Supply Chain Risk Management a unique function, or simply one of the Supply Chain Manager’s tasks? Ann Vereecke, Vlerick Leuven Gent Management School and Ghent University Els Pandelaere, Vlerick Leuven Gent Management School Danny Boeykens, Möbius
© Vlerick Leuven Gent Management School | 1
Over 250 companies responded to our questionnaire, which assessed the level of supply chain risk these companies were facing as well as the level of maturity they had reached in managing their supply chain risk.
I
n response to the economic recession, companies
The risk of supply chain disruptions is real
are intensifying their efforts to optimise their costs
A well-known case of a supply chain disruption is the crisis
in the supply chain, but they often overlook the
faced by Coca-Cola in Europe in mid-1999, when people fell ill
related supply chain risks. Despite some supply chain best practices, globalisation has increased supply chain risks. Therefore, cost optimisation should go hand-in-hand with managing risks in the supply chain.
after consuming the soft drink. Coca-Cola had to recall about 30 million cans and bottles – the largest product recall in its 113-year history. For the first time, the entire inventory of Coca-Cola’s products in Belgium was banned from sale. Soon after that incident, France, Luxembourg and The Netherlands also banned or restricted the sale of Coca-Cola products. It is estimated that this product recall caused over $200 million in
As risk management – and supply chain risk management
expenses and lost revenue and damaged the brand image of the
in particular – has recently come to the attention of both
trade-marked products of The Coca-Cola Company (Johnson and
researchers and practitioners, an advancement in risk management practices can be noticed over the past few years. However, according to several research reports, only a small minority of companies are operating at a mature stage of supply chain risk management. This report summarises the results of a research study on
Peppas, 2003). Another noted example is the fire that destroyed a Philips electronics component plant in New Mexico in 2000. This plant supplied both Nokia and Eriksson. Nokia reacted promptly, securing components from the market. Eriksson, on the other hand, was left with supply shortages that translated into an estimated $390 million in lost sales. The most significant consequence of this supply chain disruption may have been the subsequent loss of Eriksson’s market share dominance to Nokia
supply chain risk management conducted by a team of
(Sheffi, 2007).
researchers at Vlerick Leuven Gent Management School in
These cases illustrate that the risk of supply chain disruptions
collaboration with our partner Möbius. Over 250 compa-
is very real and that such disruptions can have large financial
nies responded to our questionnaire, which assessed the level of supply chain risk these companies were facing as well as the level of maturity they had reached in managing their supply chain risk.
implications. In fact, according to a study by Aberdeen in 2005, a company typically has an average of 12.9 supply chain disruptions per year, and 73% of industries worldwide have experienced a major supply chain disruption during the last 5 years. In 2008, more than 75% of supply chain executives stated that supply chain risk was still increasing (Marsh, 2008), and no less than 73% of the CEOs, CFOs and COOs were concerned about supply chain risk (Mc Kinsey, 2008). Clearly, supply chain risk management is a necessity. Moreover, in a global downturn, having a supply chain that is optimised for risk management as well as for cost management can be a source of competitive advantage.
© Vlerick Leuven Gent Management School | 2
Why supply chain risk has increased
Essentially, this tool:
Ironically, one of the main reasons that supply chain risk has
> provides an assessment of the impact of disruptions on a
increased in recent years is the implementation of supply chain
company’s operational and financial results.
best practices. Low-cost sourcing, lean supply chains, just-in-
> provides an assessment of the impact of mitigation strategies,
time, and VMI have helped reduce inventories and eliminate
such as a multiple sourcing strategy or an extra safety stock,
redundancies in the supply chain. However, these practices
on the company’s operational and financial results. This
have also made supply chain risk more visible: prior to their
assessment is based on a return on investment (ROI) analysis
implementation, buffers and slack in the supply chain concealed
of the different mitigation strategies.
certain risks.
> supports companies in managing their supply chain risks.
