Supply Chain Management: Risk and Resilience
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Questions and Answers

What type of risk management process involves developing practices to reduce the likelihood of a disruption and/or limit the severity of financial loss?

  • Risk hedging
  • Risk retention
  • Risk transfer
  • Risk reduction (correct)

    • What is an example of a hedging strategy in risk management?

  • Hiring armed guards to travel with high-value freight
  • Diversifying transport activity among multiple carriers (correct)
  • Purchasing insurance coverage from a third party
  • Accepting the consequences of occurrence

    • What does a company do when it decides to 'do nothing' and accept the consequences of occurrence in risk management?

  • Risk reduction
  • Risk hedging
  • Risk retention (correct)
  • Risk transfer

    • Why would a company contract with a third-party logistics service provider (3PL) in risk management?

    <p>To transfer risk to a third party</p> Signup and view all the answers

    What is an example of a buffering strategy in risk management?

    <p>Having extra jets available to reduce the impact of equipment failures</p> Signup and view all the answers

    What is a characteristic of a 'known known'?

    <p>It is information that is recognized and understood with no uncertainty</p> Signup and view all the answers

    What was the outcome of the 'millennium bug' prevention efforts?

    <p>It was controlled, but its value was questioned by managers</p> Signup and view all the answers

    What is an example of a 'known unknown' in the context of climate change?

    <p>The precise future impacts of climate change on specific regions</p> Signup and view all the answers

    What is the purpose of the Container Security Initiative (CSI)?

    <p>To enhance the security of cargo entering the United States</p> Signup and view all the answers

    What is the term for unexpected and unpredictable factors or events that can impact a situation?

    <p>Unknown unknowns</p> Signup and view all the answers

    What is the primary goal of a system with resilience?

    <p>To return to its original state after being disrupted</p> Signup and view all the answers

    What is a common characteristic of human-caused security risks?

    <p>They are motivated by political, ideological, or criminal intent</p> Signup and view all the answers

    What is the primary purpose of risk identification in the risk management process?

    <p>To discover, define, describe, document, and communicate risks</p> Signup and view all the answers

    What is a common example of an inherent physical risk in global supply chains?

    <p>Longer distances and greater product handling</p> Signup and view all the answers

    What is the next step after risk identification in the risk management process?

    <p>Risk assessment</p> Signup and view all the answers

    What is a key focus of risk management in terms of demand and inventory?

    <p>Visibility to optimise asset utilisation</p> Signup and view all the answers

    What type of dependencies are considered in Level 2 of an holistic approach to risk management?

    <p>Assets and infrastructure</p> Signup and view all the answers

    What is a potential risk to trading relationships in Level 3 of an holistic approach?

    <p>Loss of a sole supplier</p> Signup and view all the answers

    What factors are considered in Level 4 of an holistic approach to risk management?

    <p>Green environmental and legal regulatory changes</p> Signup and view all the answers

    What is an example of a socio-political factor considered in Level 4 of an holistic approach?

    <p>Actions by pressure groups</p> Signup and view all the answers

    What is the primary focus of Level 1 in the holistic approach to managing supply chain risk?

    <p>Process operations and inventory management</p> Signup and view all the answers

    What is a key characteristic of 'wicked problems' in the context of supply chain management?

    <p>They involve multiple stakeholders and have multiple consequences</p> Signup and view all the answers

    What is the purpose of C-TPAT?

    <p>To conduct a comprehensive self-assessment of supply chain security practices</p> Signup and view all the answers

    What is a key aspect of the holistic approach to supply chain management?

    <p>Considering the interconnectedness of systems and the consequences of solutions</p> Signup and view all the answers

    What is the significance of 'valuative' frameworks in the context of wicked problems?

    <p>They acknowledge multiple and differing perceptions</p> Signup and view all the answers

    What are the three key aspects of risk management in supply chain operations?

    <p>Visibility of demand and inventory, velocity to reduce the likelihood of obsolescence and optimise asset utilisation, and control of the whole supply chain operations with process coordination</p> Signup and view all the answers

    What type of assets are considered in Level 2 of an holistic approach to risk management?

    <p>Nodes in the networks such as ports, factories, distribution centres, and links such as transport and communications infrastructure</p> Signup and view all the answers

    What is a critical factor to monitor in inter-organisational networks in Level 3 of an holistic approach?

