Supply chain safety management


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Supply chain safety management

  1. 1. M. Essig et al. (Eds.): Supply Chain Safety Management, LNL, pp. 41– © Springer-Verlag Berlin Heidelberg 2013Targets and Components of Supply ChainSafety Management: Structure of the BookEva-Maria Kern1, Michael Hülsmann2, Stephan Klein-Schmeink3,and Michael Essig41Bundeswehr University Munich,Chair of Knowledge Management and Business Process Design,Werner-Heisenberg-Weg 39, 85577 Neubiberg,Germanyeva-maria.kern@unibw.de2Jacobs University Bremen,Associate Professor of Systems Management, International Logistics – Schoolof Engineering and Science Campus Ring 1, 28759 Bremen,Germanym.huelsmann@jacobs-university.de3Gesellschaft für Entwicklung, Beschaffung und Betrieb (g.e.b.b.) mbH,Business Unit Manager, Ferdinand-Porsche-Str. 1a, 51149 Köln,Germanystephan.klein-schmeink@gebb.de4Bundeswehr University Munich, Chair of Materials Management and Distribution,Werner-Heisenberg-Weg 39, 85577 Neubiberg,Germanymichael.essig@unibw.deBased on the introductory chapter, five elements can be distinguished that are allpart of the concept of SCSM. First at all (1), since various concepts already existin the literature, the necessity of developing a new concept for the management ofrisk and uncertainty factors in company spanning supply chains has to be empha-sized. Then (2), risk and uncertainty factors threatening a supply chain’s safetyhave to be identified and analyzed. Following this, adequate action measures haveto be taken: Preventive action measures aim at eliminating the source of risk anduncertainty factors and therefore make contribution to a supply chain’s protection(3). Reactive action measures, by contrast, aim at minimizing the detrimentalimpact resulting from risk and uncertainty factors that already have occurred andtherefore make contribution to a supply chain’s resilience (4). Finally, amanagement process has to be implemented enabling a supply chain to improveit’s overall preparedness (5).In accordance with the concept of SCSM and its elements, the intended bookwill be subdivided into five chapters. Before describing the chapters in detail, thefollowing figure gives an overview of SCSM and the structure of the book:
  2. 2. 42 E.-M. Kern et al.Chapter 1 included the introduction of SCSM being characterized as a concep-tually funded, integrated concept which aims at ensuring the continuity of com-pany spanning supply chains.Sandra Tandler and Michael Essig therefore discussed the state of research andoutlined the need for a new concept. Based on an extensive literature analysis,they identified 16 concepts for the management of risk and uncertainty factors thatcurrently prevail in the literature. Moreover, six distinguishing features emergedalong with it which laid the foundation for conducting a consistent and stringentanalysis of all identified concepts and for emphasizing similarities and differencesexisting between the concepts. The results provided evidence to the lack of anexisting, holistic concept for the management of risk and uncertainty factors insupply chains. Against this background, Sandra Tandler and Michael Essig intro-duced the concept of SCSM and its underlying elements.Based on the explanation of the conceptual foundations, the relevance and om-nipresence of the given research field will be highlighted. Therefore, chapter 2discusses various (potential) risk and uncertainty factors, which result in the in-creased vulnerability of supply chains and, by consequence, disruptions.Supply chains strongly depend on the availability of scarce natural resources toensure their continuity of supply. While the continuity of supply is – with theexception of China – primarily viewed as a task for the industry, governments areresponsible for ensuring market access and fair competition. However, since coun-tries differ with respect to their national wealth in raw materials and to their indus-trial structure, they prioritize varying key aspects in their raw material strategies.Based on this, Stormy-Annika Mildner, Gitta Lauster, and Lukas Boeckelmanngive, in their article Scarce Metals and Minerals as Factors of Risk: How to Han-dle Criticality, an overview of studies of scarce natural resources and highlightthat the two predominant risks on resource markets are price and supply risks.
