Supply Chain Uncertainty (L17)

Question 1

Define supply chain vulnerability

Answer 1

An exposure to serious disturbance, arising from risks within the supply chain as well as risks external to the supply chain

Question 2

Reasons for supply chain vulnerabilities (5)

Answer 2

1. Focus on efficiency rather than effectiveness
2. Globalisation
3. Focused factories & centralised distribution
4. Outsourcing
5. Reduced supplier base

Question 3

Efficiency vs. effectiveness

Answer 3

Businesses focused on efficiency resulting in reduced inventory and just in time manufacturing.
Organisations become dependent on suppliers.

Question 4

Focused factories & centralised distribution

Answer 4

Tade deals, single markets etc. remove barriers to the flow of products across borders: economies of scale can be used to drive down cost.
Focus factories specialise in the production of a single item: products travel further increasing cost, across borders increases geo-political risk, factory flexibility is lost

Question 5

Outsourcing

Answer 5

Driven by logic that organisations are more likely to succeed by focusing on what they are good at.
Brings: loss of control, failure of 1 link has knock-on effect, more links = greater risk

Question 6

Reduced supplier base

Answer 6

Reduce suppliers organisation purchase from.
Increases communication, reducing inventory and costs.
Exposes organisation to a single point of failure

Question 7

How is risk quantified

Answer 7

Supply chain risk = Probability of disruption x impact

Question 8

Risk profile:
Disruption sources (5)

Answer 8

1. Supply - How vulnerable is the organisation to disruptions in supply?
2. Demand - How volatile is demand?
3. Process - How resilient are processes?
4. Control - What is the impact of internal control processes?
5. Environmental - How vulnerable is the chain to external factors?

Question 9

Stages of supply chain risk management (7)

Answer 9

1. Understand the supply chain
2. Improve the supply chain
3. Identify the critical paths
4. Manage the critical paths
5. Improve network visibility
6. Establish a supply chain continuity team
7. Work with suppliers and customers to improve supply chain risk management procedures

Question 10

Improve the supply chain (4 ways)

Answer 10

1. Simplification
2. Improving process reliability
3. Reducing variability
4. Reducing complexity

Question 11

Likely characteristics of critical paths (5)

Answer 11

1. Long lead times from order to delivery
2. Single source of supply
3. Dependence on specific infrastructure
4. Bottlenecks
5. High levels of risk

Question 12

Managing critical paths (5)

Answer 12

1. Contingency plans
2. Re-engineer supply chain
3. Process control to monitor supply chain
4. Add capacity to remove bottlenecks
5. Increase inventory if alternative suppliers can’t be found

Question 13

Improve network visibility

Answer 13

A supply chain “control tower” can monitor all aspects of complex supply chains