapter for download…making my thoughts available for criticism for the whole Internet world, not just the inquisitive  reader who stumbles upon this book in the university library and decides to read it.

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Business continuity 101

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Revised on: 2011-03-22

This is the 3rd day with severe transportation and thus supply chain disruptions all over Europe, due to the volcanic ash cloud from Iceland, forcing travellers, cargo shippers and logistics providers to seek alternative solutions. In essence this is a very practical lesson in business continuity. Who would have thought that a volcano eruption in country that until recently and before the IceSave dispute did not make any headline news could create such havoc with widespread impacts? I certainly did not. Nonetheless, it is also a lesson in business creativity: German car rental company Sixt shows how.

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Vulnerable or valuable supply chain?

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Revised on: 2015-10-02

More than a year old now, but still holding not so few words of wisdom is the Pricewaterhouse Coopers report on supply chain integrity: From vulnerable to valuable. Their analysis shows that moving away from the typical business mindset of supply chain improvements only in terms of cost reductions is well worth the effort. Companies must invest in enhancing the integrity of their supply chains, in a manner which balances operational objectives with reputational risks. This requires developing “leading risk indicators” in addition to the typical Key Performance Indicators, in order to measure supply chain performance.

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Supply Chain Risk Webinars

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Revised on: 2015-09-12

I’ve never given much though to webinars as a means of communication, as  blogging is my force, although I do have a lecture on supply chain risk, but not in webinar style. Perhaps it’s time to reconsider. I just recently became aware of  WTG Webinar, a website that caters to the business community and serves webinars by highly acclaimed speakers on management and supply chain issues, thus bringing the world of thought leadership and insider industry knowledge directly to your desktop. So, what’s in store at WTG Webinar?

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