7.6 Key Terms, References, and Accessibility Descriptions

Key Terms

Force majeure disruption – “an unexpected event such as a war, crime, or an earthquake which prevents someone from doing something that is written in a legal agreement.” (Cambridge Dictionary, 2022)

Chapter References

Cambridge University Press. (2020). Force majeure. In Cambridge dictionary. https://dictionary.cambridge.org/dictionary/english/force-majeure

Cambridge University Press. (2022). Vulnerability. In Cambridge dictionary. https://dictionary.cambridge.org/dictionary/english/vulnerability

FITT. (2021). FITTskills: Global value chain (7th ed.). Forum for International Trade Training.

FITT. (2013). FITTskills: International trade management (6th ed.). Forum for International Trade Training.

Government of Canada. (2016). Guide to integrated risk management. https://www.canada.ca/en/treasury-board-secretariat/corporate/risk-management/guide-integrated-risk-management.html#toc4_6

Gurtu, A., & Johny, J. (2021). Supply chain risk management: Literature review. Risks, 9(1), 16. https://doi.org/10.3390/risks9010016. CC BY-4.0

Interos. (June 30, 2021). Estimated average annual cost to respondents’ organizations as a result of global supply chain disruptions in 2021, by region or country (in million U.S. dollars) [Graph]. Statista. https://www.statista.com/statistics/1259125/cost-supply-chain-disruption-country/

Open Risk Manual. (2021). Supply chain risk. https://www.openriskmanual.org/wiki/IT_Risk

Sheffi, Y., & Rice, J.B. Jr. 2005. A supply chain view of the resilient enterprise. MIT Sloan Management Review (47), 41. https://www.proquest.com/docview/224969684?pq-origsite=gscholar&fromopenview=true

Smorodinskaya, N., Katukov, D., & Malygin, V. (2021). Global value chains in the age of uncertainty: advantages, vulnerabilities, and ways for enhancing resilience. Baltic Region (13), 78-107. https://journals.kantiana.ru/eng/baltic_region/4953/31214/

Supply Chain Risk. (2020, February 18). In Open Risk Manual. https://www.openriskmanual.org/wiki/index.php?title=Supply_Chain_Risk&oldid=13807.

Image Descriptions

Fig 7.1: Value adding activities (across top): Research and development, design and development, manufacturing, distribution and logistics, sales and marketing, services.
Supply chain stages (centre left): Initial inputs (materials/commodities sector, supporting inputs from sector), intermediate goods (components sector (sub-sector)), final goods (final goods sector), distribution and sales (distribution and sales sector (sub-sector)).
End markets (centre right): producer-specific, buyer specific, geographic markets.
Supporting environment (across bottom): infrastructure and finances, government agencies, business, information & technology services, education, testing and training, trade and professional associations, NGOs and standards. [Return to image].

Fig 7.3: 3 categories of risks.
External risks are risks that cannot be controlled by the firm (natural factors, geopolitical, government, consumer preferences, economic, competitors, cyber attacks, changes in environment, technological, market failures, social, commercial, regulatory climate, ecological, legislation).
Distribution channel risks are risks that combine of controllable and uncontrollable risks (loss of merchandise, labour unavailability, information accuracy, cargo damage, disasters, infrastructure unavailability, quality of insurance risks, outsourcing risks, partnering risks, supplier performance risk). Internal risks are risk that can be controlled by the company (privacy, security, supply network, forecasting accuracy, reputation, corporate controls, employees, operation & producing, legal, non-performance, management & procurement, human error, technical, non-technical, deficient knowledge). Below the columns of risks are arrows pointing cumulatively to value adding activities, supply chain stages, supporting environment, end market. [Return to image].

Fig 7.4: United States 228 million, Nordic countries 196 million, Global 184 million, United Kingdom 146 million, DACH 145 million [Return to image].

Fig 7.5: Risk management cycle: Identifying, Assessing, Responding, Communicating, Monitoring

Alternative Text-Based Activities

Assessing What You Already Know

Question 1:

Globalization transformed international business significantly by enhancing cutting-edge technology as well as increasing shipping trade worldwide.

• True (Correct)
• False

Feedback: It is true that globalization transformed international business significantly by enhancing cutting-edge technology as well as increasing shipping trade worldwide. As a result, the connection between countries and continents became shorter and faster, impacting economic performance and gaining economic benefits.

Question 2:

Supply Chain Management can promote (______) in the business field, and risk mitigation strategies can help organizations reduce (_____) such as human-made or natural disasters.

• competitiveness, risks (Correct)
• ways, opportunities
• relationships, problems
• networking, issues

Feedback: Supply Chain Management can promote competitiveness in the business field, and risk mitigation strategies can help organizations reduce risks such as human-made or natural disasters.

