Governments are applying greater scrutiny to traders supply chain risk management and supplier oversight practices. When both supply may be disrupted and demand is stochastic, we demonstrate that a risk averse firm should typically choose a decentralized inventory system design. Risk pooling is an efficient and promising strategy to meet this challenge by reducing the underlying demand uncertainty through aggregation. These minerals are mined in the democratic republic of congo drc and neighboring countries hereinafter, the covered countries, and their extraction funds.
In this spotlight series, supply chain dive identified five types of supply chain risk, and some practical tips for mitigating them. A statistical concept that suggests that demand variability. The author also provides readers with a downloadable computerized decision support tool to compare and choose appropriate riskpooling methods and to apply them in companies. Highlights this paper considers the location, productiondistribution and inventory. It uses strategies of pooling and sharing resources so that risk in supply disruption can be shared. We explore several managerial implications of systematic risk. In supply chain management, the two major applications of risk pooling center on form postponement and geographic postponement.
Reconciling supply chain vulnerability, risk and supply chain. When one business within the supply chain fails to deliver their product or service to the next business in the chain, the entire supply chain can be disrupted. First introduced in the supply chain context in designing and managing the supply chain, risk pooling is a statistical concept that suggests that demand variability is reduced if one can aggregate demand, for example, across locations, across products or even across time. Say using alternative supplier, increasing safety stock etc. Managing risk in supply chains business queensland. This is a vital component of supply chain success and defines how well the system reacts to uncertainty. The benefits of upstream and downstream integration of. This is in contrast to the classical result that when supply is deterministic and demand is stochastic, centralization is optimal due to the riskpooling effect. For example, in producing sugar the supply chain might involve sugarcane farmers, processors, packaging manufacturers, distributors, wholesalers and retailers. Risk pooling mitigates demand and lead time uncertainty in logistics and supply chain management. Supply chain system design integrated with risk pooling. The basic definition of risk is the probability of occurence of a. To support companies in collaborative supply chain, new strategies.
Inventory management and risk pooling in the supply chain. Summary of lecture notes for chapter 2, simchilevi et al. Supply chain risk pooling refers to the practice of consolidating as much of a businesss supply chain as possible into one flow. The ten riskpooling methods can be implemented everywhere along the supply chain and mainly pertain to the value activities storage 1, transportation 2 and 3, procurement 4 and 5, production of goods and services 6, 7, and 8, and sales and distribution 9 and 10. Tavakkolimoghaddam uncertain supply chain management 2 2014 75 money, transportation capacity and supply. Inventory management, supply contracts and risk pooling. Also, competences in managing the data requirements and using it systems need attention. Inherently forecasts are much more accurate at an aggregate level. Risk pooling strategies to reduce and hedge uncertainty redesign the supply chain, production process or product to either reduce the uncertainty a firm faces or hedge uncertainty so that the firm. The problem is mixed integer nonlinear problem and decomposed into two stages. Supply chain risk and reward measuring risk in your supply chain apics point of view risk. Response regarding conflict minerals basic stance on conflict minerals the issues of conflict minerals are considered important by panasonic.
Placing risk pooling in the supply chain, business logistics. Supply chain assets may face loss due to the unknown risk. The 5 types of supply chain risk supply chain dive. A survey of supermarkets in kenya, argues that supply chain integration can encourage information sharing, collaboration and cooperation among supply chain partners. In the literature, different approaches have been applied to deal with different forms of uncertainty. In general, these forms of pooling leverage centralization so as to diminish the impact of demand uncertainty on supply chain performance, which can be thought of as a generalization of the risk pooling e ect studied by eppen 1979 and by this paper.
