8.5 Chapter Summary
Summary
Risk management in supply chain and operations management involves identifying, assessing, and mitigating various risks that can disrupt the flow of goods and services. Key risks include demand variations, natural disasters, global events, supplier risks, cybersecurity threats, and ethical concerns. For instance, demand fluctuations can lead to excess inventory or stockouts, while natural disasters like earthquakes and floods can halt production and distribution. Supplier risks, including financial instability and quality issues, can disrupt supply chains, and cybersecurity threats can compromise data and operations. Ethical concerns, such as labour violations and environmental impact, also pose significant risks to supply chains.
To manage these risks, companies adopt strategies like multisourcing, nearshoring, stress testing, building buffers, and improving cybersecurity. Multisourcing reduces dependency on a single supplier, while nearshoring brings suppliers closer to core operations, reducing transportation risks. Stress testing identifies vulnerabilities through simulated disruption scenarios, and building buffers involves maintaining extra inventory and capacity. Enhancing cybersecurity includes standardizing security protocols, controlling access, vetting vendors, and implementing robust data governance. By leveraging technological innovations like IoT, blockchain, and AI, companies can enhance visibility, transparency, and resilience in their supply chains, ensuring business continuity amidst uncertainties.
OpenAI. (2024, June 28). ChatGPT. [Large language model]. https://chat.openai.com/chat
Prompt: Please take the chapter content in this document attached and summarize the key concepts into no more than two paragraphs. Reviewed by authors.
Key Terms
- Nearshoring involves strategically locating suppliers and distributors closer to your core operations or final product destinations.
- Stress testing is invaluable for identifying vulnerabilities, some of which may be deeply embedded within the supply chain.
- Supply chain management includes all activities that turn raw materials into finished goods and put them into customers’ hands.
- Supply chain risk management (SCRM) is the process of finding and addressing potential vulnerabilities in a company’s supply chain.
