process

Natural Disaster Management Planning

Daniel Dumke — Mon, 27 Feb 2012 14:44:45 +0000

After the 2004 tsunami, which heavily affected parts of Thailand and Indonesia, national and international disaster response was quick to support the affected regions.

Within several weeks of the disaster, approximately 400 international non government organizations (NGOs) were working in Indonesia alone providing basic assistance to the affected population.

Introduction to disaster relief

Several factors are necessary to improve response activities:

Preparedness in vulnerable regions, focussing on the “ability to respond quickly and appropriately”.

Local involvement. The local authorities and population directly involved in a disaster also are “in the best position to respond immediately” to a disruption.

Coordinated needs assessment, which also includes local groups ensures that support can be given on efficiently where required

Information sharing: “Emergency preparedness and response stages are driven by information”. Therefore sharing information between the disaster response parties is an important factor to improve overall outcome.

Logistics expertise and efficiency. Natural disasters often leave most critical infrastructure destroyed. To quickly support a large number of road access is of utmost importance. “Logisticians play an important role during the initial emergency period, they are often given limited authority to carry out their decisions. Frequently too, the assessment teams sent by humanitarian agencies to determine the needs of the affected population do not include logisticians. When logisticians are not included in the planning and decision-making process this causes delays in distributing relief.” Also local logistics expertise should be levered to further foster the speed of delivery.

Method

To build her disaster response model the author conducted several interviews with disaster relief managers involved in the 2004 tsunami. The goal was to assess the degree of execution of the above mentioned factors.

The interviews were carried out with of five NGO and government managers (figure 1).

Figure 1: Interviewee Sample Group (Perry, 2007)

The author summarized shortfalls in several key areas, including preparedness, local involvement and coordination (figure 2).

Figure 2: Disaster Response Shortfalls during the 2004 Tsunami (Perry, 2007)

Model

Drawing from the cumulative findings of the extensive pre- and post-tsunami literature analysis and the research findings, a hindsight model of effective natural disaster response management planning has been developed that is holistic and inclusive.

Figure 3 summarizes the relevant stakeholders and tasks.

Figure 3: Holistic Model for Effective Disaster Response (Perry, 2007)

Key elements include:

the rigorous monitoring and forecasting of natural disaster risk and mitigating the effects of an impending disaster, with risk reduction activity, natural hazard forecasting, adoption of viable early warning systems;

the building of awareness through high profile, broad-based disaster planning and awareness programs led by the local government and building networks and trust;

the addressing of demographic vulnerability, poverty and long-term, sustainable livelihoods;

the linking of all stages from forecasting, warning, mitigation, response and recovery to community development for resilience;

the incorporation of disaster management protocols, social policy, international support, training programs in logistics and response, simulation programs, empowerment of local communities and encouragement of improvisation in chaotic scenarios; and

assurances that there is adequate funding for all facets of natural disaster management and reducing risk, with suitable early warning systems and protocols, the development of a cadre of local expertise, particularly in the field of logistics as well as planning for a positive future for vulnerable communities.

Conclusion

I presented this model for two reasons. First, for its inclusion of the logistics aspects of humanitarian disaster relief efforts. Second, for the aspects which might be transferable a business situation.

The model especially highlights the need for quick information by extensive communication and local knowledge and capabilities to deal with disasters swiftly.

One caveat I would like to mention, even though the study and the model are backed extensively using related literature, I was missing a broader empirical foundation of the work. Five interviews (as in-depth as they may be) just are not enough to build a reliable model. Further testing is therefore required!

Reference:

Perry, M. (2007). Natural disaster management planning: A study of logistics managers responding to the tsunami International Journal of Physical Distribution & Logistics Management, 37 (5), 409-433 DOI: 10.1108/09600030710758455

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Discovering the Right Planning Approach for your Supply Chain

Daniel Dumke — Mon, 24 Oct 2011 13:51:00 +0000

Some weeks ago I wrote about Fisher’s suggestions on how to select the right supply chain for your product. But how to continue from there? How do different products affect the further planning steps needed?
So I looked for another article to fill the gap and found “Selecting the right planning approach for a product” by Kaipia and Holmström (2007) which covers different planning approaches for different products.
This review is based on the review of Fisher’s model, so make sure to read that article as well.

