Risk Flashcards
What is risk? So
Something that may or may not have a negative side effect. Therefore there is uncertainty and lack of visibility .
Economic formula
Risk = Probability of occurrence x consequences/impact
daily parole decisions example
- External factors influence judgement.
- Less favourable decisions as they got hungrier, up until so low just before lunch time where it hits bottom.
What are the 4 steps to risk management?
- Identification - events and relationships are defined
- Prioritisation - probability and consequences identified so can be ranked from most to least critical
- Monitoring - low critical risks might be monitored
- Mitigation - high to medium critical risks go into mitigation planning and implementation
What is the sc risk challenge?
- A supply chain is a chain of decision nodes, networked together
- Each node plays a role in the value add process
- Each node therefore has the potential to contribute to the risk profile of a buyer firm
- Link between node also contribute to a buyer’s risk profile
- Global environment and macroeconomic factors also contribute to the risk profile
Impacts of risk?
- If you have risk it’s going to cost you in time or money
- There’s a correlation between time and financial costs
- Severe consequences when there is a disruption
- RISK MATTERS
Why are supply chains increasingly vulnerable?
- Supply Base Reduction e.g. single sourcing
- Increasing demand and speed pressures
- Increasing complexity and lack of visibility
- Global Sourcing e.g increasing number of hand-offs, not necessarily location
- Lean Operations e.g. reduced inventories
- Supply Chain Complexity e.g. globalisation and outsourcing
4 categories for sources of risk
- Supply
- Demand
- Network related
- Environmental
Sources of supply risk
- Dependency on key suppliers e.g. land rover supplier went bankrupt, took them 6 months to find new suppliers.
- Intellectual property e.g. Samsung supplier apple and infringed on Apples patents
- Supply delays/labour strikes e.g. Ba nearly all the catering was outsourced, staff strikes, cancelled flights and additional costs of £40 million
- Inbound quality issues - supplier not delivering to required level
- Inventory risk - not holding enough stocks
- Accidents
Sources of demand risk
- Fragmentation of mass markets
- Short life cycles
- Disruptive innovation e.g. Uber started off as taxi now do Uber eat
- Forecasting
- Drop in demand e.g. Firestone…look up issue
Sources of network related risks
- Complexity
- Density e.g. Toyota, earthquake in Japan causes shortages of parts and led to closing of plants, all Toyota in japan so hit them hard, could have had plants or other supplier in diff countries to limit this impact.
- Lack of visibility
- Bullwhip effect
Sources of environmental risk
- Airlines lost 400 million a day due to ash cloud, airports lost 128 million, other industry’s affected were flower companies as ash cloud destroyed flowers. 5 billion dollars in overall economic loss just due to cloud.
- Natural disasters
- Terrorism and wars
- Regulatory changes
- Economics fluctuations, such as exchange rates
- Geo-political conditions
4 types of disruption
- High impact, low probability
- Low impact, high probability
- Low, low
- High, high
(more concerned with top two)
High impact, low probability examples
o Natural disasters, sometimes can predict these or know places that are prone to them though
o Wars/terrorism
o Disruptive technologies
o Political unrest
Low impact, high probability examples
o One delivery truck breaking down o Low level weather events like snow o Delays o Human error - operational level o Quality defects o Accidents
