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

1. Supply Chain Risk The dark side of supply chain mangement Guest lecture, LOG 711, 15.09.2011 Jan Husdal Research Geographer Møreforsking Molde

4. Supply chain risks in 2011 (1) images.nationalgeographic.com/wpf/media-live/photos/000/332/cache/cargo-containers-japan-earthquake-aftermath_33237_600x450.jpg FROM: news.nationalgeographic.com/news/2011/03/pictures/110312-japan-earthquake-tsunami-nuclear-reactor-emergency-world/

5. Global effects of supply chain disruptions: Looking back at the Japan earthquake and tsunami The figure indicates that Japan's major market lies in Asia and China. If these exports are disrupted that in turn will hamper these countries, and in particular China, in exporting their goods to Europe and the US - online.wsj.com/article/SB10001424052748704662604576202823395268178.html - reuters.com/article/2011/03/14/us-japan-quake-supplychain-idUSTRE72D1FQ20110314 - bbc.co.uk/blogs/thereporters/stephanieflanders/2011/03/measuring_the_economic_aftersh.htm - scmr.com/article/japans_supply_chain_still_under_pressure/ This figure shows the sectors that are most likely to be hit the worst by the current crisis in Japan: The automotive sector and the electronics sector 2008

6. Global effects of supply chain risks Some quotes Zurich, the insurance group, has tracked more than 1,000 examples in the past five years where companies have quietly suffered because of disruption at a factory producing a critical component, or at a key transport stage. Last year, the Business Continuity Institute published a survey of companies which suggested that three-quarters had experienced production hiccups in their supply chain in the previous 12 months , due to unexpected surprises (ranging from weather to health issues to earthquakes). www.cnbc.com/id/42103348

7. The financial impact of supply chain glitches Hendricks, K. B., & Singhal, V. R. (2003). The effect of supply chain glitches on shareholder wealth . Journal of Operations Management, 21 , 501-522. “ Glitch” (production or shipment delay) announcements on average decrease shareholder value by near 11% , based on a sample of 519 announcements made during 1989-2000. “Glitches” could be due to many reasons including inaccurate forecast , poor planning , part shortages , quality problems, production problems, equipment breakdowns , capacity shortfall, and operational constraints . Glitches could be due to suppliers , customers , or internal sources.

8. Supply chain risks in 2011 (2) www.rollingstone.com/music/news/sony-warehouse-destroyed-in-london-riots-20110809 … the blaze will have a direct impact on deliveries of CDs and DVDs throughout the region, as this was the only facility storing their products in the country …. … the warehouse stored the entire inventory of PIAS UK, the primary distribution hub for over 150 labels…

9. Supply chain risk – implications/consequences? Loss of goods Insurance? Loss of vehicle Replacement? Delayed delivery Brand reputation? Injured personell Hiring and training? Weather conditions Detour possible? Suggested reading: Husdal, J. & Bråthen, S. (2010). How Norwegian freight carriers handle supply chain disruptions . Paper presented at the World Conference for Transportation Research 2010, Lisbon, Portugal, 11-15 July 2010.

10. Supply Chain Risk – another example news.bbc.co.uk/2/hi/africa/7692408.stm

11. Why Supply Chain Risk? Supply chain risk research has grown in importance in the last 10 years and has resulted in many frameworks and concepts of risk categories and risk mitigation measures, but there is yet to be a consensus on which framework that best captures different types of supply chain risks. Oke, A., & Gopalakrishnan, M. (2009). Managing disruptions in supply chains: A case study of a retail supply chain . International Journal of Production Economics, 118 (1), 168-174 .

15. The Ericsson/Nokia fire Mukherjee, A. (2009). The Fire That Changed an Industry. In The Spider's Strategy: Creating Networks to Avert Crisis, Create Change, and Really Get Ahead (pp. 3-15). Upper Sadle River: FT Press. http://www.ftpress.com/articles/article.aspx?p=1244469 “ On July 20, 2000, Ericsson reported that the fire and component shortages had caused a second-quarter operating loss of $200 million in its mobile phone division. As such, annual earnings would be lower by between $333 million and $445 million. Six months later, it reported divisional annual losses of $1.68 billion, a 3% loss of market share, and corporate operating losses of $167 million.”