Methods

The authors build their planning approach on three methods:

Literature review
Development of a framework to differentiate planning approaches for different types of products based on a case company
Application of the selection framework in a case study

Figure 1: Overview Case Companies (Kaipia and Holmström, 2007; click to enlarge)

Case companies

Three case companies were examined: Vaisala, Mattel and Zara. Figure 1 exhibits the product properties and planning approaches currently used by them.

Vaisala, focusses on short lead times in the distribution network and local component buffers for supplies. Production is “to-order” with a high degree of flexibility. The strategic goal is to be responsive to customer demand.
Mattel, Inc, uses continuous, planned product changes, to keep supply and manufacturing efficient.
Zara’s system is based on fast reaction to changes in sales, in combination with a highly compressed design-to-customer process. Half of the demand can be seen as quite stable, so overall less responsiveness is necessary.

Planning approaches

The authors distill eight planning approaches from the literature, which are used as a basis for the selection of the right planning process. Included in figure 2 are the features and requirements for each planning approach.

Figure 2: Planning Approaches with Features and Requirements (Kaipia and Holmström, 2007; click to enlarge)

Selection process

Using the cases different product properties in supply and demand are analyzed and aligned with the requirements of the planning approaches. From this the authors deduce the selection process shown in figure 3.

Figure 3: Selection Process for the Right Planning Approach depending on the Product Type (Kaipia and Holmström, 2007; click to enlarge)

The authors conclude with general recommendations for the right planning approach for several OEM product types, shown in figure 4.

Figure 4: Recommendations for different Product Types (Kaipia and Holmström, 2007; click to enlarge)

Conclusion

While Fisher (1997) kept his work low-key, with only few pinpointed recommendations for specific products or companies, the authors in this article were more aggressive. There is even a strategy of last resort if everything else fails: simplify, invest and create the “planning organization”.

I did not find any errors in their logic conclusions, but of course these recommendations might be overly specific for many other case studies. What to use? I really liked the approach of listing the different planning approaches with the respective requirements and to deduce the planning process for the different product types from that, so may be this might be the common denominator which could be used for a multitude of cases.

Reference:

Kaipia, R., & Holmström, J. (2007). Selecting the right planning approach for a product Supply Chain Management: An International Journal, 12 (1), 3-13 DOI: 10.1108/13598540710724347

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Introduction to Risk Management in Supply Chains

Daniel Dumke — Wed, 21 Sep 2011 13:09:00 +0000

This is another introductory article (book chapter) to supply chain risk management. I included it, since it is an early (2003) view on supply chain risk management from another perspective. Many other articles I reviewed up to now are following the “Cranfield School Approach” with (Christopher, Jüttner, …) and this one by Peter Kajüter (Münster University, Germany) shows a different approach developed in parallel.

Basis and literature

Risk is defined as

a future development or event that might adversely impact the achievement of corporate goals.

Kajüter argues that risk management is a entrepreneurial need, which should be established by any company. Most developed countries also “support” this need by further regulation requiring risk management systems to contain the risk on a company level. But there seems to be no regulation demanding risk management which covers the supply chain and

consequently, companies are free to extend the scope of risk management beyond the company level and develop inter-organizational approaches to managing risk.

The literature review shows that two streams regarding risks in supply chains can be distinguished:

Investigation of mathematical models to analyze risk sharing instruments.
Focus on conceptual issues in supply chain risk management based on exploratory case studies.

Figure 1: Stages of Supply Chain Risk Management Implementation (Kajüter, 2003)

Corporate and supply chain risk management

Based on the review of the conceptual literature, Kajüter identifies three approaches in supply chain risk management (figure 1).

Depending on the integration stage of the supply chain network and the intensity of collaboration.

Corporate risk management is characterized by individual risk handling of a single company. Supply chain related risks are considered by purchasing risk assessments which are part of the overall risk management.

If buyers and suppliers start to cooperate in managing risks, supply chain risk assessments can be observed. They are characterized by a rather informal communication of risks among the supply chain members and joint efforts to handle them.

Supply chain risk management finally constitutes a structured and formal approach to managing risks by collaboration of supply chain partners. A specific risk management process for the supply chain is established.

