Supply chain risk management

Introduction to Supply Chain
Management
• Supply Chain Management (SCM) as a discipline has witnessed
a tremendous growth during the last two decades.
• This growth has been noticed in terms of modeling and
analyzing various issues arising due to the development of
complex networks amongst different organizations not only
within countries but also across the globe.
• These issues are mainly related to designing, planning and
coordinating the material, information, and money flows across
the supply chains.
• Increasing dynamism and uncertainty in the business
environment risk issues are becoming key concerns to the
organizations.

Continue…
• The risks in supply chains arise mainly due to Operational
fluctuations such as variability in supply, demand uncertainties,
and price variability (Juttner, 2005; Christopher and Lee, 2004)
• Natural events such as earthquakes, cyclones, epidemics and
Manmade crises such as terrorist attacks, unethical business
practices and economic recessions (Kleindorfer andSaad, 2005).
• Effective management of risks is becoming the focal concern of
the firms to survive and thrive in a competitive business
environment.
• Thus the supply chain risk management (SCRM) has the prime
objective of identifying the potential sources of risks and
suggesting suitable action plans to mitigate them.

Continue…
• Developing an effective SCRM program is always a
critical task and requires skills and expertise in multiple
areas.
• Considerable work has been reported in the SCRM
literature dealing with issues with qualitative and
quantitative approaches.
• Supply chain optimization is now a major research
theme in process operations and management.
• A great deal of research has been undertaken on facility
location and design, inventory and distribution
planning, capacity and production planning and detailed
scheduling.

Operational issues in the
Pharmaceutical Supply Chain
• Demand management
• Inventory management and distribution
requirements planning
• Secondary production planning and scheduling
• Primary manufacturing campaign planning and AIl
inventory management


ANON HEALTHCARE Introduction

As an ISO 9001:2008 Certified company, ANON
HEALTH CARE situated in Ahmedabad (Gujarat) is
one of the fastest growing pharmaceutical houses in
present times. ANON HEALTH CARE
with intention to provide quality products, raw
material and other food products for the nation.

Continue. . .
• Anon Healthcare also provides third party
export services as a third party manufacturing.
Organization can provide WHO GMP state of
the art manufacturing facility as on request.
• Anon Healthcare as a Third Party Manufacturer in
the field of pharmaceutical formulation and Food
Supplements depends mainly on product quality,
low production cost, on-time delivery and the Client
relationship.

Product Range
General Tablets/Capsules/Syrups
o Cardio-Diabetic Range
o Respiratory Range etc…
Liquid Filled Hard Gelatin Food Products
o Omega 3, 6, 9 Fatty Acids
o Co-Enzyme Q 10 Capsules
o Vitamin D3 Capsules
o Garlic Capsules etc…
Soft Gelatin Capsules
o Progesterone Capsules


Literature review
Literature review

“Everyone sees the unseen in proportion
“Everyone sees the unseen in proportion
to the clarity of his heart, and that
to the clarity of his heart, and that
depends upon how much he has polished
depends upon how much he has polished
it. Whoever has polished it more sees more
it. Whoever has polished it more sees more
– more unseen forms become manifest to
– more unseen forms become manifest to
him” ~ Jalal ad-Din Rumi
him” ~ Jalal ad-Din Rumi

In this section, we provide an introduction to supply
In this section, we provide an introduction to supply
chain risk management. By presenting the relevant
chain risk management. By presenting the relevant
definitions and summarizing the important literature,
definitions and summarizing the important literature,
we describe the background to the field of this study.
we describe the background to the field of this study.

In this section, we included following data:
In this section, we included following data:
•• A general framework
A general framework
•• Definitions of risk
Definitions of risk
•• Supply chain risk management
Supply chain risk management
•• Supply chain risk Identification
Supply chain risk Identification

A general framework
A general framework
Earlier supply chain management focused on the
Earlier supply chain management focused on the
material flows of the network and broadened to
material flows of the network and broadened to
include other flows, such as financial and information
include other flows, such as financial and information
flows. We believe that a risk event can create
flows. We believe that a risk event can create
disruption in either one or a combination of these
disruption in either one or a combination of these
flows.
flows.
 Supply chain risk could be mitigated if we have a
 Supply chain risk could be mitigated if we have a
detailed investigation and description of the root
detailed investigation and description of the root
causes of disruption from the aspect of these flows.
causes of disruption from the aspect of these flows.