Question 3:

Globalization has increased the risk significantly (______) and (______).

• internally, externally (Correct)
• globally, internally

Feedback: Risks have always existed everywhere; however, globalization has increased the risk significantly internally and externally. Challenges within the global value chain could be lack of visibility within companies, chaos, inaccurate research or forecast, human mistakes, mother nature, political situation and so forth.

Question 4:

What is vulnerability? Write your answer in the box below.

Feedback: According to the Cambridge University Press (2022),
“Vulnerability is the quality of being vulnerable (able to be easily hurt, influenced, or attacked), or something that is vulnerable” (Cambridge University Press, 2022).

[Return to activity].

Check Your Understanding: Explain the concept of value chain vulnerability by reviewing current challenges

Question 1:

Globalization has made the global value chain model more sophisticated and more vulnerable for all parties, with many interruptions and disruptions on the supply chain network.

• True (Correct)
• False

Feedback: Globalization has made the global value chain model more sophisticated and more vulnerable for all parties, with many interruptions and disruptions on the supply chain network. The global value chain is a complex model with simultaneous flow of information and products .

Question 2:

How many value-adding activities representing basic operational functions exist?

• 4
• 6 (Correct)
• 7
• 8
• 5

Feedback: 6 (six) main value-adding activities representing basic operational functions that Global Value Chains firms are engaged in to bring a product from an idea to the end use.

Question 3:

Choose the right value-adding activities below. Check all that apply.

• Research and development (Correct)
• Design and development(Correct)
• Manufacturing(Correct)
• Education, tasting, and training (Incorrect)
• Distribution and logistics(Correct)
• Sales and marketing(Correct)
• Service(Correct)

Feedback: Research and development, Design and development, Manufacturing, Distribution and logistics, Sales and marketing, Service

Question 4:

Drag and Drop activities in correct Category

[Return to activity].

Check Your Understanding: Identify types of risks and disruptions

Question 1:

Drag and drop risks into correct category

Question 2:

Drag and Drop definitions in correct Category

Question 3:

According to the FITT (2013), external risks can be (__________) such as cost fluctuations, market risks, inflation, environmental, operational, taxation.

• predictable and uncontrollable (Correct)
• unpredictable and uncontrollable
• unpredictable and controllable

Feedback: According to the FITT (2013), external risks can be predictable and uncontrollable such as cost fluctuations, market risks, inflation, environmental, operational, taxation. In addition, external risks can be unpredictable, such as natural hazards and sabotage, which are uncontrollable (FITT, 2013).

Question 4:

According to Silva and Reddy (2011), (______) % of the U.S. organizations suffered more than USD 1 billion in sales in the previous five years due to volatile disruption in the business cycle, with the most recurrent disruption caused by unmanageable natural disasters.

• 83
• 94
• 63
• 73 (Correct)
• 67

Feedback: According to Silva and Reddy (2011), 73% of the U.S. organizations suffered more than USD 1 billion in sales in the previous five years due to volatile disruption in the business cycle, with the most recurrent disruption caused by unmanageable natural disasters.

[Return to activity]

Check Your Understanding: Examine risk management strategies to mitigate the supply chain vulnerability

Question 1:

Risk management refers to implementing strategies and plans to manage supply chain networks through inconstant risk assessment and increasing vulnerabilities to ensure resilience in supply chains.

• True
• False (Correct)

Feedback: Risk management refers to the implementation of strategies and plans to manage supply chain networks through constant risk assessment and reduce vulnerabilities to ensure resilience in supply chains. All supply chains do not have the same risks, but some risks are common. The risks are also specific to an area of business or the field of study.

Question 2:

According to the Government of Canada, how many steps does an effective risk management process consist of?

• 4
• 5 (Correct)
• 7
• 3
• 9
• 6

Feedback: Companies need to use an effective risk management process that consists of the following steps: identifying, assessing, responding, communicating, and monitoring risks in the global value chain. The process is the so-called risk management cycle.

Question 3:

Drag and Drop explanations in correct Category

Question 4:

Choose strategies to control risk. Check all that apply.

• Prevention(Correct)
• Rescheduling(Correct)
• Conjecture(Correct)
• numerical and economic(Correct)
• vertical integration(Correct)
• Risk-sharing(Correct)
• technology and security (Correct)
• Scheduling (Incorrect)
• Support(Incorrect)
• Horizontal integration(Incorrect)

Feedback: Strategies to control risk may be divided into seven categories: prevention, rescheduling, conjecture, numerical and economic, vertical integration, risk-sharing, and technology and security. [Return to activity].