So supply chain risk management can be defined as:

Supply chain risk management is a collaborative and structured approach to risk management, embedded in the planning and control processes of the supply chain,
to handle risks that might adversely affect the achievement of supply chain goals.

Risk strategy

The author next proposes the elements of the risk strategy in a supply chain risk management framework: basic principles of risk management, defined risk limits and responsibilities.
The risk management principles are shown in figure 2. Risk limits refer to the levels of maximum damage which can be tolerated and have to be set for each individual company and the overall supply chain.
Lastly the responsibilities have to be defined for the identified risks within the chain. Kajüter suggests establishing a risk owner for each risk and a cross-functional, cross-company risk management committee.

Figure 2: Principles of Supply Chain Risk Management (Kajüter, 2003)

Risk management process

Kajüter suggest a three step process to manage supply chain risks.
The first step includes the risk analysis which has to be conducted on a supply chain level. Figure 3 shows an example.
Step two refers to the risk control, where risk management strategies are employed to mitigate risks, those include: risk avoidance, reduction, transfer and acceptance.
The last step includes risk monitoring and reporting, where processes continuous monitoring of identified risks have to be found.

Figure 3: Risk Assessment Portfolio (Kajüter, 2003)

The author concludes:

An interorganizational approach to risk management in supply chains facilitates risk management at the single firms and offers opportunities to improve supply chain performance. It requires a high level of trust and mutual respect among the individual companies, though.

Conclusion

Kajüter delivers answers for three basic questions in supply chain risk management.

What are the stages of supply chain risk management and how is it different from corporate risk management?
What are the three major parts of supply chain risk management?
How can the process of supply chain risk management be employed in a supply chain and company?

Of course, this 16 page chapter can only give hints on the implementation side, but not cover every aspect. I did not like the risk categorization very much, or at least the wording (mathematical models for risk sharing or conceptual works) leaves out much quantitative literature which just investigate risk mitigation strategies.

But all in all the article makes a great starting point for supply chain risk management endeavors in business and research.

Reference:

Kajüter, P. (2003). Risk Management in Supply Chains Strategy and Organization in Supply Chains, 321-336

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Let me help you with... Time-Based Risk Management

Daniel Dumke — Wed, 31 Aug 2011 13:56:00 +0000

Today I present you only one chapter of a great book by Wu and Blackhurst: “Managing Supply Chain Risk and Vulnerability” (which can be bought on amazon.com here).

I especially like the third chapter by Professors Sodhi and Tang on a new approach to managing disruptions: Time-based Risk Management.
The whole book features a more practitioner oriented approach so don’t expect too much focus on the methodological parts.

Reason for risk management

Supply chain disruptions should have arrived at the board rooms due to

“short-term effects (negative publicity, low consumer confidence, market share loss, etc.) and
long-term effects (stock prices and equity risk).”

So there should be enough drive to pay for even some of the more expensive risk management initiatives. Nonetheless a really robust supply chain strategy has to mitigate supply chain risks and increase profits at the same time.

Time-based risk management

The time-based risk management approach aims to travel on this thin line and deliver a strategy to mitigate disruption risk without compromising profits.
It consists of three time frames which should be in focus of the risk manager:

time to detect a disruption (D1),
time to design a solution (D2),
time to deploy (D3),
time to response is set to the sum of D1 to D3 (R1), and
time to recover (R2)

The authors argue, that prior work has pretty much focussed on the generation and selection of recovery plans, but only after the event has occurred.
The time-based risk management now tries to reduce the time needed for the other elements, since “just as 80% of the total cost of a product is determined during the product design phase, the activities that take place for designing response can have significant effect on the overall impact of a disruption.”

Argumentation

Furthermore, based on three case studies (e.g. the Nokia / Ericsson Case) the authors argue that a longer response time can also lead to hugely increased recovery times. “This is mainly because the magnitude of the problem triggered by the event escalated exponential over time.”

This argument is illustrated in figure 1 using a exponential epidemic model.

Figure 1: Effects of Response Time Reduction (Sodhi and Tang, 2009)

Activities to reduce response time

The authors name five time-based disruption management strategies to reduce the response time (R1) and therefore also the recovery time (R2).