    <p>Trading relationships and power dependencies</p> Signup and view all the answers

    What environmental and regulatory factors are considered in Level 4 of an holistic approach to risk management?

    <p>Green environmental and legal regulatory changes</p> Signup and view all the answers

    What is an example of a socio-political factor considered in Level 4 of an holistic approach?

    <p>Actions by pressure groups</p> Signup and view all the answers

    What is the focus of Level 1 in the holistic approach to managing supply chain risk?

    <p>Visibility of demand and inventory, velocity to reduce the likelihood of obsolescence and optimise asset utilisation, and control of the whole supply chain operations with process coordination</p> Signup and view all the answers

    What is an example of a risk to trading relationships in Level 3 of an holistic approach?

    <p>The loss of a sole supplier or customer</p> Signup and view all the answers

    What is the significance of Level 2 in an holistic approach to risk management?

    <p>It considers the assets and infrastructure dependencies</p> Signup and view all the answers

    What is the focus of Level 3 in an holistic approach to risk management?

    <p>Inter-organisational networks and trading relationships</p> Signup and view all the answers

    What is the significance of Level 4 in an holistic approach to risk management?

    <p>It considers the macro-environment and external factors</p> Signup and view all the answers

    A bad event that is known to occur someday is called a ______________.

    <p>risk</p> Signup and view all the answers

    The term ______________ refers to situations under which either the outcomes and/or their probabilities of occurrences are unknown to the decision-maker.

    <p>uncertainty</p> Signup and view all the answers

    A ______________ is a disturbance or problem that interrupts an event, activity, or process.

    <p>disruption</p> Signup and view all the answers

    Something that is likely to be lost or damaged is considered ______________.

    <p>vulnerable</p> Signup and view all the answers

    A ______________ SCM strategy enables a firm to manage regular fluctuations in demand efficiently under normal circumstances regardless of the occurrence of a major disruption.

    <p>robust</p> Signup and view all the answers

    Risk management focuses on ______________ of demand and inventory

    <p>visibility</p> Signup and view all the answers

    Velocity aims to reduce the likelihood of ______________ and optimise asset utilisation

    <p>obsolescence</p> Signup and view all the answers

    Nodes in the networks may be ______________ such as ports, factories, distributions centres

    <p>ports</p> Signup and view all the answers

    Level 4 views the ______________ environment within which the assets and infrastructure

    <p>macro</p> Signup and view all the answers

    In the scenario where the seller bears all transportation ___________, cost, and responsibility.

    <p>risk</p> Signup and view all the answers

    Partnering, dual sourcing and outsourcing are likely to be put forward as ______________ management solutions

    <p>risk</p> Signup and view all the answers

    A company could attempt to reduce the risk of theft or hijacking by hiring ___________ guards to travel with high-value freight.

    <p>armed</p> Signup and view all the answers

    An air cargo company may have extra jets available to reduce the impact of ___________ failures.

    <p>equipment</p> Signup and view all the answers

    Commercial vehicle accidents most transportation companies purchase coverage from ___________ companies.

    <p>insurance</p> Signup and view all the answers

    When risks have limited potential to negatively affect the supply chain, the organization may decide to 'do nothing' and accept the ___________ of occurrence.

    <p>consequences</p> Signup and view all the answers

    A 'known known' refers to something we are aware of and ______.

    <p>understand</p> Signup and view all the answers

    The 'millennium bug' was controlled once identified, but since it caused no major ______, many managers doubted if the costly prevention was necessary.

    <p>issues</p> Signup and view all the answers

    The shortage of high-quality ______ affected automotive manufacturers and fashion industry across Europe.

    <p>leather</p> Signup and view all the answers

    The COVID-19 pandemic was an ______ unknown before it emerged, as no one anticipated its occurrence or the extent of its impact.

    <p>unknown</p> Signup and view all the answers

    The 9/11 attack were so far outside the risk managers’ field of ______ that new security measures were introduced.

    <p>reference</p> Signup and view all the answers

    Three parameters are typically evaluated: Probability—the likelihood of the risk occurring, Impact—the consequences if the risk does occur in terms of service time, cost, and/or ______, and Proximity—the anticipated timing of the risk.

