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Supply chain risk management
 

Supply chain risk management

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Supply Chain Management as a discipline has witnessed a tremendous growth during the last two decades. Following are the some of risks or issues due to operational problems in supply chain management. ...

Supply Chain Management as a discipline has witnessed a tremendous growth during the last two decades. Following are the some of risks or issues due to operational problems in supply chain management.

Demand Management
Inventory Management
Secondary Production Planning
etc.

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Supply chain risk management Supply chain risk management Presentation Transcript

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  • Introduction to Supply Chain Management • Supply Chain Management (SCM) as a discipline has witnessed a tremendous growth during the last two decades. • This growth has been noticed in terms of modeling and analyzing various issues arising due to the development of complex networks amongst different organizations not only within countries but also across the globe. • These issues are mainly related to designing, planning and coordinating the material, information, and money flows across the supply chains. • Increasing dynamism and uncertainty in the business environment risk issues are becoming key concerns to the All Right Reserved: www.stark-softs.com organizations.
  • Continue… • The risks in supply chains arise mainly due to Operational fluctuations such as variability in supply, demand uncertainties, and price variability (Juttner, 2005; Christopher and Lee, 2004) • Natural events such as earthquakes, cyclones, epidemics and Manmade crises such as terrorist attacks, unethical business practices and economic recessions (Kleindorfer andSaad, 2005). • Effective management of risks is becoming the focal concern of the firms to survive and thrive in a competitive business environment. • Thus the supply chain risk management (SCRM) has the prime objective of identifying the potential sources of risks and suggesting suitable action plans to mitigate them. All Right Reserved: www.stark-softs.com
  • Continue… • Developing an effective SCRM program is always a critical task and requires skills and expertise in multiple areas. • Considerable work has been reported in the SCRM literature dealing with issues with qualitative and quantitative approaches. • Supply chain optimization is now a major research theme in process operations and management. • A great deal of research has been undertaken on facility location and design, inventory and distribution planning, capacity and production planning and detailed scheduling. All Right Reserved: www.stark-softs.com
  • Operational issues in the Pharmaceutical Supply Chain • Demand management • Inventory management and distribution requirements planning • Secondary production planning and scheduling • Primary manufacturing campaign planning and AIl inventory management All Right Reserved: www.stark-softs.com
  • ANON HEALTHCARE Introduction As an ISO 9001:2008 Certified company, ANON HEALTH CARE situated in Ahmedabad (Gujarat) is one of the fastest growing pharmaceutical houses in present times. ANON HEALTH CARE with intention to provide quality products, raw material and other food products for the nation. All Right Reserved: www.stark-softs.com
  • Continue. . . • Anon Healthcare also provides third party export services as a third party manufacturing. Organization can provide WHO GMP state of the art manufacturing facility as on request. • Anon Healthcare as a Third Party Manufacturer in the field of pharmaceutical formulation and Food Supplements depends mainly on product quality, low production cost, on-time delivery and the Client relationship. All Right Reserved: www.stark-softs.com
  • Product Range General Tablets/Capsules/Syrups o Cardio-Diabetic Range o Respiratory Range etc… Liquid Filled Hard Gelatin Food Products o Omega 3, 6, 9 Fatty Acids o Co-Enzyme Q 10 Capsules o Vitamin D3 Capsules o Garlic Capsules etc… Soft Gelatin Capsules o Progesterone Capsules All Right Reserved: www.stark-softs.com
  • Literature review Literature review “Everyone sees the unseen in proportion “Everyone sees the unseen in proportion to the clarity of his heart, and that to the clarity of his heart, and that depends upon how much he has polished depends upon how much he has polished it. Whoever has polished it more sees more it. Whoever has polished it more sees more – more unseen forms become manifest to – more unseen forms become manifest to him” ~ Jalal ad-Din Rumi him” ~ Jalal ad-Din Rumi All Right Reserved: www.stark-softs.com
