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Supply Chain Risk Management_ DHL Company

Student’s Name

Institution Affiliation
SUPPLY CHAIN RISK MANAGEMENT 2

Supply Chain Risk Management _ DHL Company

Introduction

Management of risk in the modern company is becoming challenging every day and this is all

attributed to uncertainties in global outsourcing, supply-demand, and short product life cycles.

According to Ghadge, Dani, and Kalawsky (2012), risk in this context, refers to the potential for

unwanted negative consequences that arise from an activity or an event. Ghadge, Dani, and

Kalawsky (2012) further suggest that the current global business environment is now being

influenced by many factors such as just-in-time globalized supply chains, financial instability,

new technologies, company mergers, shorter time-to-market, and e-business and this has forced

many organizations to embrace new ways of doing businesses. Even so, this significant progress

has its challenges.

According to Ghadge, Dani, and Kalawsky (2012), today’s leaner and just-in-rime globalized

supply chains are more vulnerable due to external (natural and man-made) and operational

disruptions. This is in alignment with Ghadge, Dani, and Kalawsky’s (2012) suggestion that

supply chain risk is the exposure of supply chain activities to events that causes disruptions,

thereby adversely affecting the efficient management of the supply chain network. Therefore,

this essay will use DHL Company to discuss the various types of risks (categories and drivers)

and what can be done to mitigate such risks.

The Various Types of Risk (Categories and Drivers) That Can Occur in the Chosen

Company’s Supply Chain

Supply chain risks vary from one industry and company to another. Even so, three areas stand

out. According to Khojasteh (2018), these three areas include quality risks, which arise from the

failure of components or products to meet the expected performance specifications; natural

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catastrophe risks, from volcanoes, earthquakes, and extreme weather events; and the dynamic

world of cyber risks which arise from accidental failures or criminal interference of IT systems.

All these affect DHL Company and will be addressed in detail in the next sections.

Quality Issues/Risks

The impact caused by quality issues in the supply chain ranges from minor to extremely

severe. According to Akkucuk (2019), the reason why quality issues are feared as risks in the

supply chain is that they can be hard to detect on time. As such, they can quickly turn into

reputational risks. The quality risks in many companies including DHL Company depend on the

quality of the product in question. In addition, new technologies product introductions, and new

supply chain entrants are increasing supply chain risks because the operators are not acquainted

with the way they should handle the new factors. Other scholars such as Jha & Duyne (2010)

suggest that the economic cycle is also a factor that is adversely affecting the supply chain. For

example, in times of economic depression, companies have been forced to forego quality to

reduce expenses. Senior leaders at DHL are now focusing on the pharmaceutical industries

because they had identified the most critical risk, which is the “regulatory shutdown” (Jha &

Duyne, 2010). The shutdown was imposed by the Food and Drug administration board in the

USA in response to quality issues. In essence, once the quality of products has been neglected,

the entire supply chain is adversely affected and this, if not addressed on time, becomes a

reputational risk.

Natural Catastrophes/Risks

Natural catastrophe risks tend to affect most supply chains in recent years. Notably, according

to Khojasteh (2018), there are specific natural catastrophes that made a significant impact on the

supply chain, and they include the Tohoku earthquake and Thailand floods in 2011. The impact
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of the risks affected many industries and especially the electronics and automotive sectors that

served the fragility of supply chains. DHL Company is making a great effort to ensure that the

natural catastrophes are being monitored to ensure the sustainability of its supply chain. For

example, through historical data, the company has a good understanding of the likelihood of the

occurrence of a natural catastrophe. Munich Re also has an extensive database of losses made

and various risk classes including a global data set for natural hazards that have occurred in the

last three decades (Khojasteh, 2018). The extensive knowledge of natural disasters combined

with an in-house risk modeling developed by the company helps it to conduct global and national

risk evaluations.

With the knowledge available for use about natural catastrophes, DHL Company has noted

that some of them such as earthquakes have the probability of remaining constant while others

are changing. This has prompted the company to insist that natural catastrophe risks should be a

key factor for considering in setting up a sustainable supply chain. For instance, Khojasteh

(2018) suggests that since suppliers of the same component tend to cluster together, companies

should have secondary supply chain firms as a backup and should not located in the same area as

the primary supplier. This would ensure that if a natural catastrophe happens in the location of

the primary supplier, then secondary suppliers would not be affected.

Cyber Risks

The supply chain has become vulnerable to cyber-attacks because it has experienced

significant changes in recent years all attributed to rapid growth in digital communication.

According to Ivanov, Dolgui, and Sokolov (2019), other changes such as the increased

interconnectedness nature of products, firms, and supply chain have also increased the

vulnerability of the supply chain to cyber risks. The proof for this vulnerability includes severe
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cyber-attacks and it is estimated that this will also increase in the future. A survey done by the

Business Continuity Institute has also shown that the most common cause of supply chain

disruption is information and communications technology outages (Ivanov, Dolgui & Sokolov,

2019). Cybercriminals are focusing their attacks more on the industrial infrastructure and

conventional computer networks. For example, the United States Industrial Control Systems

Cyber Emergency Response Team (ICS-CERT) responded to more than 240 incidents reported

by industry partners and asset owners in 2014 (Ivanov, Dolgui & Sokolov, 2019). As such, DHL

Company uses this kind of data to enhance its IT-infrastructure.