    <p>quality</p> Signup and view all the answers

    Risk can be evaluated via ______ or quantitative analysis.

    <p>qualitative</p> Signup and view all the answers

    To develop ______ risk management and mitigation strategies.

    <p>proactive</p> Signup and view all the answers

    The simplest way to eliminate a risk is to not perform an activity that carries risk, this is known as ______.

    <p>avoidance</p> Signup and view all the answers

    In the case of freight loss or damage, the seller could choose to work only on an ______ (EXW) basis.

    <p>Ex Works</p> Signup and view all the answers

    Study Notes

    Resilience in Supply Chain Management

    • Resilience refers to the ability of a system to return to its original or desired state after being disrupted.
    • This concept encourages a whole system perspective, accepts that disturbances happen, and implies adaptability to changing circumstances.

    Types of Risks

    • Inherent Physical Risks:
      • Global supply chain is susceptible to loss, damage, and delay problems due to longer distances, greater product handling, multiple border crossings, and more intermediaries.
    • Human-caused Security Risks:
      • Motivated by political, ideological, or criminal intent, including theft, weapons, illicit trade, and illegal entry of stowaways.

    Risk Management Process

    Step 1 - Risk Identification

    • Identification of potential threats and disruptions to which the organization is susceptible.
    • Techniques used: brainstorming, interviews, and historical information analysis.

    Step 2 - Risk Assessment

    • Evaluation and prioritization of risks to determine how serious each risk is to the organization.

    Risk Reduction Strategies

    • Developing practices to reduce the likelihood of a disruption and/or limit the severity of financial loss.
    • Examples: hiring armed guards to travel with high-value freight, diversification of transport activity, and buffering strategy.

    Risk Transfer

    • Sharing responsibility for risk management with trading partners or reassigning risk to third-party logistics service providers (3PLs).
    • Examples: purchasing insurance coverage from a third party, contracting with 3PLs.

    Risk Retention

    • Deciding to accept the consequences of occurrence when risks have limited potential to negatively affect the supply chain.

    An Holistic Approach

    Known Knowns

    • Refers to something we are aware of and understand, with no uncertainty.
    • Example: Y2K (millennium bug).

    Known Unknowns

    • Refers to something we are aware we do not know, with recognized uncertainty or gap in our knowledge.
    • Examples: climate change, foot and mouth disease in British livestock (2001).

    Unknown Unknowns

    • Unexpected and unpredictable factors or events that can impact a situation because they lie outside the realm of our awareness and understanding.
    • Examples: COVID-19 pandemic, 9/11 attack.

    Wicked Problems

    • Societal problems that involve multiple stakeholders, generate waves of consequences, and require consideration within valuative frameworks.
    • Requires a mentality of the CSO (Chief Supply Chain Officer).

    Levels of Supply Chain Risk Management

    Level 1 - Process Operations and Inventory Management

    • Focuses on process operations and inventory management, including visibility of demand and inventory, velocity, and control of supply chain operations.

    Level 2 - Assets and Infrastructure Dependencies

    • Considers the assets and infrastructure, including nodes in the networks (ports, factories, distribution centers), and links (transport and communications infrastructure).

    Level 3 - Inter-Organisational Networks

    • Views supply chain risk at inter-organisational networks, including organisations that own or manage assets and infrastructure.

    Level 4 - The Macro-Environment

    • Views the macro environment, including green environmental and legal regulatory changes, socio-political factors, and geo-political factors.

    Risk Management – A Big Picture

    • Risk: exposure to the chance of injury or loss; a bad event that is known to occur someday
    • Disruption: disturbance or problems that interrupt an event, activity, or process
    • Vulnerability: something is at risk; likely to be lost or damaged
    • Uncertainty: situations under which either the outcomes and/or their probabilities of occurrences are unknown to the decision-maker

    Types of Risks

    • Inherent Physical Risks: global supply chain is susceptible to loss, damage, and delay problems due to longer distances, greater product handling, multiple border crossings, and more intermediaries
    • Human-Caused Security Risks: motivated by political, ideological, or criminal intent, including theft, illegal entry of stowaways, and currency laundering