  3. 3. Targets and Components of Supply Chain Safety Management: Structure of the Book 43They then discuss national raw material strategies by taking into consideration thedifferent sets of countries and conclude by stating that despite these differences,all countries considered in their study face one common challenge: securing met-als and minerals at sustainable prices.At the latest since 2001, September 11, highly developed industrial nationsmust accept that potential state and often also non-state adversaries are spying outtheir weak points – the hub of all power – and preparing to attack them. However,there is still a lack of imagination with regard to “new” forms of threats and at-tacks and to the possibilities that can result from the combination of military andnon-military instruments. In their article Hybrid Threats and Supply Chain SafetyManagement, Marc Oprach and Boris Bovekamp therefore take a new view onrisk factors threatening the continuity of supply since their focus is on hybridthreats comprising all state and non-state adversaries who, in a conflict, use thefull spectrum of conventional, criminal, terrorist and irregular measures. Their aimis both to sensitize industrial nations about the topic by highlighting the optionsthat hybrid adversaries have and to shed light on how industrial nations cansuccessfully respond to those hybrid threats.The political environment is becoming more and more volatile and demand dri-ven, therefore unforeseeable for supply chains operating within it. Thus, since thepolitical environment can have significant impacts on their activities, it poses asignificant risk factor for supply chains. However, speaking about political envi-ronment and risk requires a clear-cut definition to cut through the confusion exist-ing in the contemporary body of scholarly literature. To overcome this, CarloMasala aims in his article Political Environment as a Factor of Risk at contribut-ing to a conceptual clarification of two concepts political environment and risk.Therefore, he firstly comes up with discriminating definitions of both terms anddiscusses their connections afterwards. Then, he discusses some empirical exam-ples to illustrate how the political environment might be considered as a riskfactor. Finally, some theoretical considerations are presented regarding potentialstrategies for managing risks emanating from specific political environments.Besides legally required, information on the risk situation is mainly demandedby shareholders, potential investors, and other stakeholders such as employees toaccess and appraise the future performance of the company. Therefore, risk dis-closures in annual reports become the main type of risk communication between acompany and its stakeholders. As companies nowadays normally act withinsupply chains, Christoph Bode, René Kemmerling, and Stephan M. Wagner aim,with their article Internal versus External Supply Chain Risks: A Risk DisclosureAnalysis, at providing a tool that allows them to systematically identify and ana-lyze their supply chain risks. Based on this, they propose a simple classificationsystem for the analysis of supply chain risks. This two-level system distinguisheson the top level between internal-driven and external-driven supply chain risksand on the second level between five risk categories. Finally, the analysis of theannual 10-K report of 219 companies between 2007 and 2009 shows that the im-portance of internal-driven supply chain risks has increased in the last years.
  4. 4. 44 E.-M. Kern et al.For the benefit of a higher protection of supply chains, chapter 3 deals with theidentification of preventive action measures. In this context, particular emphasiswill be placed on the discussion of security procedures and initiatives which spe-cifically aim at strengthening logistics chains being part of company spanningsupply chains.Aviation security is of high significance since it enables various process chainsto achieve a higher safety level. However, due to its often time-consuming sche-duling processes, aviation security makes it increasingly difficult to achieve just-in-time delivery. Against this background, Gerhard Wirth sheds, in his article Thesecure process chain in aviation security, light on the topic of what is meant byaviation security. By examining the processes that relate to the arrival and, respec-tively, to the departure of passengers, he highlights the complexity surroundingaviation security resulting from its great sensitivity to changes induced by lawsand regulations. He concludes by stating that appropriate management systems areneeded to ensure the "just-in-time" positioning of personnel and equipment tohandle passengers and luggage, at the right time and in the right location, and thusensuring a functional process chain.The physical transportation of goods requires the construction of infrastructures,such as highways, bridges, and others. Those built infrastructures are key elementsof physical supply chains. However, recent events comprising multiple threats at thesame time, show that physical supply chains are highly vulnerable and that, due totheir strong interdependencies, even tiny causes can have the potential to disruptphysical supply chains. Given this background, Norbert Gebbeken deals in his ar-ticle Protection of Buildings with the safety of critical built infrastructures againstmultiple threats