How the Risks Mentioned Above Can Be Mitigated

Management of Regulatory Compliance across Extended Supply Chain Networks

Concerning quality issues and risks in the supply chain across the world, governments should

engage the customs authorities and border security services to balance free-flowing international

trade with trade compliance needs. According to DHL Resilience360 (2020), all companies

involved in the movement of goods across borders should play their part by following the

enforcement mechanisms and voluntary schemes. For instance, in the United States, the

government and the private sector have an incentive-based partnership (the Customs-Trade

Partnership against Terrorism (C-TPAT)). C-TPAT attempts to mitigate quality risks and issues

by offering the supply chain participants benefits such as reduced penalties and inspections

(DHL Resilience360, 2020). Compliance needs do not only ensure that supply chains are

documented well and robust. It also demands the participants to manage and understand

compliance throughout their overseas supply chains. DHL Company is showing its commitment

towards this through its DHL Resilience 360, which avails an ideal platform for firms to improve

the visibility of their international trade links. In essence, compliance across the extended supply
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chains and understanding associated risks will go a long way in ensuring zero quality risks and

issues.

Ensuring Environmentally Sustainable and Socially Responsible Practices

As seen earlier, natural disasters and climate/weather conditions are major disruptions to

supply chains. As such, DHL Resilience360 (2020) suggests that shareholders of supply chains,

customers, and regulators should strive to support sustainable practices by doing their businesses

in a way that has minimal impact on the communities and the environment. Therefore, in case a

business is outsourcing some supply chain services, they should ensure that those firms have and

upheld the same standards across all networks. Even though the management of sustainable

procurement risks is challenging, solutions have been proposed. For instance, according to DHL

Resilience360 (2020), the procurement departments should strive to attain supply chain visibility

by getting early information on possible compliance risks. The consequences for firms that do

not comply should be harsh and long-lasting. For instance, according to DHL Resilience360

(2020), companies that do not comply with sustainable supply chain standards should be

prosecuted if they engage in environmental damages and if the externally-sourced materials and

products do not meet the regulatory requirements.

Logistics Control Tower

As noted earlier, supply chains are vulnerable to cyber risks and without logistics control

towers, the vulnerability even gets worse. According to DHL Resilience360 (2020), logistics

control towers would be handy based on the fact that they would help to identify, manage, and

mitigate the impact of supply chain disruption. DHL Resilience360 (2020) further adds that the

risk of the supply chain to cyber-attacks is increased by multi-tiered supply chains and the fact

that interdependencies, weaknesses, and single points of failure can be deep in the supply chain
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network. This is the reason why a problem in a warehouse, distribution hub, or port in one

continent can cause a chain of reaction leading to loss of production. DHL Resilience 360 has

some logistics towers, which act as a single-window perspective on an entire supply chain. This

helps in understanding the entire supply chain's weaknesses, performance, and other pre-empt

issues and risks (DHL Resilience360, 2020). Therefore, cyber risks can be monitored and

identified when they occur to prompt fast action.

Conclusion

In conclusion, the essay has used DHL Company to discuss the various types of risks

(categories and drivers) and what can be done to mitigate such risks. From the essay, areas that

pose significant risks to the supply chain include quality risks, which arise from the failure of

components or products to meet the expected performance specifications; natural catastrophe

risks, from volcanoes, earthquakes, and extreme weather events; and the dynamic world of cyber

risks which arise from accidental failures or criminal interference of IT systems. These problems

can be mitigated by adopting compliance standards for all firms involved in supply chain

activities, adopting sustainable supply chain practices, and use of logistics control tower to

monitor and identify cyber-attacks. Lastly, companies should focus more on research and

development of supply chain risks so that they can have an idea and be ready for issues that

might come up.

References
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Akkucuk, U. (2019). Ethical and sustainable supply chain management in a global context.

Hershey, PA: Business Science Reference.

DHL Resilience360. (2020). Sustainable Procurement Risk Management Solution | DHL

Resilience360. Retrieved 2 December 2020, from

https://www.resilience360.dhl.com/solutions/sustainable-procurement/

Ghadge, A., Dani, S., & Kalawsky, R. (2012). Supply chain risk management: present and future

scope. The international journal of logistics management. Retrieved from

https://www.researchgate.net/publication/232417119_Supply_Chain_Risk_Management_Pres

ent_and_Future_Scope

Ivanov, D., Dolgui, A., & Sokolov, B. (2019). Handbook of ripple effects in the supply chain.

Cham, Switzerland: Springer.

Jha, A. K., & Duyne, J. E. (2010). Safer homes, stronger communities: A handbook for

reconstructing after natural disasters. Washington, DC: World Bank.

Khojasteh, Y. (2018). Supply chain risk management: Advanced tools, models, and

developments. Singapore: Springer.