Supply Chain Risks: A systems Thinking Approach_Abhijeet Ghadge PhD
Supply Chain Risks : A
Abhijeet Ghadge and Samir Dani
School of Business and Economics,
Loughborough University, UK
7th SEPTEMBER 2010
10th International Supply Chain Risk Management Network
Bachelor of Engineering in Aeronautical Engineering
Aeronautical Society of India, New Delhi, India
Master of Technology in Industrial Engineering and Management
Indian Institute of Technology (IIT) Kharagpur, India
Currently pursuing PhD in Supply Chain Risk Management
School of Business & Economics, Loughborough University, UK
Around 4 years (operational level) experience in Design and development,
Supply chain activities in Aerospace, Automotive domain.
Defense Research Development Organization (DRDO), Bangalore, India
Infotech Enterprises Limited, Bangalore, India
TATA Voltas, Mumbai, India
Classification of supply chain risks
Chopra and Sodhi (2004) Classified supply chain risks as disruptions, delays,
systems, forecast, intellectual property,
procurement, receivables, inventory, and capacity.
Sinha et al. (2004) Classified four areas of risks which include standards,
supplier, technology, and practices.
Finch (2004) Classified risks into three broad categories which
include the three levels of coverage: application level,
organizational level, and inter-organizational level.
Norrman and Lindroth (2004) Categorize the type of risks into operational accidents,
operational catastrophes, and strategic uncertainty.
Kleindorfer, Saad (2004) Divided risks in two broad risk categories as (1) risks
arising from the problems of coordinating supply and
demand, (2) risks arising from disruptions to natural
Tang (2006) Concluded there exist two kinds of risks in supply chain
as operational risk and disruption risk
Tang and Tomlin (2008) Companies usually manage supply chain risks either at
the strategic (long term) or at the tactical (medium
Systems thinking approach
Process of understanding how factors/parameters/
variables influence one another within a whole.
concept originally evolved in the defense sector, but now it
being widely spread globalised in all sectors.
Focuses on understanding how the physical processes,
information flows and managerial policies interact so as to
understand dynamics of the variables of interest.
Change in one variable affects other variables over time,
which in turn affects the original variable.
Systems of systems
Typical supply chain network links from a systems perspective
“ Systems of systems are large scale concurrent and distributed systems that are
comprised of complex systems ” -Kotov,1997
To understand the interdependencies within the factors and the
risk propagation within Supply chain.
Literature review on SCM and SCRM for last 10 years (2000 onwards)
Finding from workshops conducted as a part of three NEXT-GEN
(Next Generation Manufacture Supply Chains and Economy Research Collaboration)
Use of Systems Engineering tools and techniques to identify different
affecting parameters and nodes within SC.
Causal loop diagramming
Analytical Hierarchy/Network process
System Dynamics/ simulation (parallel & Discrete)
Delphi technique/Group consensus
Next generation supply chains
Information and communication technology
3PL/4PL Logistics service
Risks from sustainability perspective…
Sustainable supply chain risks (to be presented at LRN conference, 2010)
Causal loop diagram
Causal loop diagram for supply chain system
Risk propagation in aerospace supply chain
Industry Supply Chain Disruption Risk Impact
Airbus A380 (2005)
1) Distributed Integration dependencies
among manufacturing sites and
2) Design configuration management
problems (CATIA V4/V5)
1) Mismatch of electrical
harness between designed
and physically appeared
routing on aircraft.
2) Costly delays for two years.
Boeing 787 (2006)
1) Failure of assemble to order
2) Failure by global supplier network to
1) Problems with spare parts
led to delays up to 2 years.
2) Financial loss due to
cancellation of orders.
3) Reputation loss
JSF F-35 Lockheed Martin (2010)
1) Development is being done
concurrently with early production.
2) National shortage of professionals
leading to longer flight test program.
1) JSF F-35 delays up to 2015
to US Air Force
2) Delays resulting in heavy
cost increases to JSF program
Instances of supply chain risk propagation in the aerospace sector
Systems thinking/SD modelling approach identifies influential risk
parameters for supply chain.
New perspective towards using systems thinking to manage future
supply chain risks.
Challenges for Simulating the complete complex model of SC (non-
availability of sufficient data, setting parameter’s values, etc)
The Research framework is in its infancy and needs further testing
and would be developed further.