  • In this section, we provide an introduction to supply In this section, we provide an introduction to supply chain risk management. By presenting the relevant chain risk management. By presenting the relevant definitions and summarizing the important literature, definitions and summarizing the important literature, we describe the background to the field of this study. we describe the background to the field of this study. In this section, we included following data: In this section, we included following data: •• A general framework A general framework •• Definitions of risk Definitions of risk •• Supply chain risk management Supply chain risk management •• Supply chain risk Identification Supply chain risk Identification All Right Reserved: www.stark-softs.com
  • A general framework A general framework Earlier supply chain management focused on the Earlier supply chain management focused on the material flows of the network and broadened to material flows of the network and broadened to include other flows, such as financial and information include other flows, such as financial and information flows. We believe that a risk event can create flows. We believe that a risk event can create disruption in either one or a combination of these disruption in either one or a combination of these flows. flows.  Supply chain risk could be mitigated if we have a  Supply chain risk could be mitigated if we have a detailed investigation and description of the root detailed investigation and description of the root causes of disruption from the aspect of these flows. causes of disruption from the aspect of these flows. All Right Reserved: www.stark-softs.com
  • Similar ideas have been presented by: Similar ideas have been presented by: ••Chopra and Sodhi (2004), Chopra and Sodhi (2004), ••Johnson (2001) and Johnson (2001) and ••Spekman and Davis (2004), Spekman and Davis (2004), who all identify the dimension of risk in the form of supply who all identify the dimension of risk in the form of supply chain flows. chain flows. ••Spekman and Davis (2004) however go further, and Spekman and Davis (2004) however go further, and concentrate on information sharing and network relationships concentrate on information sharing and network relationships and add the security of internal information systems, and add the security of internal information systems, relationships forged among supply chain partners and relationships forged among supply chain partners and corporate social responsibility to their risk dimensions. corporate social responsibility to their risk dimensions. All Right Reserved: www.stark-softs.com
  • ••Arlbjörn and Halldorsson (2002) share this idea of Arlbjörn and Halldorsson (2002) share this idea of viewing risk on the flows of material and information, viewing risk on the flows of material and information, but view the third perspective in terms of flow of but view the third perspective in terms of flow of services. services. ••One important change in managing supply chain is One important change in managing supply chain is the emphasis on integrating activities into key supply the emphasis on integrating activities into key supply chain processes instead of looking at individual chain processes instead of looking at individual functions. functions. ••In the SCRM literature too, we note that managerial In the SCRM literature too, we note that managerial aspects may not be the same for the inbound and aspects may not be the same for the inbound and outbound sides. outbound sides. All Right Reserved: www.stark-softs.com
  • ••For instance, when discussing the risk in terms of For instance, when discussing the risk in terms of supplier selection, a major concern is to sustain the supplier selection, a major concern is to sustain the flow of raw material, whereas on the demand side, flow of raw material, whereas on the demand side, financial risk, such as a customer’s possibility of financial risk, such as a customer’s possibility of bankruptcy, may become important. bankruptcy, may become important. ••However, there is no clear evidence of interlinking However, there is no clear evidence of interlinking flows and of integrating activities in previous studies. flows and of integrating activities in previous studies. Therefore, in this study, we identify the flows in the Therefore, in this study, we identify the flows in the form of material, financial and information flows. form of material, financial and information flows. All Right Reserved: www.stark-softs.com