Similar ideas have been presented by:
Similar ideas have been presented by:
••Chopra and Sodhi (2004),
Chopra and Sodhi (2004),
••Johnson (2001) and
Johnson (2001) and
••Spekman and Davis (2004),
Spekman and Davis (2004),
who all identify the dimension of risk in the form of supply
who all identify the dimension of risk in the form of supply
chain flows.
chain flows.
••Spekman and Davis (2004) however go further, and
Spekman and Davis (2004) however go further, and
concentrate on information sharing and network relationships
concentrate on information sharing and network relationships
and add the security of internal information systems,
and add the security of internal information systems,
relationships forged among supply chain partners and
relationships forged among supply chain partners and
corporate social responsibility to their risk dimensions.
corporate social responsibility to their risk dimensions.

••Arlbjörn and Halldorsson (2002) share this idea of
Arlbjörn and Halldorsson (2002) share this idea of
viewing risk on the flows of material and information,
viewing risk on the flows of material and information,
but view the third perspective in terms of flow of
but view the third perspective in terms of flow of
services.
services.
••One important change in managing supply chain is
One important change in managing supply chain is
the emphasis on integrating activities into key supply
the emphasis on integrating activities into key supply
chain processes instead of looking at individual
chain processes instead of looking at individual
functions.
functions.
••In the SCRM literature too, we note that managerial
In the SCRM literature too, we note that managerial
aspects may not be the same for the inbound and
aspects may not be the same for the inbound and
outbound sides.
outbound sides.

••For instance, when discussing the risk in terms of
For instance, when discussing the risk in terms of
supplier selection, a major concern is to sustain the
supplier selection, a major concern is to sustain the
flow of raw material, whereas on the demand side,
flow of raw material, whereas on the demand side,
financial risk, such as a customer’s possibility of
financial risk, such as a customer’s possibility of
bankruptcy, may become important.
bankruptcy, may become important.
••However, there is no clear evidence of interlinking
However, there is no clear evidence of interlinking
flows and of integrating activities in previous studies.
flows and of integrating activities in previous studies.
Therefore, in this study, we identify the flows in the
Therefore, in this study, we identify the flows in the
form of material, financial and information flows.
form of material, financial and information flows.


••In addition, we analyse the system as a process model of
In addition, we analyse the system as a process model of
source (supply), make (production) and deliver (demand).
source (supply), make (production) and deliver (demand).
••The foundation of this process model is the Supply Chain
The foundation of this process model is the Supply Chain
Operations Reference (SCOR) model, for it has been widely
Operations Reference (SCOR) model, for it has been widely
used among supply chain practitioners as well as researchers
used among supply chain practitioners as well as researchers
(Supply Chain Council, 2008).
(Supply Chain Council, 2008).
••For any supply chain irrespective of its complexity, these
For any supply chain irrespective of its complexity, these
aspects, as well as the three flows, provide a framework to
aspects, as well as the three flows, provide a framework to
describe the system.
describe the system.
••Risk issues will also be discussed based on these
Risk issues will also be discussed based on these
perspectives.
perspectives.

••From a perspective of flows, we define the material flow as
From a perspective of flows, we define the material flow as
••Physical movement of products from suppliers to customers.
Physical movement of products from suppliers to customers.
••Letters of credit
Letters of credit
••Timely payment of bills
Timely payment of bills
••bankruptcy
bankruptcy
••Payment schedules
Payment schedules
••Credit terms and suppliers’ contracts fall under the category
Credit terms and suppliers’ contracts fall under the category
of financial flows.
of financial flows.
••Information flow is used to keep all supply chain elements
Information flow is used to keep all supply chain elements
updated and hence provides resources for decision making in
updated and hence provides resources for decision making in
the supply chain.
the supply chain.
••Examples of information flow are order status, order delivery
Examples of information flow are order status, order delivery
and inventory status, among others.
and inventory status, among others.

Definitions of risk
Definitions of risk
••In reviewing risk management literature, the first
In reviewing risk management literature, the first
difficult question is
difficult question is
what is supply chain risk?
what is supply chain risk?
••It is particularly difficult to distinguish risk and
It is particularly difficult to distinguish risk and
uncertainty in supply chain operations management.
uncertainty in supply chain operations management.
••In this section we therefore present relevant
In this section we therefore present relevant
definitions.
definitions.

••Risk used to be simply linked to unexpected events.
Risk used to be simply linked to unexpected events.
••Christopher and Lee (2004) view risk as the “effect of
Christopher and Lee (2004) view risk as the “effect of
external events such as wars, strikes or terrorist attacks and
external events such as wars, strikes or terrorist attacks and
impact of changes in business strategy”.
impact of changes in business strategy”.
Kleindorfer and Saad (2005) follow the same line and relate
Kleindorfer and Saad (2005) follow the same line and relate
risk to….
risk to….
••Operational contingencies
Operational contingencies
••Natural hazards, earthquakes, hurricanes and storms
Natural hazards, earthquakes, hurricanes and storms
••Terrorism and political Right Reserved: www.stark-softs.com
All instability.
Terrorism and political instability.