Globalisation has also played a role in the increase in supply
The second objective of the project was to gain an understanding
chain risk over the past decade. Trends such as outsourcing,
of the types and levels of risks companies face in their supply
global sourcing and off-shoring have increased the complexity of
chain, and to estimate the maturity companies demonstrate in
the supply chain, making monitoring and control more difficult.
managing these supply chain risks. For this purpose, we developed a survey instrument. The insights gained from conducting the survey in over 250 companies are summarised in this report.
Towards a complex SC
In a later phase, we plan to use the survey as a benchmark tool that will allow practitioners to measure their company’s supply
Towards a lean SC with low inventories
• More disruptions likely, • But inventory is a buffer
• Low inventory • But fewer disruptions due to greater control
High risk zone • More frequent disruptions • Low inventory buffer
chain risk maturity relative to their peers.
The survey respondents As we see in Figure 2, most of the respondents are active in Western Europe, mainly in Belgium and France. About half of them hold a position in supply chain management (Figure 3).
Figure 1: Complex versus lean supply chain (Marsh, 2008)
Figure 1 shows that managing supply chain risk is an especially
Figures 4 and 5 show that mid-sized as well as large companies from a variety of industries are represented in the survey.
critical task in companies with a lean, global supply chain. Unless they have carefully assessed the risks and have put
Cou
mitigation strategies in place, these companies will experience a greater degree of supply chain disruption, while having less inventory with which to buffer disruption.
Belgium
12%
France
3%
5%
Netherlands
7%
47%
UK
The supply chain risk research project Möbius and Vlerick Leuven Gent Management School joined
Netherlands
Switzerland
Switzerland
26%
Other
forces to conduct a research project on supply chain risk management. The project had two objectives: The first objective was to be able to support companies in
Figure 2: Country office base respondent
assessing the impact of supply chain risks on their performance. In order to reach this objective, we developed a supply chain risk assessment tool. By means of Monte Carlo simulation, the tool allows us to estimate the impact of events in the supply chain on the chain’s performance.
© Vlerick Leuven Gent Management School | 3
Belg Fran Net UK Swi Oth Tota
Classification of supply chain risk General
Management
9%
Risk
Management
3%
Other
16%
Supply chains are often very complex. They can involve many different players – production units, distribution centres, suppliers and logistics providers, and customers – all connected via flows
Financial
Management
2%
of goods and flows of information. Therefore, companies are
?Manu@acturing,
OperaBons
or
Quality
Management
11%
Supply
Chain
Management
52%
subject to multiple risk drivers, internally as well as externally, that can cause supply chain disruptions. Disruptions can occur at each node in the supply chain, with potential impacts on
:Procurement,
Purchasing,
Materials
or
Commodity
Management
7%
other nodes in the chain. Based on a literature review and on several in-depth interviews
Figure 3: Respondent’s position
General Management
9,5
Supply Chain Management
52,2
Procurement, Purchasing, Materials or Commodity Management Manufacturing, Operations or Quality Management
6,5 11,4
Financial Management
1,5
Risk Management
2,5
Other, please specify:
Under
€100
Million
16,4
€100M-€500M
€500
M‐€1000
M
€100
M‐€500
M
Over 1000 M
Over
1000
M
25%
37%
with managers, we identified 33 different types of supply chain risks (see Table 1). These 33 risks can be grouped into 5 categories: demand, supply, process, control and environmental risk (Figure 6). Size
of
business
unit Under
€100
Million €100
M‐€500
M €500
M‐€1000
M Over
1000
M
11%
27%
Figure 4: Size of business unit Figure 6: Categories of supply chain risks
Demand risk is the risk that the company will experience demand that is not anticipated, and provisioned for, in the chain. Examples are: dependency on a small number of large customers, and the possibility that radically new products will replace existing products. Supply risk originates from suppliers that are unable to deliver the materials that the company needs to meet its production requirements and/or demand forecasts. Examples are: a lack of supply capacity, or dependency on suppliers that are financially unsound. Figure 5: Respondents per industry
Process risk is associated with the variability of a company’s operational processes, such as variations in production cost, quality problems or the possibility of a product recall. Control risk arises from the application of the assumptions, rules, systems and procedures that govern how an organisation exerts control over its processes. Examples are: unreliable planning and control systems, the impact of introducing a new product, and a lack of skilled employees. © Vlerick Leuven Gent Management School | 4
Environmental risk refers to possible occurrences in the environment in which the company operates. This category comprises a high diversity of risks, which we have grouped into three sub-categories:
Frequency of supply chain risks The five categories indicate the kinds of issues that may occur in the supply chain. But with what frequency do they occur? In our survey instrument, we have asked the respondents to
> The first sub-category of environmental risk consists of the most visible or dramatic risks, such as terrorist activities, natural disasters and global warming. > The second sub-category consists of the more ‘subtle’ risks
score the frequency of each of the 33 potential disruptions in his or her supply chain, on a scale from 1 to 5. A score of 1 means that the respondent strongly disagrees that the disruption occurs, indicating a low level of risk. A score of 5 means that
– for example, the risk that the company’s reputation will be
the respondent strongly agrees that the disruption occurs,
damaged through exposure of intellectual property or a social
indicating a high level of risk.