  • ••In addition, we analyse the system as a process model of In addition, we analyse the system as a process model of source (supply), make (production) and deliver (demand). source (supply), make (production) and deliver (demand). ••The foundation of this process model is the Supply Chain The foundation of this process model is the Supply Chain Operations Reference (SCOR) model, for it has been widely Operations Reference (SCOR) model, for it has been widely used among supply chain practitioners as well as researchers used among supply chain practitioners as well as researchers (Supply Chain Council, 2008). (Supply Chain Council, 2008). ••For any supply chain irrespective of its complexity, these For any supply chain irrespective of its complexity, these aspects, as well as the three flows, provide a framework to aspects, as well as the three flows, provide a framework to describe the system. describe the system. ••Risk issues will also be discussed based on these Risk issues will also be discussed based on these perspectives. perspectives. All Right Reserved: www.stark-softs.com
  • ••From a perspective of flows, we define the material flow as From a perspective of flows, we define the material flow as ••Physical movement of products from suppliers to customers. Physical movement of products from suppliers to customers. ••Letters of credit Letters of credit ••Timely payment of bills Timely payment of bills ••bankruptcy bankruptcy ••Payment schedules Payment schedules ••Credit terms and suppliers’ contracts fall under the category Credit terms and suppliers’ contracts fall under the category of financial flows. of financial flows. ••Information flow is used to keep all supply chain elements Information flow is used to keep all supply chain elements updated and hence provides resources for decision making in updated and hence provides resources for decision making in the supply chain. the supply chain. ••Examples of information flow are order status, order delivery Examples of information flow are order status, order delivery and inventory status, among others. and inventory status, among others. All Right Reserved: www.stark-softs.com
  • Definitions of risk Definitions of risk ••In reviewing risk management literature, the first In reviewing risk management literature, the first difficult question is difficult question is what is supply chain risk? what is supply chain risk? ••It is particularly difficult to distinguish risk and It is particularly difficult to distinguish risk and uncertainty in supply chain operations management. uncertainty in supply chain operations management. ••In this section we therefore present relevant In this section we therefore present relevant definitions. definitions. All Right Reserved: www.stark-softs.com
  • ••Risk used to be simply linked to unexpected events. Risk used to be simply linked to unexpected events. ••Christopher and Lee (2004) view risk as the “effect of Christopher and Lee (2004) view risk as the “effect of external events such as wars, strikes or terrorist attacks and external events such as wars, strikes or terrorist attacks and impact of changes in business strategy”. impact of changes in business strategy”. Kleindorfer and Saad (2005) follow the same line and relate Kleindorfer and Saad (2005) follow the same line and relate risk to…. risk to…. ••Operational contingencies Operational contingencies ••Natural hazards, earthquakes, hurricanes and storms Natural hazards, earthquakes, hurricanes and storms ••Terrorism and political Right Reserved: www.stark-softs.com All instability. Terrorism and political instability.
  • ••Quinn (2006) also refers the natural and man-made disasters, Quinn (2006) also refers the natural and man-made disasters, to “catastrophic events” which are the source of risk. to “catastrophic events” which are the source of risk. ••Tang (2006a) defines risk as an operational as well as a Tang (2006a) defines risk as an operational as well as a disruption risk, but he however does not distinguish between disruption risk, but he however does not distinguish between them. them. ••Spekman and Davis (2004) claim that risk definition can Spekman and Davis (2004) claim that risk definition can either be objective or subjective. either be objective or subjective. ••Risk which relies on probability alone, such as coin flipping Risk which relies on probability alone, such as coin flipping or dice throwing, is considered to be objective. or dice throwing, is considered to be objective. ••However, when the consequences of risk need to be assessed However, when the consequences of risk need to be assessed along with its expectation of occurrence, it is categorized as along with its expectation of occurrence, it is categorized as All Right Reserved: www.stark-softs.com subjective risk. subjective risk.