••Quinn (2006) also refers the natural and man-made disasters,
Quinn (2006) also refers the natural and man-made disasters,
to “catastrophic events” which are the source of risk.
to “catastrophic events” which are the source of risk.
••Tang (2006a) defines risk as an operational as well as a
Tang (2006a) defines risk as an operational as well as a
disruption risk, but he however does not distinguish between
disruption risk, but he however does not distinguish between
them.
them.
••Spekman and Davis (2004) claim that risk definition can
Spekman and Davis (2004) claim that risk definition can
either be objective or subjective.
either be objective or subjective.
••Risk which relies on probability alone, such as coin flipping
Risk which relies on probability alone, such as coin flipping
or dice throwing, is considered to be objective.
or dice throwing, is considered to be objective.
••However, when the consequences of risk need to be assessed
However, when the consequences of risk need to be assessed
along with its expectation of occurrence, it is categorized as
along with its expectation of occurrence, it is categorized as
subjective risk.
subjective risk.

Supply Chain Risk Management
Supply Chain Risk Management

Kouvelis et al. (2006) view SCRM in terms of
Kouvelis et al. (2006) view SCRM in terms of
managing the uncertainty of demand, supply and
managing the uncertainty of demand, supply and
costs.
costs.
••Carter and Rogers (2008) define SCRM as:
Carter and Rogers (2008) define SCRM as:
“The ability of a firm to understand and manage its
“The ability of a firm to understand and manage its
economic, environmental, and social risks in the
economic, environmental, and social risks in the
supply chain” which could be materialized by the
supply chain” which could be materialized by the
adoption of contingency planning and having a
adoption of contingency planning and having a
resilient and agile supply chains.
resilient and agile supply chains.

••Risk is defined as: “The combination of the probability of
Risk is defined as: “The combination of the probability of
occurrence of harm and severity of that harm.”
occurrence of harm and severity of that harm.”
••Supply chain risk management (SCRM) is a new and novel
Supply chain risk management (SCRM) is a new and novel
methodology that captures both the operations as well as the
methodology that captures both the operations as well as the
financial aspects of decision-making.
financial aspects of decision-making.
••Supply chain management, in general, is still a relatively new
Supply chain management, in general, is still a relatively new
concept in most developing countries, more so in India; and
concept in most developing countries, more so in India; and
many companies have not even begun to consider the formal
many companies have not even begun to consider the formal
management of their supply chain.
management of their supply chain.

The risks are broadly classified as
The risks are broadly classified as
••Supply related
Supply related
••Cost related
Cost related
••Demand related,
Demand related,
••Production related
Production related
••Miscellaneous risks.
Miscellaneous risks.

Supply Risk
Supply Risk

..

These are risks that could potentially affect or
These are risks that could potentially affect or
disrupt the supply of products or services that the
disrupt the supply of products or services that the
pharmaceutical supply chain offers its customers.
pharmaceutical supply chain offers its customers.
••Imports
Imports
••Inferior Quality of supply
Inferior Quality of supply
•• Non-Availability of resources
Non-Availability of resources
•• Natural Disasters
Natural Disasters
•• Man-made Disasters
Man-made Disasters
•• Selection of Supplier
Selection of Supplier
•• Cost Risk
Cost Risk

Production Risks
Production Risks
Production risks are those that could potentially
Production risks are those that could potentially
affect or disrupt the production of the pharmaceutical
affect or disrupt the production of the pharmaceutical
products.
products.
••Malfunctioning of Machinery
Malfunctioning of Machinery
••Human Risks
Human Risks
••Wrong Packaging
Wrong Packaging
••Power Shutdown
Power Shutdown


Demand Risks
Demand Risks
Demand-related risks could potentially affect the
Demand-related risks could potentially affect the
ability of the company to make products available to
ability of the company to make products available to
its customers
its customers
..

••Forecasting Errors
Forecasting Errors


Miscellaneous Risks
Miscellaneous Risks
••Transportation Risk
Transportation Risk
••Quality Risks
Quality Risks
••Storage Risk
Storage Risk
••Information Sharing Risks
Information Sharing Risks
••Safety regulations by government agencies
Safety regulations by government agencies

Research Methodology
Research Objective:
•To know at which stage company lies for assessment of supply chain risks?
•To identify the different types of risks or potential risks in company’s supply
chain?
•To suggest some possible mitigation strategies require managing these risks?
Research type: Problem identification
Research Method: In our research we used observation research as well as
survey method for research. (Survey was limited to Purchase Manager and Top
Management)
Exploratory Research: in exploratory research we used internet websites
materials, articles materials and operation management books for secondary
data.
Conclusive research: we used survey questions provided by FM global supply
chain solution. From that we came to know about the establishment of Risk
management program in ANON HEATHCARE. Also we asked some close and
open ended questions and suggestion about our project after completion.