17. Examples of risk definitions Talbot, J., & Jakeman, M. (2009). Security Risk Management – Body of Knowledge . Hoboken: John Wiley and Sons.

24. High-Impact Low Likelihood (2) www.youtube.com/watch?v=Zqo4MidIK28 Patrick Dixon, Futurist, www.globalchange.com

30. Supply Chain Risk Original figure in: Jütner, U., Peck, H. and Christopher, M. (2003) Supply Chain Risk Management: Outlining an Agenda for Future Research . International Journal of Logistics: Research and Applications, Vol. 6 , No. 4, pp. 197-210. Adaptation in: Husdal, J (2010) Supply chain disruptions in sparse transportation networks – A Norwegian perspective . Proceedings of the 10th International Research Seminar on Supply Chain Risk Management, ISCRiM , 6-7 September, Loughborough, UK. Supply Chain Risk can be viewed as a 4-fold construct: Risk sources . Consequences (impacts) of the risk sources. Risk drivers that turn risks into consequences. Strategies to address the risks.

31. Proactive versus Reactive Risk Management Asbjørnslett, B E and Rausand, M (1997) Assess the vulnerability of your production system . Report NTNU 97018. Norwegian University of Science and Technology NTNU, Department of Production and Quality Engineering, Trondheim, Norway. Tomlin, B. (2006) On the Value of Mitigation and Contingency Strategies for Managing Supply Chain Disruption Risks . Management Science, 52 (5),639-657 Ritchie, B. and Brindley, C. (2004) Risk Characteristics of the Supply Chain – A Contingency Framework . In: Supply Chain Risk. Ed. Brindley, C. , Ashgate Publishing, pp. 28-42,197-202 Mitigative actions address risk sources. Contingent actions address risk consequences.

32. Types of supply chain risk Shah, M. (2008) Supply Chain Risk Management Using SCOR . Supply Chain World Asia Pacific Conference 2008, 23 - 24 July 2008, Singapore

37. Risk Management Strategies (1) Avoid Transfer Reduce Retain Exploit DeLoach, J (2000) Enterprise-Wide Risk Management: Strategies for Linking Risk & Opportunity. Financial Times Management/ Prentice Hall. The classic Four (Five) Exploit

39. Risk Management Strategies (3) Köhler, H. (2011) Supply Chain Risiken im Low Cost Country Sourcing: Reduktion von Lieferrisiken in China und der Türkei . Berlin: Erich Schmidt Verlag. RISK Avoid Limit Transfer Retain Active Effect Cause Reduce Reactive RISK Remaining Total

42. Mitigating supply chain disruptions (1) Tang, C. (2006). Robust strategies for mitigating supply chain disruptions. International Journal of Logistics, 9 (1), 33-45 youtube.com/watch?v=K6XxcBTanZw

47. Calculating the Value-at-Risk (1) Shah, M. (2008) Supply Chain Risk Management Using SCOR . Supply Chain World Asia Pacific Conference 2008, 23 - 24 July 2008, Singapore

48. Calculating the Value-at-Risk (2) Shah, M. (2008) Supply Chain Risk Management Using SCOR . Supply Chain World Asia Pacific Conference 2008, 23 - 24 July 2008, Singapore

49. Calculating the Value-at-Risk (3) Shah, M. (2008) Supply Chain Risk Management Using SCOR . Supply Chain World Asia Pacific Conference 2008, 23 - 24 July 2008, Singapore

50. Supply Chain Disruptions (1) Sheffi, Y. (2005) The Resilient Enterprise - Overcoming Vulnerability for Competitive Advantage , Cambridge: MIT Press Warning? What happens to supply chain performance during an unforeseen event?

54. Supply Chain Risk Management youtube.com/watch?v=QlZ6TyUaYpw