Supply chain risk management must also address unknown risks. Beamon 1999 recognized some important advantages in flexible supply chain systems. A framework for risk pooling in business logistics request pdf. Aug 07, 2017 in this spotlight series, supply chain dive identified five types of supply chain risk, and some practical tips for mitigating them. Risk pooling involves using centralized inventory instead of decentralized inventory to take advantage of the fact that if demand is higher than average at some retailers, it is likely to be lower than average at others. Risk diversification and risk pooling in supply chain design article in iie transactions 448. The dissertation investigates the impact of supply chain risks on a buyers sourcing strategies with a combination of operational hedging, quantity flexible contracts, and a multisourcing strategy. Table of contentsi 1 introduction 2 the theory behind risk pooling 3 a case study 4 observations from the case. Covid19 managing supply chain risk and disruption deloitte. A framework for risk pooling in business logistics. Risk hedging supply chain it uses strategies of pooling and.
Osadchiy et al systematic risk in supply chain networks 5 industry. This requires codesign a common global supply chain. Mar 04, 2009 risk pooling strategies to reduce and hedge uncertainty redesign the supply chain, production process or product to either reduce the uncertainty a firm faces or hedge uncertainty so that the firm. Given the characteristics of this virus, and the global movement of people, containment is exceptionally difficult. Supply chain management has generated a substantial amount of. Good practice and preparation is key to improved responsiveness to what is unknown. Hence, hrl problem similar to many realworld planning problems involve noisy, incomplete or inaccurate data. What links here related changes upload file special pages permanent. On the effects of risk pooling in supply chain management. Identify importance of information technology in supply chain management. The apics dictionary, 14th edition, defines supply chain risk as the variety of possible events and their outcomes that could have a negative effect on the flow of goods, services, funds or information resulting in some level of. Because, as far as supply chain risk goes, some, if not all, stakeholders are found far beyond the.
Inventory management and risk pooling in the supply chain part 1 duration. Sep 22, 2009 advantages disadvantages large costs to have flexibility accommodate demand uncertainty capacity pooling reduce inventory investment additional transportation costs keep inventory closer to customer extra costs of operating distribution center decrease lead time lead time pooling better performance in terms of matching supply and demand. Advantages disadvantages large costs to have flexibility accommodate demand uncertainty capacity pooling reduce inventory investment additional transportation costs keep inventory closer to customer extra costs of operating distribution center decrease lead time lead time pooling better performance in terms of matching supply and demand. Decentralized systems managing inventory in supply chain. If the forecasts are inaccurate you either risk having too much or too little of a product. Methods of risk pooling in business logistics and their. Bsi supply chain security solutions team our team comprises experts in supply chain disruptionintelligence methodology and. The primary challenge in supply chain management scm is matching supply with uncertain demand.
The most important concept in supply chain management risk pooling. This reduction in variability directly leads to a decrease of the safety stock, st z p l 1. Apr 03, 2008 this is in contrast to the classical result that when supply is deterministic and demand is stochastic, centralization is optimal due to the risk pooling effect. Pooling supply chain is pooling logistics services between several entities to optimize the use and operation of the logistics function or to access a service unavailable individually example. The problem has been decomposed by echelon using lagrangean relaxation. Centralized versus decentralized systems risk pooling. Supply chain risk management the drive to improve cost efficiency and streamline operations motivates many in both the public and private sectors to expand partnerships, increase outsourcing of noncore activities, and expand their global footprint into new territories. Financial pooling in a supply chain london business school. If loss occurs, the level of damage mitigation and postrisk response that is.
In the logistics industry itself, digital twins will. The ten risk pooling methods can be implemented everywhere along the supply chain and mainly pertain to the value activities storage 1, transportation 2 and 3, procurement 4 and 5, production of goods and services 6, 7, and 8, and sales and distribution 9 and 10. Managing inventory in the supply chain echelon inventory. So it is important that smooth operations of every. Risk hedging supply chain it uses strategies of pooling. Supply chain risk exposure evaluation network screensm. In other words, its putting all your eggs in one basket. Riskpooling strategies to reduce and hedge uncertainty redesign the supply chain, production process or product to either reduce the uncertainty a firm faces or. The risk pooling literature is extensive, but fragmented and inconsistent and does not provide a sound comprehensive risk pooling definition or framework. Nov 27, 2017 inventory management and risk pooling in the supply chain part 1 duration. So it is important that smooth operations of every link in the supply chain should be taken care of. Risk diversification and risk pooling in supply chain. First stage is between plantdc and second stage is dcretailer.