responsibility issue.
Table 1 gives an overview of the 33 supply chain disruptions
> The third sub-category consists of the threat of strikes, blockades, unreliable transportation, government actions and regulatory changes.
and the average score for each disruption. The risk variables that have the highest scores are: the changing economic environment, the volatility in demand, the fluctuations in supply (prices of materials), and the dependency on suppliers. To some extent, the timing of the data collection (at the start of the economic downturn) may have raised the scores of these top risk variables.
TABLE 1:
SUPPLY
DEMAND
PROCESS
CONTROL
ENVIRONMENTAL
We
face
a
SUPPLY
CHAIN
risk
due
to
…
our
dependency
on
a
limited
number
of
key
suppliers
unreliable
suppliers
(delays,
partial
deliveries,
supplier
scheduling
problems)
the
threat
of
a
sudden
loss
of
a
contract
with
a
supplier
a
lack
of
supply
capacity
or
a
shortage
in
the
supply
market
price
fluctuations
of
raw
materials/components
our
dependency
on
suppliers
who
are
financially
unsound
the
dependency
on
a
small
number
of
large
customers
the
threat
of
a
sudden
loss
of
customer
contract
a
low
level
of
customer
loyalty
substantial
changes
in
demand
that
are
not
easily
forecasted
the
threat
of
substitute
products
the
threat
of
new
players
in
the
market
price
fluctuations
of
end
products
the
dependency
on
customers
who
are
financially
unsound
variations
in
production
or
labour
cost
the
possibility
of
quality
and
rework
issues
the
possibility
of
a
product
recall
the
threat
of
plant
or
equipment
breakdown
unreliable
planning
and
control
systems
our
dependency
on
having
outsourced
activities
(such
as
manufacturing,
warehousing,
…)
inadequate
design
of
business
processes
the
impact
of
new
product
introductions
inadequate
project
management
a
lack
of
skilled
and
qualified
employees
the
threat
of
the
exposure
of
intellectual
property
a
reputation
damage
caused
by
corporate
social
responsibility
issues
(environmental,
social,
…)
the
threat
of
strikes
and/or
blockades
(e.g.
of
ports)
unreliable
transportation
such
as
a
lack
of
transport
capacity
or
transport
security,
congestion,
…
the
possibility
of
government
actions
and/or
regulation
changes
changing
economic
environment
(recessions,
stock
market
fluctuations,
…
changing
environmental
conditions
(such
as
global
warming,
solid
waste,
…)
the
threat
of
political
instability,
war,
terrorist
activities
the
threat
of
natural
disasters
such
as
flooding,
earthquakes,
hurricanes,
…
Table 1: supply chain disruptions
Average
3,5
3,1
2,8
3,2
3,5
2,8
3,1
3,2
2,7
3,7
3,2
3,2
3,3
2,9
3,1
3,2
3,1
3,3
3,0
2,9
2,8
3,2
2,9
2,8
2,8
2,7
3,0
2,9
3,3
3,8
2,8
2,7
2,6
© Vlerick Leuven Gent Management School | 5
64% of the companies have no one r esponsible for managing supply chain risks.
