Ferrer J, Julien D (2014) Development of a risk assessment tool for the proactive management of Supply Chain risk.

1. Development of a risk assessment
tool for the proactive management of
Supply Chain risk.
Email: d.m.julien@cranfield.ac.uk
Address: B50, Manufacturing Department, Cranfield University, Cranfield, Bedfordshire, MK43 0AL
www.cranfield.ac.uk/sas/manufacturing
AIM
To develop a Supply Chain risk-profiling tool to allow organisations to be
more proactive in the identification and management of risk in their supply
network
STAGE 1. LITERATURE REVIEW
VULNERABILITY RESILIENCE EFFICIENCY
PROCESS 1 RISK IDENTIFICATION 2 RISK ASSESSMENT
Development of the risk profiles for each generic element
Identification of risk categories
Individual Risks Supply Chain Elements
The risk level is given
according to the number of
high risks
HIGH
MEDIUM-HIGH
MEDIUM
LOW-MEDIUM
LOW
1 Identify Supply Chain Elements
4 Graphic display of elements’, group of
elements’ and categories’ risks
2 Risk assessment for each element
FOCAL COMPANYCLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK
Environmental Political Political stability
Environmental Economy Environment financial situation
Environmental Legal Change in government policies
Environmental Social Attitude towards changes
Environmental Natural Earthquake, volcano, floods
Internal Disruptions Experience
Internal Disruptions Labour & Equipment availability
Internal Disruptions Raw materials availability
Internal Inventory Inventory holding cost
Internal Inventory Storage requirements
Internal Inventory Rate of product obsolescence
Internal Management IT systems integration
Internal Management Forecasting system / visibility
Internal Management Capacity cost and flexibility
Internal Management Number of suppliers
Internal Management Number of customers
Internal Management Financial strength of customers
Internal Security IT security
Internal Security Theft
A
CUSTOMER CLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK
Environmental Political Political stability
Environmental Economy Environment financial situation
Environmental Legal Change in government policies
Environmental Social Attitude towards changes
Environmental Natural Earthquake, volcano, floods
Internal Product Variations in quality
Internal Product Variations in product requirements
Internal Product Availability of substitutive goods
Internal Market Market risk
Internal Market Location
Internal Market Variations in demand
Internal Market Brand reputation
Internal Management Culture
Internal Management Relationship level
Internal Management Information sharing
Internal Accounting Bankruptcy
Internal Accounting Number of customers
Internal Accounting Payment delays
Internal Accounting Financial strength of customers
A
LINK CLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK
Network Nodes Density
Network Nodes Criticality
Network Nodes Complexity
Network Logistics Logistics Providers
Network Logistics Carrier Capacity
Network Logistics Quantity of transfer points
Network Logistics Channel Overload
Network Logistics Ports issues & Infrastructure
Network Legal Border crossing & Custom regulations
Network Management Long-term vs. Short-term contracts
Network Management Relationship level
1
SUPPLIER CLASSIFICATION CATEGORY RISK SOURCE IMPACT PROB RISK LEVEL FINAL RISK
Environmental Political Political stability 1 4 LOW
Environmental Economy Environment financial situation 3 1 LOW
Environmental Legal Change in government policies 2 5 MEDIUM
Environmental Social Attitude towards changes 2 3 MEDIUM
Environmental Natural Earthquake, volcano, floods 4 4 HIGH
Internal People Experience 1 1 LOW
Internal People Culture 5 3 HIGH
Internal Management Change in prices 4 1 LOW
Internal Management Intellectual property 5 5 HIGH
Internal Management Information sharing 4 4 HIGH
Internal Management Bankruptcy 2 4 MEDIUM
Internal Product Quality: Defects/Million 4 5 HIGH
Internal Product Value of product 4 5 HIGH
Internal Product Product uniqueness 5 4 HIGH
Internal Product Criticality of product 1 2 LOW
Internal Process Storage requirements 5 5 HIGH
Internal Process Delays in production 4 3 MEDIUM
Internal Process Flexibility 4 3 MEDIUM
Internal Process Standardisation 3 1 LOW
A HIGH
3 Summary of the elements’ risks
SUPPLIER RISK HIGH MEDIUM LOW
A HIGH 8 5 6
B MEDIUM-HIGH 5 9 5
C LOW-MEDIUM 3 10 6
D LOW-MEDIUM 3 7 9
E LOW 1 11 7
CUSTOMER RISK HIGH MEDIUM LOW
A LOW 2 10 7
B HIGH 7 3 9
C HIGH 6 8 5
D MEDIUM 4 11 4
E LOW-MEDIUM 3 9 7
F.COMPANY RISK HIGH MEDIUM LOW
A MEDIUM 4 8 7
LINKS RISK HIGH MEDIUM LOW
1 LOW-MEDIUM 1 5 5
2 HIGH 4 3 4
3 LOW 0 9 2
4 MEDIUM-HIGH 3 5 3
5 MEDIUM-HIGH 3 3 5
6 MEDIUM-HIGH 3 6 2
7 MEDIUM-HIGH 3 2 6
8 MEDIUM 2 7 2
9 LOW-MEDIUM 1 4 6
10 MEDIUM 2 4 5
5 Supply Chain Risks’ Map
Tier 2 Suppliers Link Tier 1 Suppliers Link Focal Company Link Tier 1 Customer Link Tier 2 Customer
C 1
LOW-MEDIUM LOW-MEDIUM
A 4 6 A 8 C
D 2 HIGH MEDIUM-HIGH MEDIUM-HIGH LOW MEDIUM HIGH
LOW-MEDIUM HIGH
A
MEDIUM
9 D
E 3 B 5 7 B LOW-MEDIUM MEDIUM
LOW LOW MEDIUM-HIGH MEDIUM-HIGH MEDIUM-HIGH HIGH
10 E
MEDIUM LOW-MEDIUM
STAGE 3. RISK ASSESSMENT TOOL
STAGE 2. CONCEPTUAL FRAMEWORK FOR RISK MANAGEMENT
OBJECTIVES
• Conduct a comprehensive literature review on Supply Chain Risk.
• Develop the risk management framework for Supply Chains.
• Develop a Supply Chain risk assessment tool.
METHODOLOGY
STAGE 1
LiteratureReview
STAGE 3
Developmentof the risk assessment tool
STAGE 2
Developmentof the framework
“The tool identifies the weaknesses of the supply chain and enables managers to prioritise the mitigation strategies”
Juan Ferrer
Supervisor: Dr Denyse Julien