due to natural disasters, technical disasters or terrorist attacks. Hehighlights today’s possibilities to assess and to design critical built infrastructuresand concludes by stating that numerical simulations not only help to study threatscenarios or to assess already existing infrastructures but also help to design newbuildings avoiding or reducing physical tests that are usually time consuming andexpensive or even impossible to carry out in the 1:1 scale.In recent years, cargo theft in European road freight transport chains has in-creased and has become very carefully organized. Due to its negative effects onthe partners in supply chains, Irene Sudy, Sebastian Kummer, and Ellis Lehnerdevelop in their article Risk response measures for the management of the risk oftheft and organized crime in road freight transport chains a set of risk responsemeasures for the management of cargo theft in road transportation and categorizethem according to their abilities to eliminate, reduce, transfer, or accept the risk oftheft. In order to get a deep practical insight and to ensure the practicability ofmeasures proposed, the proposed risk response measures are based on a thoroughliterature review with personal expert interviews from internationally operatinglogistics service providers as well as insurance companies in Austria and Germa-ny. This approach allows the alignment of risk response measures that can befound in the risk management literature with the measures applied in practice.Since they are responsible for the transportation of goods, logistics serviceproviders play an important role for and within supply chains. They are therefore
  5. 5. Targets and Components of Supply Chain Safety Management: Structure of the Book 45required to set-up and operate appropriate global supply chains. Thereby, logisticsservice providers are facing two challenges that have to be met: on the one hand,customers ask them to create cost-efficient and high-performance supply chains;on the other hand, since there can be observed a rise of threats, such as terrorism,or extreme weather conditions, logistics service providers are obliged to secure thegoods being transported across the supply chain. Karl Engelhard and ChristianBöhm, employees at Hellmann Worldwide Logistics, take in their article Securityof Supply Chains from a Service Provider’s Perspective a practical view on therequirements logistics service providers are facing today by describing preventivemeasures that have been successfully implemented to achieve supply chainsecurity.Social networks, online banking, e-health, e-marketplaces – these exemplarilylisted trends highlight that today’s society is moving towards a networked society.However, since ubiquitous connectivity means also widespread vulnerability, suchtrends not only include potential advantages but also potential risks with respect tosecurity and privacy. The task to protect relevant assets in the digital world isbecoming even more demanding. Based on this, Gabi Dreo Rodosek and MarioGolling describe in their article Cyber Security: Challenges and Application Areasvarious threats of cyber security and give an overview of possible countermea-sures. They conclude by stating that the approaches existing so far do not suffi-ciently face the current threats of cyber security. Research in developing newapproaches is therefore of mandatory importance.Today, it is not unusual when a product is developed in the USA, produced inAsia and sold in Europe. The world-wide flow of good and global supply chainsalready allow a society to profit from the positive effects of globalization. Howev-er, the failure of a system – whether transportation, communication or energysupply – shocks almost all areas of life and production and triggers various domi-no effects. Individual nations and international organizations have therefore thedifficult task of ensuring public security as efficiently and effectively as possible.In doing so they receive support from the logistics sector that helps create publicsecurity with its solutions by supporting governmental administrations and organi-zations in various ways. Based on this, Matthias Witt emphasizes in his articleHow logistics can create and support public security how – with recourse to hispractical experiences at LOG mbH – the logistics sector can contribute to themaintenance of public security by examining two selected examples in detail.For the benefit of a higher resilience of supply chains, chapter 4 deals with theidentification of reactive action measures.The Panama Canal extension project is deemed to be perhaps the most impor-tant transportation project in the world today. The 5.5 billion US dollar projectwill enable the Canal to handle up to 12,600 TEU, Post-Panamax vessels, insteadof the current maximum of 4,400 TEU, Panamax Vessels. It allows most Post-Panamax vessels to lower their shipping costs by using the canal and is likely tochange transportation flow patterns throughout North and South America, as wellas port loads and transportation flows inland in the Americas. Since the PanamaCanal expansion will impact cargo throughout the Americas, Liliana Rivera andYossi Sheffi give in their article Panama Canal Update a short update on thestatus quo of the project by presenting new opportunities, leading to new transpor-tation routes, new distribution patterns and new logistics hubs formation.