Figure 7, displaying the information of Table 1 grouped into the 5 categories of risk, shows that demand, supply and process risks have the highest average frequency (3.2) and that their scores are approximately equal. The environmental risks – particularly the first two sub-categories – score low on average (2.7 and 2.8). At first glance, this seems somewhat surprising, because managers often discuss environmental risks, while our research shows that these risks occur the least.
The supply chain risk manager Given the level of risk that companies are facing in their supply chain, we can expect them to assign the formal responsibility for managing these risks to a dedicated supply chain risk manager. The survey looks more closely at supply chain risk management by asking whether the company has someone formally responsible for supply chain risk management and, if so, in which department this person is based. Figure 8 shows that 64% of the companies have no one responsible for managing supply chain risks, 27% have a supply chain risk manager who is based in the supply chain department, and 9% have a supply chain risk manager who is not based in the no
risk
manager supply chain department. risk
manager,
not
in
supply
chain
department risk
manager,
in
supply
chain
department
0,64 0,09 0,27
risk
manager,
in
supply
chain
department
27%
Figure 7: Probability of supply chain risk no
risk
manager
64%
The length of the boxes in the chart (Figure 7) indicates the amount of variation in the results. When we compare these variations, two conclusions arise: first of all, the demand and
risk
manager,
not
in
supply
chain
department
9%
supply categories have a high average frequency, but they have a low degree of variation – which means that these risks are high for most of the companies in the study. In contrast, the two environmental risk sub-categories with a high frequency also have a high degree of variation – which means that some companies are experiencing a high level of environmental risk and some companies are experiencing a low level of environmental risk.
Figure 8: Percentage of risk managers
Based on these results, one could assume that most companies are not yet mature at managing their supply chain risks. But having a supply chain risk manager is only one of the aspects of maturity in supply chain risk management, as we will see in the next section.
© Vlerick Leuven Gent Management School | 6
How mature are companies when it comes to managing their supply chain risks?
risk policy and manages all possible risks via the implementation of company-wide policies and procedures. > Organisation: the second dimension of supply chain maturity
Risk management practices, techniques and tools have been
assesses the responsibility for managing the supply chain
used extensively in the financial community for years. However,
risks. A score of 1 means the company has no supply chain
only recently do we see these things being applied to supply
risk manager, whereas a score of 5 means the company has a
chain management.
formal cross-functional risk management team.
Maturity in supply chain risk management is definitely reflected in the degree to which the management of risk is embedded in
> Technology: the third dimension measures the use of information technology in managing supply chain risk and the
processes and policies and in managerial responsibilities. Mature
scope of deployment of this technology. A score of 1 means
companies will also excel in the use of technology to support risk
the company does not use technology to manage supply
management, and in the use of KPIs to measure performance
chain risks, whereas a score of 5 means the company uses an
with respect to risk management (Aberdeen, 2005; IBM, 2008;
integrated system with customers and suppliers.
Marsh, 2008). These four dimensions of supply chain risk maturity (see Table 2) have been operationalised in our survey
> Supply chain risk metrics: the fourth dimension measures to what extent the company formalises supply chain risk
as follows:
performance measurement. A score of 1 means the company does not use formal supply chain metrics. A score of 5 means
> Processes and policies: the first dimension tests whether the company has procedures for assessing and managing risk and
the company uses standardised metrics that are integrated
measures the degree to which these procedures are employed.
with other business processes.
A score of 1 means the company has a reactive supply chain risk policy and responds after the disruption has occurred. A score of 5 means the company has a proactive supply chain
Table 2 provides an overview of the scales that were used in our survey for measuring supply chain risk maturity.
TABLE 2 LEVEL OF MATURITY MEDIUM
LOW 1
2
HIGH
3
4
5
Processes and policies
We assess supply chain risks ad hoc and after the disruptions have occurred.
We have both reactive and proactive risk policies based on a limited set of risk scenarios.