Primary Data: We collected primary data from
Purchase manager and top management by using Esurvey method provided by FM global supply chain
Solution and some data from our questionnaire.
Survey Method: E-Survey and Simple survey
Research Instrument: E-Questionnaire and Simple
Questionnaire.
Scaling techniques: Automatic Result displayed via
software provided by FM Global supply chain
solution.
Sampling Technique: Interview type, open ended
and close ended questions

Target Population Definition
• Target Population: Purchase manager and Top Management Executives.
• Element: Purchase manager and Top Management Executives.
• Sampling Unit: Purchase manager and Top Management Executives.
• Sample Size: 4 (CEO, O/P Manager, Purchase Manager, Logistic Officer)
• Sampling Frame: Not Available
• Extent: ANON HEATHCARE, AHMEDABAD
• Time: April 2013

Observation (Filled E-Questionnaire)


Analysis of Risk Identification and
Mitigation
• In our project we mainly concerned with Top level
management only. As per the data we collected from the
Interview, Very first we would like to tell Top management of
Anon Healthcare is aware about the Supply chain risks but
there is no any provision for the assessment of supply chain
risks.
• We found that in Anon Healthcare lower level management is
not involve in such a thing so in organization it is quite
difficult to conduct the Audit in context with Supply Chain
Risks.
• In Organization top management believe that almost all type
of risks mentioned above affect the Supply chain of
Organization but only O/P manager found that all except
Quality Risk affect Supply chain.

• As we talk about facing the risk, from starting to till date
Anon Healthcare facing following Risks frequently
Production Risk
Transportation Risk
Logistic Risk
Packaging Risk
Forecasting Risk
Supplier Risk
• From above top management believe that Forecasting,
Production, Natural Disaster, Supplier and Logistic Risks are
more dangerous.
• By considering answers given by top management we can
conclude following reasons for individual risk.

Suggestion and Recommendations


For Logistic Risk
There are 3 main types of risks to consider when transporting a
shipment at different stages in the supply chain network:
•The risk that the shipment is delayed.
•The risk that the shipment does not reach its destination.
•The risk of hazardous material.
The reason for the first two cases could be caused due to natural
causes such as cyclones, earthquakes, heavy rainfall etc.
Contingency plans have to be made before hand to deal with
such risks. The third case that is the risk of hazardous material is
caused when the transported substance is contaminated due to
exposure to harmful substances while transporting. This can be
prevented by using right material of construction containers to
prevent exposure.

Limitation
• In Anon Healthcare, Lower management is not
involved in any risk assessment so it is not possible
to gather the data from the lower level management.
All data is depending upon the top level
management. And this organization is based on the
third party manufacturing so all the principles of
Supply chain management are not suit to the
organization.

Conclusion

• This empirical study concludes different classification of risks and its mitigation
strategies.
• The classifications are supplier risk, demand risk, production risk, logistic risk
natural disaster risk, forecasting risk and miscellaneous risks which include
transportation risks, storage risks and information sharing risks. Through a
detailed study of this medium scale Indian pharmaceutical company we have
been able to identify the risks faced in this industry at different stages of its
supply chain.
• For Anon healthcare Production, Suppliers, Forecasting and Logistic risks are
more potential. They believe that mitigation and assessment of all these risks
are very essential for smooth flow of the supply chain.
• As being third party manufacturer relation with clients or customer is very
essential for survive in the market. So, suggested mitigation strategies will help
them to sustain company image Reserved: www.stark-softs.com allow for long term
All Right and reputation and
relationship with clients and customers.

Review and Feedback
• As we have taken Review and Feedback as a part of our questionnaire. Top
management of Anon Healthcare give us favorable reviews and feedback as
mentioned below.
• Top management liked our suggestion for mitigation of Supply chain risks.
They liked almost all our suggestion and they are thinking to implement in the
organization.
• Top management is some what confuse in suggestion of ERP system. They
found some irrelevance in this suggestion. This will not be the solution at this
stage because implementation of ERP software may lead more expense at this
stage.
• Top management liked our E-Questionnaire about self assessment provided by
FM global supply chain solution. They believe this type of self E-assessment
would help them to increase the awareness about the supply chain risk and
program establishment for All Right Reserved: www.stark-softs.com
assessment of risk.

Thank You

Supply chain risk management

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