  • Supply Chain Risk Management Supply Chain Risk Management Kouvelis et al. (2006) view SCRM in terms of Kouvelis et al. (2006) view SCRM in terms of managing the uncertainty of demand, supply and managing the uncertainty of demand, supply and costs. costs. ••Carter and Rogers (2008) define SCRM as: Carter and Rogers (2008) define SCRM as: “The ability of a firm to understand and manage its “The ability of a firm to understand and manage its economic, environmental, and social risks in the economic, environmental, and social risks in the supply chain” which could be materialized by the supply chain” which could be materialized by the adoption of contingency planning and having a adoption of contingency planning and having a resilient and agile supply chains. resilient and agile supply chains. All Right Reserved: www.stark-softs.com
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  • Supply chain risk Identification Supply chain risk Identification ••Risk is defined as: “The combination of the probability of Risk is defined as: “The combination of the probability of occurrence of harm and severity of that harm.” occurrence of harm and severity of that harm.” ••Supply chain risk management (SCRM) is a new and novel Supply chain risk management (SCRM) is a new and novel methodology that captures both the operations as well as the methodology that captures both the operations as well as the financial aspects of decision-making. financial aspects of decision-making. ••Supply chain management, in general, is still a relatively new Supply chain management, in general, is still a relatively new concept in most developing countries, more so in India; and concept in most developing countries, more so in India; and many companies have not even begun to consider the formal many companies have not even begun to consider the formal management of their supply chain. management of their supply chain. All Right Reserved: www.stark-softs.com
  • The risks are broadly classified as The risks are broadly classified as ••Supply related Supply related ••Cost related Cost related ••Demand related, Demand related, ••Production related Production related ••Miscellaneous risks. Miscellaneous risks. All Right Reserved: www.stark-softs.com
  • Supply Risk Supply Risk .. These are risks that could potentially affect or These are risks that could potentially affect or disrupt the supply of products or services that the disrupt the supply of products or services that the pharmaceutical supply chain offers its customers. pharmaceutical supply chain offers its customers. ••Imports Imports ••Inferior Quality of supply Inferior Quality of supply •• Non-Availability of resources Non-Availability of resources •• Natural Disasters Natural Disasters •• Man-made Disasters Man-made Disasters •• Selection of Supplier Selection of Supplier •• Cost Risk Cost Risk All Right Reserved: www.stark-softs.com
  • Production Risks Production Risks Production risks are those that could potentially Production risks are those that could potentially affect or disrupt the production of the pharmaceutical affect or disrupt the production of the pharmaceutical products. products. ••Malfunctioning of Machinery Malfunctioning of Machinery ••Human Risks Human Risks ••Wrong Packaging Wrong Packaging ••Power Shutdown Power Shutdown All Right Reserved: www.stark-softs.com
  • Demand Risks Demand Risks Demand-related risks could potentially affect the Demand-related risks could potentially affect the ability of the company to make products available to ability of the company to make products available to its customers its customers .. ••Forecasting Errors Forecasting Errors All Right Reserved: www.stark-softs.com
  • Miscellaneous Risks Miscellaneous Risks ••Transportation Risk Transportation Risk ••Quality Risks Quality Risks ••Storage Risk Storage Risk ••Information Sharing Risks Information Sharing Risks ••Safety regulations by government agencies Safety regulations by government agencies All Right Reserved: www.stark-softs.com
  • Research Methodology Research Objective: •To know at which stage company lies for assessment of supply chain risks? •To identify the different types of risks or potential risks in company’s supply chain? •To suggest some possible mitigation strategies require managing these risks? Research type: Problem identification Research Method: In our research we used observation research as well as survey method for research. (Survey was limited to Purchase Manager and Top Management) Exploratory Research: in exploratory research we used internet websites materials, articles materials and operation management books for secondary data. Conclusive research: we used survey questions provided by FM global supply chain solution. From that we came to know about the establishment of Risk management program in ANON HEATHCARE. Also we asked some close and All Right Reserved: www.stark-softs.com open ended questions and suggestion about our project after completion.