We manage all possible risk categories consistently and proactively via the implementation of company-wide policies and procedures.
Organisation
We do not have a supply chain risk manager.
We have an individual risk manager, acting independently from any cross- functional team.
We have a formal cross-functional risk management team, handling also supply chain risks.
Technology
We do not use technology to support supply chain risk management.
We use basic local reporting tools and spreadsheets to support supply chain risk management.
We use an integrated platform and system to support supply chain risk management with customers and suppliers.
Metrics
We do not use formal supply chain risk metrics.
We measure and track supply chain risk metrics internally and independently from other business process metrics.
We have structured and standardised tracking of supply chain risk metrics, integrated with the other business processes.
Table 2: Supply chain risk maturity scales
© Vlerick Leuven Gent Management School | 7
2,7 2,1 2,8 2,3
Figure 9 shows that the average company in our survey scores
> The third group of companies, which scores low on all four
below 3 on all four dimensions. Our survey thus confirms an
dimensions, falls into the Low Maturity category. Almost half
earlier study by Marsh (2008) that states that companies are not
of the respondents (49%) fall into this category.
highly effective at managing supply chain risks.
The main difference between the Systems Maturity companies and the Low Maturity companies is the intensity with which the Systems Maturity group has invested in processes, policies and
Processes
&
Policies
5
technology and, very explicitly, in the development of supply
4
2,7
chain risk metrics as well.
3
2
Metrics
2,3
1
2,1
6rganisa8on
Processes
&
Policies
5
2,8
4
Technology
3
2
Figure 9: Level of supply chain risk maturity
High
maturity
1
Metrics
on
Systems
maturity
Low
maturity
1 1 1 1
We observe that3 the highest score 2 4 5 is on the Technology dimen2
3
4
5
2
3
4
5
sion. The that the average company 2 average 3 score of 4 2.8 indicates 5 is somewhere between not using any technology and using basic
Technology
local reporting tools and spreadsheets to manage their supply chain risks. With a score of 2.7 on Processes & Policies, the average company in our study seems to have a more reactive, rather than a proactive, policy. Given the average score of 2.3 on the use of Supply Chain Risk Metrics, we conclude that the average company uses some supply chain risk metrics, but it is far from having an integrated supply chain risk measurement system.
High
maturity Systems
maturity Low
maturity
Figure 10: Supply chain risk maturity categories Processes
&
Policies 3,93 3,05 2,09 on
4,37
2,04
1,32
3,4 3,58 We concludeTechnology that very few companies – only 2,06 18% – have a Metrics
3,57
2,96
1,35
high level of supply chain maturity, which makes this category intriguing and deserving of further investigation. We could conjecture, for example, that these companies have been subject to a higher degree of risk than the companies in the other two categories – and so they have been compelled to develop policies, procedures, systems and metrics to manage this risk. We discuss the drivers of supply chain risk maturity in the next section.
The Organisation dimension has an average score of 2.1, which is low. This confirms our earlier findings with reference to the supply chain risk management function: the average company in our study does not yet have a supply chain risk manager. However, as an average does not tell the whole story, we performed a cluster analysis which showed that the companies in our study can be grouped into three distinct levels of supply chain maturity (Figure 10): > The first group of companies scores high on all four dimensions. Of the 171 companies for which data are available, 18% fall into the High Maturity category. > The second group of companies has average scores for three of the four dimensions, but the organisational dimension is lagging. These companies – representing 33% of the respondents – fall into the Systems Maturity category.
© Vlerick Leuven Gent Management School | 8
What drives supply chain risk maturity? As only 18% of the respondents have a high level of supply chain
5
maturity, we look at these companies in more detail. What are
4
the triggers to developing on all four dimensions of supply chain
High
maturity
3
risk maturity? Is a higher level of supply chain risk a trigger for
Systems
maturity
Low
maturity
maturity?