Work with suppliers and customers to map risks
Define roles and responsibilities
Develop monitoring/advance warning systems for detection
Design recovery plans
Develop scenario plans and conduct stress tests

Risk and reward

As argued in the beginning robust strategies should not only support the company during times of disruption, but also increase competitiveness.
Using the case of Zara (fashion industry) the authors outline the advantages of time-based risk management. By managing their design, manufacture and deliver operations very closely and centralized with a already very low lead time Zara can detect disruptions almost in real time (low D1). New clothes and therefore a market adaptation can be designed very quickly, so D2 is quite low as well. Since suppliers and distribution are usually in close proximity to the factories deployment of new strategies is fast as well (low D3).

However these low lead times have not (primarily) been established for risk management purposes, but they are part of Zara’s business strategy and help them achieving continuous high growth rates as well.

Conclusion

Sodhi and Tang use very illustrative cases to make their points for a time-based risk management approach. This approach represents a corporate strategy which of course has to include a very broad definition of supply chain management. So not only the logistics and manufacturing parts are included, but also product design, finance, …

Reference:

Sodhi, M.S., & Tang, C.S. (2009). Managing Supply Chain Disruptions via Time-Based Risk Management Managing Supply Chain Risk and Vulnerability: Tools and Methods for Supply Chain Decision Makers., 29-40

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Planning for the Catastrophe

Daniel Dumke — Mon, 11 Jul 2011 09:14:00 +0000

Practitioners often complain about the huge gap between practice and research related to the estimation of risks. In theory all is easy: A disruptive event just gets a probability and outcome assigned. But in practice these figures most often have to be estimated.
Todays article by Knemeyer et al. (2009) covers exactly this dilemma and tries to answer the question of how to plan for a catastrophe.

Catastrophes

A catastrophe can be defined as an event which happens with a low probability but comes with a large impact on the business.

Figure 1: Defining Catastrophes (Knemeyer et al., 2009)

Estimating risks

Risk analysis is a major part of risk management. Figure 2 shows an example of a process where the data from a risk assessment is combined with the understanding of how risks are perceived by managers (e.g. read my articles on Managerial Risk Perception Part 1 and 2). Depending on the context managers seem to either over- or underestimate the probability of low-likelihood events, and since accuracy is very important (if you miss judge the probability of an 1% event by +1% you already doubled your probability and with it the expected loss)

Figure 2: Process for Risk Analysis (Knemeyer et al., 2009)

In the next step the strategies have to be devised and selected. Finally, the strategies should be evaluated on a regular basis to foster organizational learning.

Planning process

Figure 3 shows the suggested planning process.

Figure 3: Process view: Planning for Catastrophes (Knemeyer et al., 2009)

The first step in the planning process is to identify key supply chain locations. A location is considered key if interruption of its operations results in a major disruption in the flow of goods in the supply chain.

After finishing the first step, the manager should have a list of key locations, together with the major catastrophic events that should be considered.

As a next step the probabilities have to be estimated. The authors suggest catastrophe simulation as a tool to estimate probabilities. Figure 4 shows other possibilities. In addition to that, the potential losses have to be evaluated as well.

Figure 4: Methods used for Probability Estimation (click to enlarge; Knemeyer et al., 2009)

For the third step potential countermeasures are designed and selected in the next step for each key location. Figure 5 shows a sample of countermeasures and their impact on probability and incurred loss.

Figure 5: Sample Strategies to mitigate Catastrophes (click to enlarge; Knemeyer et al., 2009)

To select the strategies the authors suggest simple expected loss comparisons.

Conclusion

The suggested process should be suited for implementation within a company. Of course there are several simplifications which have to be analyzed prior to implementation. For instance, the authors suggest to use scenarios (each with probability and impact). I believe that when starting a process implementation like this it might be sufficient to use plain probabilities, but later on probability distributions make show a more detailed and accurate picture. But, I am wondering what you think? Could a process like this be used to improve the risk profile of a company?

Reference:

Knemeyer, A., Zinn, W., & Eroglu, C. (2009). Proactive planning for catastrophic events in supply chains Journal of Operations Management, 27 (2), 141-153 DOI: 10.1016/j.jom.2008.06.002

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Managing Supplier Sustainability Risks

Daniel Dumke — Mon, 30 May 2011 12:47:00 +0000

For many years sustainability risks have been largely neglected. Reputational damages caused by incidents like the Brent Spar platform can reach tens of millions of dollars. But in a supply chain context companies are not only held responsible for their own actions but also for the actions of their suppliers.