    Risk Management Process

    Step 1 - Risk Identification

    • Identification of potential threats and disruptions to which the organization is susceptible
    • Techniques used: brainstorming, interviews, and historical information analysis

    Step 2 - Risk Assessment

    • Evaluation and prioritization of risks to determine how serious each risk is to the organization

    Step 3 - Risk Reduction

    • Developing practices to reduce the likelihood of a disruption and/or limit the severity of financial loss
    • Examples: diversification of transport activity, buffering strategy, hedging strategy

    Step 4 - Risk Transfer

    • Sharing responsibility for risk management with trading partners or reassigning risk to third-party logistics service providers
    • Examples: purchasing coverage from insurance companies, contracting with 3PLs

    Step 5 - Risk Retention

    • Accepting the consequences of occurrence when risks have limited potential to negatively affect the supply chain

    An Holistic Approach

    Level 1 - Process Operations and Inventory Management

    • Focuses on process operations and inventory management
    • Includes: visibility of demand and inventory, velocity to reduce the likelihood of obsolescence and optimize asset utilization, and control of whole supply chain operations with process coordination

    Level 2 - Assets and Infrastructure Dependencies

    • Considers the assets and infrastructure dependencies
    • Includes: nodes in the networks (e.g., ports, factories, distribution centers) and links (e.g., transport and communications infrastructure)

    Level 3 - Inter-Organisational Networks

    • Views supply chain risk at inter-organisational networks
    • Includes: loss of a sole supplier or customer, trading relationships, and power dependencies

    Level 4 - The Macro-Environment

    • Views the macro environment within which the assets and infrastructure operate
    • Includes: green environmental and legal regulatory changes, socio-political factors, and geo-political factors

    Risk Management - A Big Picture

    • Risk refers to exposure to the chance of injury or loss, a bad event that is known to occur someday.
    • With supply chains spanning the globe, the risk of disruptions has never been greater, and any disruption can ripple through the supply chain.
    • Multiple suppliers, manufacturers, distributors, and logistics service providers create difficulties that can hide vulnerabilities and problems.

    Similar Terms

    • Disruption: a disturbance or problem that interrupts an event, activity, or process.
    • Vulnerability: something that is at risk, likely to be lost or damaged, or in danger of being harmed or damaged.
    • Uncertainty: situations under which either the outcomes and/or their probabilities of occurrences are unknown to the decision-maker.
    • Robust: strong in constitution, hardy, or vigorous, implying a supply chain strategy that can manage regular fluctuations in demand efficiently.

    Risk Management Process

    • Evaluates risk through qualitative or quantitative analysis.
    • Qualitative Analysis: provides a baseline evaluation of risks, classifying each risk as low, medium, or high on two dimensions - probability and impact.
    • Quantitative Analysis: builds on the foundation created by qualitative analysis, incorporating numerical estimates of frequency or probability and consequence.
    • Risk management process involves three steps: risk assessment, risk management strategies, and risk mitigation.

    Risk Management Strategies

    • Risk avoidance: eliminating a risk by not performing an activity that carries risk.
    • Risk reduction: developing practices to reduce the likelihood of a disruption and/or limit the severity of financial loss.
    • Risk transfer: sharing responsibility for risk management with trading partners or third-party logistics service providers.
    • Risk retention: accepting the consequences of a risk occurrence, often when the potential impact is limited.

    An Holistic Approach

    • Known known: information that is recognized and understood, with no uncertainty.
    • Known unknown: a recognized uncertainty or gap in knowledge.
    • Unknown unknowns: unexpected and unpredictable factors or events that can impact a situation.
    • Risk management focuses on visibility of demand and inventory, velocity to reduce obsolescence and optimize asset utilization, and control of the whole supply chain operations.

    Levels of Risk Management

    • Level 1: focuses on the risk management process.
    • Level 2: considers assets and infrastructure dependencies, including nodes in networks (ports, factories, distribution centers) and links (transport and communications infrastructure).
    • Level 3: views supply chain risk at inter-organisational networks, including organisations that own or manage assets and infrastructure.
    • Level 4: views the macro environment within which the assets and infrastructure operate, including green environmental and legal regulatory changes, socio-political factors, and geo-political factors.

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    Description

    This quiz assesses your understanding of risk and resilience in supply chain management, including the concept of resilience, types of risks, and their effects.

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