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Supply chain risk

Framed by: Mr. EL Kchiri

Articles analysis presentation
Presented By: Lagmiri Nada

05.Methods of
02.Research 03.Risk 04.Risk supply chain risk
01.Definitions methodologies classification sources management

07.Type of 06. The

perspectives of
methods to
08.Conclusion risk sharing and
protect against contracts in
risks SCM
1. Topic Definitions

1. Supply chain management:Supply chain management is the management of the flow of goods and services and
includes all processes that transform raw materials into final products. It involves the active streamlining of a business's
supply-side activities to maximize customer value and gain a competitive advantage in the marketplace.
2. Supply chain risk : « Supply chain risk is the damage assessed by its probability of occurrence that is caused by an
event within a company, within its supply chain or its environment affecting the business processes of more than one
company in the supply chain negatively.”
3. Supply chain risk management : Supply chain risk management (SCRM) is the coordinated efforts of an
organization to help identify, monitor, detect and mitigate threats to supply chain continuity and profitability.
02. Risks classification

Organisational risks
• comprise of inventory risk, process/operational risk
• quality risk and management risk

Network risks
• Risks arise from interactions between organisations within the supply chain network
• , supplier default and demand risk

Environnemental risks
• defined as events driven by external forces such as weather, earthquakes, political, regulatory and
market forces
03. Risk sources

 Manufacturing companies:
 Company : Loss of production-quality failure-failure of logistics service provider
 Supplier: Failure of supplier-decreasing supply quantity-decreasing supply reliability-increasing supply lead
times-rise in prices-stock outage
 Demand : Increasing variations in demand- Customer insolvency- Unpredictable substitute products
 Environnement: : legal risk- Risk of liability- Political risk-Natural disasters- Risk of conflict / war
03. Risk sources

 Logistics service providers:

 Company: Insufficient capacity- Quality failure- Shortage of employees
 Supply: Subcontractor failure- Decreasing quality of services- Dependency on Subcontractors
 Demand : Customer insolvency-Margin- Substitution of companies service
 Environnement: legal risk-risk of lability-political risk-natural disasters-risk of conflict/war
04. Methods of supply chain risk management

 Risk Bearing: continuity planning-safeguarding of data process-safety stock self-assessment

 Risk Avoiding: supplier contract review-advanced early warning system- risk oriented evaluation of new
commercial operation-external independent audits
 Risk Transfer: hedging and insurance activities
05. The perspectives of risk sharing and contracts in

There are three perspectives of risk sharing and, contracts, and they are discussed in SCM:
 Incentive alignment and supply chain risk sharing
 Agency theory
 Contracts and relational governance
06. Type of methods to protect against risks

In general, methods of protection against risks can classified depending on the object of impact on two types: physical protection and
economic protection.
• Physical protection: consists of the use of such means as alarm, purchase of safes, product quality control systems, data protection
from unauthorized access, hiring of security, etc.
• Economic protection: consists in predicting the level of additional costs, assessing the severity of possible damage, using the entire
financial mechanism to eliminate the threat of risk or its consequences. Methods of economic protection include, as
 Avoidance of risk;
 Limiting the concentration of risk
 Hedging
 Diversification
 Creation of special reserve funds (self-insurance funds or a risk fund)
07. Conclusion

 A global supply chain is subject to various types of supply and demand uncertainties existing at different
nodes of the supply chain giving rise to a variety of risks that can lead to disruption. Companies that stay on
top of supply chain risk make their businesses more resilient. They can enhance the company’s competitive
position, support growth and produce measurable returns. Many companies have recognized this and are
now undertaking supply chain risk management programs This research paper reviews published approaches
to supply chain risk management and tries to understand how the risks differ in two major industries-
electronics and pharmaceuticals. For managers, it provides knowledge of the types of risks that may be
present in their supply chain and presents a variety of strategies for identifying and managing the same.