In their 2010 paper Foerstl et al. analyze supplier sustainability risk and develop and test a framework for its mitigation.

Research question

Scholars agree that sustainable supplier management (SSM) cannot only rely on a supplier’s compliance declaration. Nonetheless, there has also been consensus, that risk mitigation measures are costly and therefore have to be targeted towards the most risky suppliers. The authors address the following research questions:

How do firms configure sustainable supplier risk management processes in congruence with dynamically changing sustainability requirements?

How can supplier sustainability risk mitigation strategies and processes be a source of competitive advantage to the buying firm?

Research framework and methodology

The authors use the research framework in figure 1 as foundation for their further research. The framework describes the process within a company from the “supplier sustainability risk identification” to the related “performance outcomes”.

Figure 1: Extended Research Framework to Manage Supplier Sustainability Risks (click to enlarge; Foerstl et al., 2010)

Since the research on how firms account for sustainability-related risks are still in an exploratory / early stage the authors decided to use a case study design to build new hypothesis is this field.

The case study participants (5 overall) have been selected to be from the chemical industry, since

first, environmental protection has high strategic relevance in the chemical industry since its costs are among the highest of all industries. Second, the industry’s high profitability and a long history of incidents have led to close scrutiny by its stakeholders, emphasizing the relevance of responsible environmental and social behaviour.

Data analysis

The findings fit into the above mentioned framework and are denoted in figure 2 by P1 to P5.

Figure 2: Summary of Research Findings (click to enlarge; Foerstl et al., 2010)

Proposition 1
The initial development of sustainability risk assessment is based on the perceived stakeholder pressure, but the chosen risk assessment method is independent of the pursued sustainability dimension.

Proposition 2a
Supplier sustainability risk assessment enables an effective sustainability risk mitigation response.

Proposition 2b
The initial configuration and deployment of supplier sustainability risk management capabilities is valuable in building excess capacity, which enables firms to broaden the scope of their sustainability risk management processes.

Proposition 3a
The ability of sustainable supplier selection, development and phase-out strategies to mitigate sustainability risks depends on the rigor with which they are applied.

Proposition 3b
The ability of sustainable supplier assessment and development capabilities to mitigate sustainability risks depends on the astuteness with which they are created and applied.

Proposition 4a
Sustainability risk assessment capabilities allow for effective supplier selection, leading to risk reduction, which constitutes a source of competitive advantage.

Proposition 4b
Beyond the reduction of supplier sustainability risks, sustainable supplier development has a positive effect on operational performance and hence competitive advantage.

Additionally, the author discovered the issue of “external responsiveness”, which has not been part of the original model. It relates to the response time towards new social and environment standards. Two of the interviewed companies also directly approached Non Governmental Organizations (NGOs) to integrate these groups into their sustainability risk management processes.

Proposition 5
Under the presence of dynamic stakeholder stimulus, external responsiveness has a positive effect on sustainability risk identification, assessment and mitigation processes, which in turn affect sustainability risk performance outcomes.

Results

As a summary the authors conclude that

the earlier firms begin to assess their suppliers for sustainability, the greater the accumulation of sustainability-related risk management capabilities relative to their competitors will be.

sustainable supplier assessment and development has positive effects on the buying firm: 1) more profound mitigation of corporate reputational risk and 2) enhanced operational performance.

supplier assessment, selection, and development must be tightly interlocked to effectively manage the sustainability risk exposure caused by individual suppliers or the supply base as a whole

Conclusion

The authors did a great job presenting their results. I was positively surprised to see that they elaborated on three pages about the application of the case study methodology and the sample companies. The sample selection towards companies with great emphasis on sustainability overall (e.g. the companies have all been picked from major sustainability related stock indices) of course leads to a skewed sample which cannot be seen as a representative average, but more as a best practice example.