  6. 6. 46 E.-M. Kern et al.There is an increasing amount of influences that can endanger logistics systemsto carry out their functions. Hence, the ability to resist against them is increasinglyimportant for logistics companies as well as whole logistics networks to gain andmaintain competitiveness through offering and ensuring a high reliability of logis-tics services. Thus, the robustness of logistic systems, i.e., the ability to restoretheir operational reliability after being damaged, becomes an increasingly impor-tant topic. Based on this, Philip Cordes and Michael Hülsmann introduce in theirarticle Self-Healing Supply Networks – A Complex Adaptive Systems Perspectivethe concept of self-healing processes that allow logistics systems to take decisionson their own. For this purpose, the authors focus on analysing the technologicaland organizational pre-conditions for self-healing processes in modern supplynetworks and how they contribute to a logistics system’s robustness. Finally, theassociated developed hypotheses show that there are both potentials to increasethe robustness of logistics systems and potential limitations that have to be takeninto consideration.Critical infrastructures subsuming organizations and institutions of great impor-tance for the national community are of specific character as nobody recognizes thevalue of them as long as they work. However, if there is a break-down which canresult in long-term interruption of supplies, critical disruption of public safety andother dramatic results, one realizes, how important critical infrastructures really are.Supply chains are dependent on critical infrastructures’ safety as well as, for exam-ple, energy is needed to produce goods. Given this background, Albrecht Broemmediscusses in his article Supply Chains – How to Support Critical Infrastructures’Safety, Protection, Preparedness, and Resilience a process model including severalsteps that have to be taken into consideration to achieve a higher safety level ofcritical infrastructure. Being the president of the Technisches Hilfswerk, he presentsthis governmental organisation and shows, by providing some examples, how theTHW gives support to restore critical infrastructures after a break-down.Ensuring product availability outbound to customers has become a major cus-tomer requirement over the past decades. Consequently, distributors, traders, andoriginal equipment manufacturers (OEM) across the supply chain are forced tooptimize their operations and to achieve continuity of supply. Companies thereforerequire hands-on management concepts that warn them about and trigger them torespond to potential product shortages as early as possible. Yet, the high complexi-ty of todays supply chains makes this task very demanding. Based on this, Joerg S.Hofstetter and Wolfgang Stölzle introduce in their article Supply Chain EventManagement – concept and use in business practice the concept of Supply ChainEvent Management (SCEM). They address the existing heterogeneity of SCEMunderstandings and SCEM approaches found in business practice and academiatoday and the missing hands-on measurement for SCEM use. Finally, they shedlight on the darkness about the current use of SCEM in business practice.Ensuring agility along with disruption resistance and resilience are crucial is-sues in supply chain (SC) planning. To overcome this challenge, Dmitry Ivanov,Boris Sokolov, and Joachim Käschel develop in their article Adaption-based sup-ply chain resilience an adaptation-based supply chain resilience framework whichis provided to companies to achieve maximal economic performance and stability
  7. 7. Targets and Components of Supply Chain Safety Management: Structure of the Book 47in their supply chains. Therefore, they propose a detailed analysis of supply chainresilience based on a mutual classification of flexibility and reliability elements.Subsequently, they present an algorithm of decision-making on supply chainplanning which contributes to both supply chain reliability and flexibility. Theresulting supply chain resilience framework and tools make it possible to take intoaccount individual risk perceptions of managers, different strategies with regard torisk management, and to consider not only supply chain economic performancebut also supply chain stability.Finally, chapter 5 is concerned with the implementation of the elements ofSupply Chain Safety Management discussed above within the underlying man-agement process.Increasing economic globalization and rising competitive pressure represent achallenge to companies, which have to ensure cost-effective purchasing in globalsourcing and offer products on various international sales markets. End-to-endmonitoring