Risk management processes for managing disruptions in supply chains

Abstract

The research focuses on formal supply chain disruption management (SCDM) processes and the usefulness of such procedures. Based on the risk management (R?) process, a generic SCDM process consists of the following interconnected phases: define context, identification, assessment, implementation and management and monitoring. Each phase is described, and possible activities and strategies a company may adopt are proposed.

Following a literature research in respect of SCDM strategies and RM processes, the application of SCDM processes in two case study company contexts, auto-manufacturing and water utilities, is examined. The auto-manufacturing company, which operates in a global supply chain and follows lean practices, does not adopt formal processes for managing supply chain disruptions. Disruptions are usually managed on a reactive basis by ‘fighting fires’ and proactive measures are based on the company’s experience in handling past disruption events. The water utilities company uses a formal RM process for managing disruptions along its water supply chain, apparently motivated by a requirement to follow regulations set by the regulators and because of its involvement in offering a product which meets basic needs of its customers.

The application of RM to supply chains is not a widely practiced concept as is evident from both the literature and the case study findings. Companies usually avoid spending resources on preparing for disruptions that may never materialize, and companies that do apply RM do so either because of regulations or disruptions in the past that had an adverse impact on the companies’ operations. When applied, though, it helps guide decision makers through the SCDM process, with which more informed decisions can be taken and important risks handled, increasing the resilience and robustness of the company to supply chain disruptions.

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