Risks in Supply Chains for Small and Medium Sized Companies

Large Cooperations often employ staff for supply chain planning and sometimes additional staff for supply chain risk management.

Small / medium enterprises usually have more limited resources and therefore have to focus more. For this reason M.N. Faisal developed a prioritization of supply chain risks.

Basis

The prioritization is based on a literature review (for the basic population) and expert opinion. The expert opinion is extracted by using a fuzzy AHP (Analytical Hierarchy Process). The basic procedure is for each expert to evaluate / compare pairs of risks on a 0 to 9 scale. This method is adjusted to include the fuzzy character of most decision processes.

Results

Faisal adapts the standard supply chain components (product-, financial-, information-flow) to categorize the risks. He also adds a relational category.

Enclosed you find the top three risks in each category:

1. Physical Flow
1. Poor Quality
   supplier does not meet quality standards
2. Capacity Inflexibility
   facilities provide only limited flexibility
3. Transportation
   in case of outsourced transportation
2. Financial Flow
1. Untimely payments
2. Currency flucuations
3. Lack of hedging
   eg. in case of bankruptcy of a supplier
3. Relational aspects
1. Reputational risk
2. Lack of trust and opportunism risk
3. Legal risks
   risk from litigation by stakeholders
4. Informational flow
1. Information security
2. Forecast risk
3. IT outsourcing risk