Development of a risk assessmenttool for the proactive management of Supply Chain risk.

Email: d.m.julien@cranfield.ac.ukAddress: 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’ risksSUPPLIER 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’ MapTier 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 1Literature Review

STAGE 3Development of the risk assessment tool

STAGE 2Development of the framework

“The tool identifies the weaknesses of the supply chain and enables managers to prioritise the mitigation strategies”

Juan FerrerSupervisor: Dr Denyse Julien