  • Primary Data: We collected primary data from Purchase manager and top management by using Esurvey method provided by FM global supply chain Solution and some data from our questionnaire. Survey Method: E-Survey and Simple survey Research Instrument: E-Questionnaire and Simple Questionnaire. Scaling techniques: Automatic Result displayed via software provided by FM Global supply chain solution. Sampling Technique: Interview type, open ended and close ended questions All Right Reserved: www.stark-softs.com
  • Target Population Definition • Target Population: Purchase manager and Top Management Executives. • Element: Purchase manager and Top Management Executives. • Sampling Unit: Purchase manager and Top Management Executives. • Sample Size: 4 (CEO, O/P Manager, Purchase Manager, Logistic Officer) • Sampling Frame: Not Available • Extent: ANON HEATHCARE, AHMEDABAD • Time: April 2013 All Right Reserved: www.stark-softs.com
  • Observation (Filled E-Questionnaire) All Right Reserved: www.stark-softs.com
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  • Analysis of Risk Identification and Mitigation • In our project we mainly concerned with Top level management only. As per the data we collected from the Interview, Very first we would like to tell Top management of Anon Healthcare is aware about the Supply chain risks but there is no any provision for the assessment of supply chain risks. • We found that in Anon Healthcare lower level management is not involve in such a thing so in organization it is quite difficult to conduct the Audit in context with Supply Chain Risks. • In Organization top management believe that almost all type of risks mentioned above affect the Supply chain of Organization but only O/P manager found that all except Quality Risk affect Supply chain. All Right Reserved: www.stark-softs.com
  • • As we talk about facing the risk, from starting to till date Anon Healthcare facing following Risks frequently Production Risk Transportation Risk Logistic Risk Packaging Risk Forecasting Risk Supplier Risk • From above top management believe that Forecasting, Production, Natural Disaster, Supplier and Logistic Risks are more dangerous. • By considering answers given by top management we can conclude following reasons for individual risk. All Right Reserved: www.stark-softs.com
  • Suggestion and Recommendations All Right Reserved: www.stark-softs.com
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  • For Logistic Risk There are 3 main types of risks to consider when transporting a shipment at different stages in the supply chain network: •The risk that the shipment is delayed. •The risk that the shipment does not reach its destination. •The risk of hazardous material. The reason for the first two cases could be caused due to natural causes such as cyclones, earthquakes, heavy rainfall etc. Contingency plans have to be made before hand to deal with such risks. The third case that is the risk of hazardous material is caused when the transported substance is contaminated due to exposure to harmful substances while transporting. This can be prevented by using right material of construction containers to All Right Reserved: www.stark-softs.com prevent exposure.
  • Limitation • In Anon Healthcare, Lower management is not involved in any risk assessment so it is not possible to gather the data from the lower level management. All data is depending upon the top level management. And this organization is based on the third party manufacturing so all the principles of Supply chain management are not suit to the organization. All Right Reserved: www.stark-softs.com
  • Conclusion • This empirical study concludes different classification of risks and its mitigation strategies. • The classifications are supplier risk, demand risk, production risk, logistic risk natural disaster risk, forecasting risk and miscellaneous risks which include transportation risks, storage risks and information sharing risks. Through a detailed study of this medium scale Indian pharmaceutical company we have been able to identify the risks faced in this industry at different stages of its supply chain. • For Anon healthcare Production, Suppliers, Forecasting and Logistic risks are more potential. They believe that mitigation and assessment of all these risks are very essential for smooth flow of the supply chain. • As being third party manufacturer relation with clients or customer is very essential for survive in the market. So, suggested mitigation strategies will help them to sustain company image Reserved: www.stark-softs.com allow for long term All Right and reputation and relationship with clients and customers.
  • Review and Feedback • As we have taken Review and Feedback as a part of our questionnaire. Top management of Anon Healthcare give us favorable reviews and feedback as mentioned below. • Top management liked our suggestion for mitigation of Supply chain risks. They liked almost all our suggestion and they are thinking to implement in the organization. • Top management is some what confuse in suggestion of ERP system. They found some irrelevance in this suggestion. This will not be the solution at this stage because implementation of ERP software may lead more expense at this stage. • Top management liked our E-Questionnaire about self assessment provided by FM global supply chain solution. They believe this type of self E-assessment would help them to increase the awareness about the supply chain risk and program establishment for All Right Reserved: www.stark-softs.com assessment of risk.
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