Reference:

Foerstl, K., Reuter, C., Hartmann, E., & Blome, C. (2010). Managing supplier sustainability risks in a dynamically changing environment—Sustainable supplier management in the chemical industry Journal of Purchasing and Supply Management, 16 (2), 118-130 DOI: 10.1016/j.pursup.2010.03.011

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Decision Support for Supply Chain, Product and Process Design

Daniel Dumke — Wed, 02 Feb 2011 13:46:00 +0000

Many companies are struggling with the idea to use modern optimization techniques to support decision making in strategic supply chain management.

But beside mathematical modeling of the supply chain there are other methods as well, such as network based approaches. In their 2005 paper Blackhurst, Wu and O’Grady present a more intuitive decision support method with the goal to improve decisions within the supply chain context.

Methodology

Figure 1: Example Product Chain Decision Model (Blackhurst et al. 2005)

Complex and dynamic systems like supply chains are hard to understand as a whole. The PCDM (Product Chain Decision Model) uses a network based approach. The network (example see figure 1) therefore consists of different nodes (place nodes: marked by circles and transition nodes: marked by bars). Transition nodes are used for processes, transferring input into output (eg. a transport, production, …), where place nodes are used for components within the supply chain (eg. production facility). The connections are marked by an arrow.

Case Study

Figure 2: Case Study for Chassis Assembly using PCDM (click to enlarge, Blackhurst et al. 2005)

As an example Blackhurst et al. use a case study, where they model the chassis assembly of Rockwell Collins, using actual data of their processes. The result of the status quo can be seen in figure 2. The network presentation is enhanced by the added information, like the lead time (LT) and the reorder point (ROP) at the nodes.

With the help of these networks the authors then optimize the network from the base case with local informations first to an information sharing network. This already helps reducing echelon inventory a lot. The second adjustment is to change raw materials to improve the product and the network even further.

Conclusion

The presented method for improving the supply chain network is intuitive, easy to understand and implement. Yet, it does not seem to be so new, nevertheless, it is a nice addition to the usual supply chain networks to add some key indicators directly at the nodes.
Even though this tool might seem overly simplistic, I really recommend using more tools like these. Many companies do not even analyze their network on a systematic basis, so this looks to be a good starting point for companies which have not used similar tools before.

Reference:

Blackhurst, J., Wu, T., & O’Grady, P. (2005). PCDM: A Decision Support Modeling Methodology for Supply Chain, Product and Process Design Decisions Journal of Operations Management, 23 (3-4), 325-343 DOI: 10.1016/j.jom.2004.05.009

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Effects of Process Maturity and Uncertainty on SC Performance

Daniel Dumke — Mon, 31 Jan 2011 16:16:00 +0000

Process orientation may or may not be a very hip topic right now. Nevertheless effective processes are a foundation for company performance. Lockamy, Childerhouse, Disney, Towill and McCormack (2008), analyze and explain the impact of process maturity and uncertainty on supply chain performance, the full paper can be obtained here free of charge.

In close collaboration with several businesses they conducted an empirical study on this topic, which I present in the following.

Business Process Orientation and Quickscan

Business process orientation can be described using the dimensions process management, process jobs and process view.

Process management & measurement means that the company is using metrics on aspects of the process such as output quality, cycle time, process cost and variability, in contrast to traditional accounting measures.

Process jobs focus on processes as opposed to functions, and are cross-functional in responsibility.

Finally, process view is the cross-functional, horizontal picture of a business involving elements of structure, focus, measurement, ownership and customers.

Relationship between Process Capabilities and Maturity (Lockamy et al., 2008)

The authors used the Quick Scan methodology with over 20 different supply chains. It consists of the following four methods: questionnaire analysis, process mapping, semi-structured interviews, modelling from numerical data.

Each quick scan took about two weeks at the site of the client and resulted in: a current status of the organization and the supply chain, evaluation of the maturity of its practices and processes and its ability to meet current and future customer needs, furthermore details on the management of uncertainty and interfaces beteween these areas.

Supply Chain Maturity and Uncertainty

Supply chain maturity is described here using five cumulative levels:

Ad Hoc, marks an unstructured supply chain with badly defined processes. Typical are no process measures and few “process jobs”.

Defined, stands for a level where processes and the supply chain has been defined. Process performance is measured sometimes.

Linked, describes a level where supply chain management jobs have been established and performance measures are conjointly evaluated with clients and vendors.

Integrated, traditional functions beginn to disappear, supply chain measures and management is embedded into the organization. This leads to reduced SC cost.