of supply and production chains as well as the certification of productsand processes are therefore critical for ensuring that the requirements of differenttarget markets are complied with and that the expectations of target groups fromdifferent cultural backgrounds are fulfilled. By outsourcing this task to specialservice providers, companies can focus on their core competencies, minimize therisks of global sourcing and exploit the opportunities offered by new markets.Against this background, Axel Stepken describes – with recourse to four compa-nies TÜV Süd had accompanied – in his article Monitoring and Certification ofSupply Chain Safety how testing and inspection along the global supply and pro-duction chains as well as the role of product and process certification work inpractice.Global supply chains – and some business sectors (e.g., the military), in particular– are increasingly forced with the requirement of complying with complex laws,regulations and standards. Ensuring end-to-end supply chain compliance hastherefore become a critical success factor for all elements and relations, materialmovements and information flows within and along global supply chains. Due to itssignificant impact on the risk and chance dimension of a supply chain’s perfor-mance, compliance affairs have to be managed. Against this background, JosefMauermair shows in his article Compliance and Supply Chain Safety how, from atheoretical and a supplier’s perspective, a compliance system can be developed,implemented and run. He therefore refers to a life cycle model of rules which aimsat to ensuring supply chain preparedness and outlines the possibilities and limita-tions of planning, running and controlling rules as the core objects of the compliancesystem.Innovation is a precondition for economic development, as it opens up oppor-tunities for competitive advantages and long-term success. However, innovationalso means risk, as it takes place under conditions of uncertainty. The currentliterature surrounding the concept of SCRM is characterized by its prevailingdisregard of interrelations with opportunities and innovation, and of definition ofobjectives (which is a basic requirement to identify both positive and negativedeviations). Against this background, the article Supply Chain Innovation and RiskAssessment (SCIRA) Model provided by Stephan Klein-Schmeink and ThomasPeisl represents an advanced approach of SCRM located at a strategic level, since
  8. 8. 48 E.-M. Kern et sheds light on how objectives for supply chains can be defined, and how thetension between innovation, opportunities, and risks can be successfully managed.In accordance with the frequently cited business wisdom ‘You can’t manage,what you don’t measure’ supply chain managers need support in quantifying andthus mitigating supply chain risks. A look into the relevant literature shows, how-ever, that only few publications can be identified which choose simulations andmathematical models as an alternative to large-scale surveys. Thus, Andreas Brie-den, Peter Gritzmann, and Michael Öllinger introduce in their article Supply ChainSafety: A Diversification Model based on Clustering a novel quantitative algo-rithm that provides a multiple covering of the commodity graph via constrainedclustering. It can be used to measure the risk of the status quo of the supply chainof a production by calculating the (conditional) probability of failure. This risk canbe judged in comparison to best assignments of suppliers to different supply chaincomponents of the same size. By using this quantitative approach, it is demon-strated that the risk of failure can be significantly reduced.Auctions are a common tool which not only allows to optimize ex-factory pric-es but also to allocate the production capacity in exactly these markets (interna-tionally) and to those dealers (intra-nationally) that can reach these maximumprices with their customers. The control effort is minimized as the optimal distri-bution is defined as a self-adjusting mechanism and sales channel risks are lo-wered. In the automotive industry, auctions are implemented in various areas sofar. However, in sales of new automobiles there is no comprehensive applicationof auctions in place yet. Thomas Ruhnau and Thomas Peisl therefore propose intheir article Risk Management through Flexible Capacity Allocation and PriceControl – Auctions in the New Car Sales Process a model for a forward auctionwith one supplier and a large number of bidders for the indirect sales of new ve-hicles aiming at risk reduction in a manufacturer’s sales channel. They defineand explain the auction model by a process flow and conclude by discussingchallenges and suggesting solutions.