Developing a process for supply chain risk management

Abstract

In today's competitive markets, companies look for any advantage they can build over their competitors. A number of companies recognize that supply chain excellence is an opportunity to create such an advantage. A superior supply chain provides manufacturing flexibility, fast on-time delivery, and lower cost products than those of a lesser competitor. Risk management concepts are beginning to be applied to supply chains in ever-broadening scope. Companies reliant on their supply chains now seek innovative ways to manage risk to the supply chain and ensure its smooth operation. Implementing a risk management process for the supply chain can generate long term value for a company by improving continuity of supply and component quality. By identifying risks to the supply of necessary components and then assessing the risk of each component's availability and quality, it is possible to gain a comprehensive understanding of the risk to the supply chain for a given product or product family. This understanding of the risk to the supply chain allows managers to make decisions based on the expected costs and assists them in determining the appropriate risk mitigation activities.