2
Figure 11 compares the level of supply chain risk acrossenvironment
3 the environment
1 environment
2 three maturity clusters (High,
High
maturity 3,22 Systems
maturity Systems and 2,52 Low Low
maturity 2,65
1
environment
1
3,15 3,47 2,84 2,93 Maturity) we 2,62 3,03
have discussed earlier. Our results show no significant difference in the level of risk among the three maturity clusters for the supply risks, the demand risks, the process risks and the control risks.
environment
2
environment
3
Figure 12: Supply chain risk maturity versus environmental risk
As we have seen, the environmental risks are the main driver for supply chain risk management. This is also reflected in Figure 13, which shows that companies with a higher level of environmental risk are more likely to have someone responsible for supply chain risk management.
Risk
manager demand supply process control ENV
1 ENV
2 ENV
3 yes 3,27 3,24 3,32 2,91 2,97 2,95 3,27 no 3,1 3,13 3,11 2,95 2,54 2,67 2,93
5
4
High
maturity
3
5
Systems
maturity
Low
maturity
4
2
3
1
Demand
Supply
Process
Control
Environment
Demand Supply Process Control Environment High
maturity 3,2 3,41 3,41 2,98 3,28 Systems
maturity 3,15 3,11 3,19 2,94 2,76 Low
maturity 3,18 3,17 3,18 3 2,77
Figure 11: Supply chain risk maturity versus supply chain risk
2
1
demand
supply
process
control
yes
ENV
1
ENV
2
ENV
3
no
However, we do see a clear difference in the level of environmental risk across the three maturity groups. The highly mature
Figure 13: Supply chain risk manager versus supply chain risk
companies report a higher level of environmental risk than the
It is striking that, in the highly mature companies, 30% of the
other two groups. As we can see in Figure 12, this higher level of
supply chain risk managers are not based in the supply chain
risk is observed for all three aspects of environmental risk: the
department, whereas this percentage is only 7% in the immature
dramatic environmental risks, the risks that damage reputation,
companies (see Figure 14). Maturity seems to be linked to
and the third category that includes strikes and governmental
creating a team that focuses on risk management, or at least
actions. This seems to suggest that it is not the demand, supply,
takes a broader perspective on the issue, which extends beyond
process and control risks that push companies to develop their
theHigh
Maturity borders of the supply chain department. 0,304347826 0,695652174
supply chain risk management, but rather the environmental
Not
in
SC
department
Systems
Maturity Low
Maturity
In
SC
department
0,230769231 0,066666667
0,769230769 0,933333333
risks. This probably means that the supply chain manager takes care of the uncertainty in supply and demand, as well as the
100%
risks associated with the process, as this is an inherent aspect
80%
of the supply chain management function. The environmental
60%
risks, on the other hand, are most often managed by a risk
40%
manager.
20%
In
SC
department
Not
in
SC
department
0%
Systems
Maturity
High
Maturity
Low
Maturity
Figure 14: Supply chain risk manager versus supply chain risk maturity
© Vlerick Leuven Gent Management School | 9
High
Maturity Systems
Maturity Low
Maturity
%
of
companies
in
maturity
category
per
industry
study who do and do not have someone formally responsible for
High
Maturity
Systems
Maturity
Food
products
and
beverages
Machinery
and
equipment
Nransport
logis7c
services
Wholesale
and
retail
Plas7cs
and
rubbers
Electronic
equipment
Pharma
Dutomo7ve
100%
80%
60%
40%
20%
0%
Chemicals
Manufacture
of
te67les 0,285714 0,142857 0,571429 Finally, let’s check whether different industries show different Chemicals 0,277778 0,388889 0,333333 Dutomo7ve 0,272727 0,272727 0,454545 levels of maturity in supply chain Pharma risk management. 0,2 0,333333 Figure 0,466667 15 Electronic
equipment 0,181818 0,363636 0,454545 shows how the companies inPlas7cs
and
rubbers the various industries0 in0,833333 our study 0,166667 Wholesale
and
retail 0,153846 0,384615 0,461538 are divided over the three maturity groups. shows Nransport
logis7c
services 0,142857 Figure 0,571429160,285714 Machinery
and
equipment 0,076923 0,461538 0,461538 the percentage of companiesFood
products
and
beverages in each of the0industries in our 0,416667 0,583333
Manufacture
of
te67les
An industry perspective
Low
Maturity
supply chain risk management. The highest proportion of high maturity companies is found in
Figure 15: Industry versus supply chain risk maturity
the textile, chemical, and automotive industries. If we include the systems maturity companies in our interpretation, the chemical industry stands out in terms of maturity. The textile no
%
companies
with
formal
SC
Risk
responsible
per
industry
0,4285714 0,5714286
supply chain risk managers, not a single textile company in our sample reported having a manager formally in charge of supply chain risk management.