Extended, collaboration is routine, competition is based on a multi-firm supply chain.

Supply Chain Management Maturity Model (Lockamy et al., 2008)

Supply chain uncertainty is defined similar to Christopher and Peck (2004) and devided into process, control, supply, demand uncertainty. Based on other empirical study it can be stated that:

Supply chain uncertainty significantly contributes to poor customer service levels, excess inventory, long lead times, increased quality inspections, and bureaucratic decision-making processes.

Results

After collecting all data during the quick scan on the process maturity and experienced supply chain uncertainty levels the author drew the following conclusions:

Reductions in supply chain uncertainty can be achieved by increasing the maturity levels of processes employed within the supply chains

By increasing supply chain maturity levels and by correspondingly reducing uncertainty, firms can improve overall supply chain performance

Levels of maturity in the area of process structure and jobs can significantly reduce the level of control uncertainty within supply chains

Reductions in demand and control uncertainty can be achieved by increasing the maturity levels of process measures utilised within supply chains

Process Maturity vs. Supply Chain Performance (Lockamy et al., 2008)

Conclusion

One would think that better processes lead to better supply chain performance. But it is hard to objectively measure the maturity of a specific process. How do you grade them. For example maybe a process is documented, but to which level of detail and how are current is it? There are processes that work perfectly without having a process chart available which documents the exact interfaces.

So evaluating processes is always an extremely subjective task. I trust the reputation of the participating author that they used all due diligence necessary. Nevertheless it would have been great to see more details on how the evaluation has been conducted.

Reference:

Lockamy, A., Childerhouse, P., Disney, S., Towill, D., & McCormack, K. (2008). The impact of process maturity and uncertainty on supply chain performance: an empirical study International Journal of Manufacturing Technology and Management, 15 (1) DOI: 10.1504/IJMTM.2008.018237

Christopher, M., & Peck, H. (2004). Building the Resilient Supply Chain The International Journal of Logistics Management, 15 (2), 1-14 DOI: 10.1108/09574090410700275

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Process oriented Approach to Supply Chain Risk Management

Daniel Dumke — Mon, 24 Jan 2011 14:39:00 +0000

Supply Chain Risk Management started from the need to better control the risks within Supply and Demand Networks. The processes in (Corporate) Risk Management have been developed and convene in the classic, cyclic processes:

Risk Identification
Risk Assessment
Measures (Development and Implementation)
Risk Monitoring

Hallikas et al. (2004) tried to transfer this process into the supply chain setting.

Figure 1: Risk Diagramm (Hallikas et al. 2004)

Risk Management Process in the Network Environment

The authors start with a description of the general steps in the risk management process. The risk assessment is done using a semi quantitative diagram (Figure 1). For the risk management phase the authors suggest the following strategies:

Risk transfer
Risk taking
Risk elimination
Risk reduction
Further analysis of individual risk taking

So up to now this information can also be found on wikipedia, but the genuine part starts with the “network risk management process”, where additional focus has to be put on how to integrate new aspects of collaboration and cooperation. The key is to add a seperate process of mutual risk identification, assessment, … and to feed insights from the individual risk processes into the mutual risk monitoring process. Figure 2 exhibits the details.

Figure 2: Risk Management Process in a Network Setting (Hallikas et al. 2004)

Deeper Understanding of Network Risks

Nevertheless it is important to stress the importance of in depth analysis of the network risks. It is likely that simplistic methods for risk identification sometimes used in a corporate environment are not sufficient for a network setting. Increased complexity and additional risks increase the chance of missing important risks. As an example for a more suited method the authors cite a case study using systems dynamics analysis (see figure 3).

Figure 3: Example Dynamic Complexity (Hallikas et al. 2004)

Conclusion

Goal of the mutual risk assessment process is to benefit both partners, the paper describes some challenges of risk management in a cooperative environment. Communication between the companies on their views on risks can therefore help to find adequate strategies to deal with the risks.

Reference:

Hallikas, J., Karvonen, I., Pulkkinen, U., Virolainen, V., & Tuominen, M. (2004). Risk management processes in supplier networks International Journal of Production Economics, 90 (1), 47-58 DOI: 10.1016/j.ijpe.2004.02.007

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