10.4 Managing Global Supply Chain Risks

Global supply chains face numerous risks, from political instability to natural disasters. Companies must identify and assess these risks to protect their operations. Effective strategies include diversifying suppliers, maintaining buffer inventory, and implementing flexible manufacturing processes.

Risk management extends beyond identification to mitigation and preparation. Techniques like scenario planning and stress testing help companies prepare for various outcomes. Collaboration with suppliers, enhanced visibility, and technology integration further strengthen supply chain resilience against potential disruptions.

Global Supply Chain Risk Identification and Assessment

Risks in global supply chains

Top images from around the web for Risks in global supply chains

• 

  Risk management strategy for supply chain sustainability and resilience capability | Risk Management View original

  Is this image relevant?

• 

  Understanding the Business Environment | OpenStax Intro to Business View original

  Is this image relevant?

• 

  Part Three What is Cyber Resilience? | Black Swan Security View original

  Is this image relevant?

• 

  Risk management strategy for supply chain sustainability and resilience capability | Risk Management View original

  Is this image relevant?

• 

  Understanding the Business Environment | OpenStax Intro to Business View original

  Is this image relevant?

1 of 3

Top images from around the web for Risks in global supply chains

• 

  Risk management strategy for supply chain sustainability and resilience capability | Risk Management View original

  Is this image relevant?

• 

  Understanding the Business Environment | OpenStax Intro to Business View original

  Is this image relevant?

• 

  Part Three What is Cyber Resilience? | Black Swan Security View original

  Is this image relevant?

• 

  Risk management strategy for supply chain sustainability and resilience capability | Risk Management View original

  Is this image relevant?

• 

  Understanding the Business Environment | OpenStax Intro to Business View original

  Is this image relevant?

1 of 3

• Political risks destabilize operations through government instability, regulatory changes, trade restrictions, expropriation (Venezuela's oil industry nationalization)
• Natural disasters disrupt supply chains via earthquakes, hurricanes, floods, tsunamis (2011 Japan earthquake impacted global electronics supply)
• Economic risks impact profitability through currency fluctuations, inflation, economic recessions (2008 financial crisis)
• Operational risks hinder performance via transportation delays, quality control issues, supplier bankruptcy (Hanjin Shipping bankruptcy 2016)
• Cybersecurity risks compromise data integrity through breaches, system failures, intellectual property theft (NotPetya attack on Maersk 2017)

Risk assessment and mitigation strategies

• Risk assessment techniques evaluate vulnerabilities:
  1. SWOT analysis identifies internal and external factors
  2. Failure Mode and Effects Analysis (FMEA) assesses potential failures
  3. Probability-Impact matrix prioritizes risks based on likelihood and impact
• Risk mitigation strategies reduce exposure:
  • Diversification of suppliers spreads risk across multiple sources
  • Buffer inventory cushions against supply disruptions
  • Flexible manufacturing adapts to changing conditions
  • Hedging against currency risks protects against exchange rate fluctuations
• Scenario planning prepares for various outcomes:
  • Best-case, worst-case, and most likely scenarios guide decision-making
  • Stress testing evaluates supply chain resilience under extreme conditions
• Supplier risk management ensures reliable partnerships:
  • Supplier audits assess capabilities and compliance
  • Performance monitoring tracks supplier reliability and quality
  • Contractual safeguards protect against supplier-related risks

Supply chain visibility and collaboration

• Supply chain visibility enhances risk management:
  • Real-time tracking of inventory and shipments improves responsiveness
  • End-to-end visibility across all tiers of suppliers identifies vulnerabilities
• Collaborative planning strengthens partnerships:
  • Information sharing with suppliers and customers improves coordination
  • Joint demand forecasting aligns production with market needs
• Technology enablers facilitate transparency:
  • Internet of Things (IoT) devices track assets and conditions
  • Blockchain ensures data integrity and traceability
• Benefits of visibility and collaboration include:
  • Early risk detection allows proactive mitigation
  • Faster response to disruptions minimizes impact
  • Improved decision-making based on comprehensive data

Insurance and contingency planning

• Supply chain insurance types protect against various risks:
  • Business interruption insurance covers lost income during disruptions
  • Cargo insurance safeguards goods in transit
  • Trade credit insurance protects against customer default
• Contingency planning elements ensure business continuity:
  • Backup suppliers provide alternative sourcing options
  • Alternative transportation routes bypass disrupted areas
  • Emergency response teams coordinate crisis management
• Business continuity planning maintains critical operations:
  • Recovery time objectives set restoration timelines
  • Critical function identification prioritizes essential processes
  • Communication protocols ensure clear crisis messaging
• Risk transfer strategies share risk burden:
  • Contractual risk allocation assigns responsibilities to appropriate parties
  • Third-party logistics providers offer specialized risk management
• Continuous improvement enhances resilience:
  • Post-disruption analysis identifies lessons learned
  • Regular plan updates and simulations keep strategies current