Risk in Supply Chain Management
Winter Project Dec’ 2012
A Literature review on Risk in Supply Chain
[pic]
Under the Guidance of: Submitted by:
Prof. P.K. Jha Sandeep Singh
Dept. of Industrial Engineering & Management M.Tech 1st year
IIT Kharagpur 12IM60R03
Risk in supply chain
1. What is Risk? Risk can be broadly defined as a chance of danger, damage, loss, injury or any other undesired consequences. A more scientific definition of risk was provided by the Royal Society (1992):‘‘the probability that a particular adverse event occurs during a stated period of time, or results from a particular challenge. As a probability in the sense of statistical theory, risk obeys all the formal laws of combining probabilities’’. Others have developed this scientific perspective of risk, such as Mitchell (1995) and Gillet (1996). Mitchell (1995) defined risk as “the probability of loss and the significance of that loss to the organization or individual”. Mitchell expressed this as a formula Risk = P (loss) X I (loss)
2. Why are supply chains prone to risk? Global supply chains are formed by a multitude of companies acting as part of a long and complex logistics system. The continuing disintegration and the specialization of operations have made the chains vulnerable to disturbances coming from both inside and outside the system. The visibility of operations outside the companies’ own functions has decreased, and with it the ability to identify risks threatening them and the whole supply chain. Harland et al. (2003) found that less than 50% of the risks were visible to the focal company in the supply chains they examined. The risks that are identified are typically related to the companies’ own functions. In most cases, in terms of business impact, risks of disruption are much greater than the operational risks (Tang, 2006). There is therefore a need for a broader view of the supply chain that would facilitate proper
A Literature review on Risk in Supply Chain
[pic]
Under the Guidance of: Submitted by:
Prof. P.K. Jha Sandeep Singh
Dept. of Industrial Engineering & Management M.Tech 1st year
IIT Kharagpur 12IM60R03
Risk in supply chain
1. What is Risk? Risk can be broadly defined as a chance of danger, damage, loss, injury or any other undesired consequences. A more scientific definition of risk was provided by the Royal Society (1992):‘‘the probability that a particular adverse event occurs during a stated period of time, or results from a particular challenge. As a probability in the sense of statistical theory, risk obeys all the formal laws of combining probabilities’’. Others have developed this scientific perspective of risk, such as Mitchell (1995) and Gillet (1996). Mitchell (1995) defined risk as “the probability of loss and the significance of that loss to the organization or individual”. Mitchell expressed this as a formula Risk = P (loss) X I (loss)
2. Why are supply chains prone to risk? Global supply chains are formed by a multitude of companies acting as part of a long and complex logistics system. The continuing disintegration and the specialization of operations have made the chains vulnerable to disturbances coming from both inside and outside the system. The visibility of operations outside the companies’ own functions has decreased, and with it the ability to identify risks threatening them and the whole supply chain. Harland et al. (2003) found that less than 50% of the risks were visible to the focal company in the supply chains they examined. The risks that are identified are typically related to the companies’ own functions. In most cases, in terms of business impact, risks of disruption are much greater than the operational risks (Tang, 2006). There is therefore a need for a broader view of the supply chain that would facilitate proper
References: |An empirical |Jorn-Henrik Thun, |Identify Risk |Empirical Study |Atkinson W. 2006 | |analysis of supply |Daniel Hoeing |Probability of occurrence |Hypothesis |Z |Risk Assessment in |Jyri P. P. Vilko, |Identify risk, classify, identify|Empirical study |Harland et al. 2003 | |multimodal Supply |Jukka M |networks |Richard Brenchley, |risk impact, and develop a supply|study/Case-studies |Harland et al. 1999 | | |Helen Walker |network risk tool