Supply Chain Risk Management
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_________________________ EXECUTIVE SUMMARY A growing number of hi-tech supply chain managers are being tasked to manage risks to their supply chains in their increasingly competitive and innovative environments. This study proposes risk mitigation methodologies relevant to the hi-tech industry. The proposed risk methodologies are based on analysis of the supply-chain characteristics inherent to the hi-tech industry, vulnerabilities in the upstream and downstream hi-tech supply chain and successful steps taken by hi-tech firms in response to supply chain disruptions. ____________________________________________________________
_________________________ 1. INTRODUCTION 1.1. Definition of Supply Chain Risk Management Supply chain risk management is the systematic identification, assessment, and quantification of potential supply chain disruptions with the objective to control exposure to risk or reduce its negative impact on supply chain performance (Supply chain council Risk SIG, 2009). Potential disruptions can either occur within the supply chain (e.g. insufficient quality, unreliable suppliers, machine break-down, uncertain demand etc.) or outside the supply chain (e.g. flooding, terrorism, labor strikes, natural disasters, large variability in demand etc.). Management of risk includes the development of continuous strategies designed to control, mitigate, reduce, or eliminate risk.
1.2. Hi-Tech Industry Supply Chain Characteristics The high tech industry has the most complex supply chain structure of any industry sector. Despite their supply chain complexity, Hi-tech companies consistently make up more than half of AMR’s Top 25 Supply Chain List (See Appendix 1). There are several risk sources within the high-tech industry supply chain that make it interesting to explore:
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Supply Chain Risk in the Hi-Tech Industry
1.2.1. Globalization/ Supply Chain Complexity High-tech industry
_________________________ EXECUTIVE SUMMARY A growing number of hi-tech supply chain managers are being tasked to manage risks to their supply chains in their increasingly competitive and innovative environments. This study proposes risk mitigation methodologies relevant to the hi-tech industry. The proposed risk methodologies are based on analysis of the supply-chain characteristics inherent to the hi-tech industry, vulnerabilities in the upstream and downstream hi-tech supply chain and successful steps taken by hi-tech firms in response to supply chain disruptions. ____________________________________________________________
_________________________ 1. INTRODUCTION 1.1. Definition of Supply Chain Risk Management Supply chain risk management is the systematic identification, assessment, and quantification of potential supply chain disruptions with the objective to control exposure to risk or reduce its negative impact on supply chain performance (Supply chain council Risk SIG, 2009). Potential disruptions can either occur within the supply chain (e.g. insufficient quality, unreliable suppliers, machine break-down, uncertain demand etc.) or outside the supply chain (e.g. flooding, terrorism, labor strikes, natural disasters, large variability in demand etc.). Management of risk includes the development of continuous strategies designed to control, mitigate, reduce, or eliminate risk.
1.2. Hi-Tech Industry Supply Chain Characteristics The high tech industry has the most complex supply chain structure of any industry sector. Despite their supply chain complexity, Hi-tech companies consistently make up more than half of AMR’s Top 25 Supply Chain List (See Appendix 1). There are several risk sources within the high-tech industry supply chain that make it interesting to explore:
2
Supply Chain Risk in the Hi-Tech Industry
1.2.1. Globalization/ Supply Chain Complexity High-tech industry
References: Research Papers Lee, V Padmanabhan, and Whang; (1997), ‘The Bullwhip Effect In Supply Chains, Sloan Management Review’, Vol 38, Iss 3, pp Peter Finch, (2004), ‘Case Study: Supply chain and Risk management’, Supply chain Management: An international Journal, Vol9, No2, pp. 183-195. Collin and Lorenzin, (2006), ‘Plan for supply chain agility at Nokia Lessons from the mobile infrastructure industry’, International Journal of Physical Distribution & Logistics Management Vol. 36 No. 6, pp. 418-430 15 Arun Saksena (2009) ‘High-Tech Industry: The Road to Profitability Through Global Integration and Collaboration’ Cisco Internet Business Solutions Group (IBSG) Valdero - From Planning to Control: Improving The High-Tech Supply Chain - Valdero Source: AMR Research, 2009 17