Supply Chain Risk Management
IBM Global Business Services
White Paper
Supply Chain Risk Management: A Delicate Balancing Act
A multi-faceted view on managing risk in a globally integrated enterprise
Risk Management
IBM Global Business Services Page
Table of Contents
Risk and Consequence: Tales from the Industry Supply Chain Risk Categories Disruptive Events, Uncertainty and Impact Models and Methods for Supply Chain Risk Management Example of Risk Management for IBM’s Product Supply Chains An Approach for Measuring the Impact of Identified Supply Chain Risks Key Lessons from IBM’s Supply Chain Risk Management Approach The Landscape: Supply Chain Risk Management Supply Chain Risk Management: Getting Started In Summary Authors Footnotes
4 6 7 9 12 15 17 18 19 21 22 23
Risk management practices, techniques and tools have been used extensively in the financial community for years. Risks with respect to a company’s supply chain have begun to receive attention only more recently, as the push to increase supply chain efficiencies has illuminated the delicate balance between financial considerations and those of the customer. During the last twenty-odd years, supply chain management practices have evolved toward more lean process approaches in order to reduce waste within the overall chain. Concepts such as just-in- time, virtual inventory, supplier rationalization, and reductions in the number of distribution facilities have reduced total supply chain costs, but the result has been increased risk. Trade-offs between achieving optimal supply chain efficiencies and management of supply chain risk have created a conundrum of sorts. Businesses have witnessed many supply chain malfunctions (with substantial consequences) due to supply and demand disruptions: the affected companies reported, on average, 14% increase in inventories, 11% increase in cost, and 7% decrease in sales in the year following the disruption. 1, 2 Today’s industrial supply chains face risks from many
White Paper
Supply Chain Risk Management: A Delicate Balancing Act
A multi-faceted view on managing risk in a globally integrated enterprise
Risk Management
IBM Global Business Services Page
Table of Contents
Risk and Consequence: Tales from the Industry Supply Chain Risk Categories Disruptive Events, Uncertainty and Impact Models and Methods for Supply Chain Risk Management Example of Risk Management for IBM’s Product Supply Chains An Approach for Measuring the Impact of Identified Supply Chain Risks Key Lessons from IBM’s Supply Chain Risk Management Approach The Landscape: Supply Chain Risk Management Supply Chain Risk Management: Getting Started In Summary Authors Footnotes
4 6 7 9 12 15 17 18 19 21 22 23
Risk management practices, techniques and tools have been used extensively in the financial community for years. Risks with respect to a company’s supply chain have begun to receive attention only more recently, as the push to increase supply chain efficiencies has illuminated the delicate balance between financial considerations and those of the customer. During the last twenty-odd years, supply chain management practices have evolved toward more lean process approaches in order to reduce waste within the overall chain. Concepts such as just-in- time, virtual inventory, supplier rationalization, and reductions in the number of distribution facilities have reduced total supply chain costs, but the result has been increased risk. Trade-offs between achieving optimal supply chain efficiencies and management of supply chain risk have created a conundrum of sorts. Businesses have witnessed many supply chain malfunctions (with substantial consequences) due to supply and demand disruptions: the affected companies reported, on average, 14% increase in inventories, 11% increase in cost, and 7% decrease in sales in the year following the disruption. 1, 2 Today’s industrial supply chains face risks from many
References: in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates. GBW03015-USEN-01