Manufacture
of
teKEles
Machinery
and
equipment
PlasEcs
and
rubbers
Pharma
Transport
logisEc
services
yes
Wholesale
and
retail
the chemical industry shows the highest proportion of formal
100%
80%
60%
40%
20%
0%
DutomoEve
0,4166667 0,5833333 0,6 Pharma 0,375 0,625 Wholesale
and
retail 0,3333333 0,6666667 Interestingly, the chemical industry and the textile industry PlasEcs
and
rubbers 0,25 0,75 Machinery
and
equipment 0,1428571 0,8571429 score very differently on theManufacture
of
teKEles organisational dimension: 0whereas1
Chemicals
DutomoEve
0,4 a relatively high proportion Transport
logisEc
services of low maturity companies.
Food
products
and
beverages
Electronic
equipment
Food
products
and
beverages 0,4166667yet 0,5833333 relatively large proportion of highly mature companies, also
Electronic
equipment
yes
Chemicals 0,4761905 industry seems to have a wider range of maturity0,5238095 levels, with a
no
Figure 16: Supply chain risk manager versus industry
Somewhat to our surprise, our study found no high maturity companies in the food and beverage industry, despite the attention that is paid to food quality and safety. On the other hand, this industry shows a relatively high proportion of supply chain risk managers. This seems to indicate that supply chain risk is taken care of by giving formal responsibility for it to one of the managers; yet, at the same time, there is still a lot of room for the food and beverage industry to develop an overall policy towards supply chain risk.
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In particular, the organisational dimension of supply chain risk management – that is the creation of cross-functional teams to manage supply chain risks – needs further attention. Conclusion
References
Due to globalisation – and despite some supply chain best practi-
> Aberdeen, Supply Chain Risk Management:
ces – supply chain risks have increased. Although companies and
Building a Resilient Global Supply Chain,
supply chain managers have increased their risk management
white paper, 2008
efforts over the past few years, only 18% of the companies are at a mature stage of supply chain risk management. In particular, the organisational dimension of supply chain risk management – that is, the creation of cross-functional teams to manage supply chain risks – needs further attention. Our research shows that the highest levels of supply chain risk
> Johnson V. and Peppas S., Crisis management in Belgium: the Case of Coca-Cola, Corporate Communications: an international journal, vol 8, nr 1, 2003, pp18-22 > Marsh, Stemming the Rising Tide of Supply Chain Risks, white paper, 2008
can be found in the demand, supply and process risk categories. As these risks are in the supply chain manager’s domain, the management of them is undoubtedly part of his/her job. In companies with a high level of other supply chain risks – especially environmental risk – the organisational dimension
> Sheffi Y., The Resilient Enterprise: overcoming vulnerability for competitive advantage, MIT press, 2007 > IBM, Supply Chain Risk Management: a Delicate Balancing Act, white paper, 2008
can be developed by forming a formal cross-functional risk management team, where a risk manager works with the supply chain manager to manage all supply chain risks.
© Vlerick Leuven Gent Management School | 11
Research team
Els Pandelaere
Danny Boeykens
Jonas Hatem
Erika Vreys
Roel De Haes
Research carried out by the Vlerick Centre for Supply Chain Excellence
July 2010
Prof Dr Ann Vereecke
The Autonomous Management School of Ghent University and Katholieke Universiteit Leuven
ISBN: 9789078858720
© Vlerick Leuven Gent Management School | 12