Supply chain flexibility could be defined as the ability to accommodate volume and schedule fluctuations from suppliers, manufacturers and customers. Jan 08, 20 summary of lecture notes for chapter 2, simchilevi et al. Risk management in the supply chain has become increasingly important as companies both large and small seek to extend their global reach. Differentiate between operational resilience and traditional thirdparty performance requirements. Different types of risk in your supply chain, and how to.
Bus 140 operations supply chain ch 10 flashcards quizlet. In a 2006 article, reconciling supply chain vulnerability, risk and supply chain management, by helen peck, she attempts to do just that, hence my analogy of looking down at supply chains from space in order to really see the big picture. If there is only one theoretical concept you need to understand to make better supply chain decisions, it is risk pooling very close but still a far second is the bullwhip effect first introduced in the supply chain context in designing and managing the supply chain, risk pooling is a statistical concept that suggests that demand variability is reduced if one can aggregate demand, for. Characterize different supply chain management strategies. Supply chain of apple, dell or any other company and then try to visualise the supply chain from sourcing part to the distribution part of the company. The most important concept in supply chain management risk pooling risk pooling. Unknown risk may be framed or classified in two ways. In form postponement, the objects being aggregated are products i. Risk pooling, supply chain hierarchy, and analysts. The author also provides readers with a downloadable computerized decision support tool to compare and choose appropriate risk pooling methods and to apply them in companies. Risk diversification and risk pooling in supply chain design.
Supply chain management risk pooling inventory management. Unique challenges of country of origin, transportation infrastructure, supplier norms, and producthandling procedures. It uses strategy of being responsive and flexible to the changing diverse needs. A risk pool is one of the forms of risk management mostly practiced by insurance companies. The most important concept in supply chain management. The supply chain includes every link to the transformation of customer needs in to useful products and to cater them back to the customers. Inventory pooling with strategic consumers harvard business. Risk pooling effect is incorporated in the system to minimize the supply chain cost. Apply basic techniquesmethods to solve key issues in supply chain management. Decentralized systems practical issues in inventory management inventory where do we hold inventory. In this book we focus specifically on the science of supply chains. True maturity of the organisation can be measured in terms of how top down and across the organisation the supply chain is embedded, how the supply chain is really performing at each stage, and how risk is being assessed and acted upon on a daily basis. Enterprises entering new markets often need to form new supplier relationships, engage with stateowned entities, and adapt to local laws and culture.
External dependencies and supply chain risk management. Financial pooling in a supply chain ming hu rotmanschool ofmanagement, universityoftoronto,ming. A statistical concept that suggests that demand variability is reduced if one can aggregate demand, for example, across locations, across products or even across time. Risk pooling strategies the objective of a risk pooling strategy is to redesign the supply chain, the production process or the product to either reduce the uncertainty the firm faces or to hedge uncertainty so that the firm is in a better position to mitigate the consequence of uncertainty. When both supply may be disrupted and demand is stochastic, we demonstrate that a riskaverse firm should typically choose a decentralized inventory system design.
The following approaches are used in risk pooling within a supply chain reducing the number and variety of parts, creating flexible capacity and combining inventories from multiple locations into one location. May 21, 2014 true maturity of the organisation can be measured in terms of how top down and across the organisation the supply chain is embedded, how the supply chain is really performing at each stage, and how risk is being assessed and acted upon on a daily basis. The impact of valuation heterogeneity on equilibrium prices in supply chain networks. The most important concept in supply chain management risk. That, in turn, will drive significant changes in the operation of supply chains and logistics processes. The main focus of this paper is to analyze the effects of risk pooling under different supply chain settings.
1029 167 983 1133 782 956 680 222 1560 946 331 1566 1464 770 838 880 426 972 1462 38 1183 1271 543 662 411 174 1201 1301 334 704 1282 1168 226 915 95 144 1032