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Supply chain risk management (SCRM): A case study on the automotive and
electronic industries in Brazil

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DOI: 10.1108/13598540910970072

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 Insight from industry

Supply chain risk management (SCRM):

a case study on the automotive and electronic
industries in Brazil
Mauricio F. Blos
Department of Management and Information Systems Science, Nagaoka University of Technology, Nagaoka, Japan
Mohammed Quaddus and H.M. Wee
Graduate School of Business, Curtin University of Technology, Perth, Australia, and
Kenji Watanabe
Department of Management and Information Systems Science, Nagaoka University of Technology, Nagaoka, Japan

Abstract
Purpose – The purpose of this paper is twofold: to identify the supply chain risks in the automotive and electronic industries in Brazil, and to highlight
the urgency of supply chain risk management (SCRM) implementation.
Design/methodology/approach – It uses exploratory study methodology in the automotive and electronic industries, taking in consideration of the
(SCRM) phase of initiation.
Findings – There are significant practices to implement SCRM: better supply chain communication, SCRM and business continuity planning training
program, and the creation of a chief risk officer position to manage the supply chain risks.
Research limitations/implications – The limitation of this study comes from its small sample size. There are two simple reasons: many companies
did not know SCRM and thus misinterpreted the information about SCRM.
Practical implications – This case study promotes more preparedness for the two industries to manage the risks of supply chain.
Originality/value – This study shows the risks that surround the supply chain in the automotive and electronic industries in Brazil and how these
industries can implement SCRM in a successful way.

Keywords Supply chain management, Risk management, Business continuity, Automotive industry, Electronics industry, Brazil

Paper type Case study

Introduction Supply chain management is “the management of material,

Supply chain risk management (SCRM) is a new and novel
methodology that captures both the operations as well as
the financial aspects of decision-making. Supply chain
management, in general, is still a relatively new concept in
most developing countries; and many companies have not
even begun to consider the formal management of their
supply chain. Some consider the cause as the organizational
behavior: departmental structure and bad communications.
However, supply chain management grows rapidly each day,
and many senior supply chain professionals from the
investigated industries have expressed its broader future
role.
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-8546.htm
Supply Chain Management: An International Journal
14/4 (2009) 247– 252
q Emerald Group Publishing Limited [ISSN 1359-8546]
[DOI 10.1108/13598540910970072]
information and finance through a network of organizations
(i.e. suppliers, manufacturers, logistics providers, wholesales/
distributors and retailers) that aims to produce and deliver
products or services for the consumers. It includes the
coordination and collaboration of processes and activities
across different functions such as marketing, sales,
production, product design, procurement, logistics, finance,
and information technology within the network of
organizations.” Supply chain risk management (SCRM) is
“the management of supply chain risks through coordination
or collaboration among the supply chain partners so as to
ensure profitability and continuity” (Brindley, 2004)
(Figure 1).
The risk in supply chain management originates from two
key areas: supply and demand. The next level of equal
importance is environmental, political, process and security
risks. Political and environmental risks may always remain
amorphous and refractory to adequate quantification.
Security risks are even more volatile but on a far higher
priority level. Based on the definitions of supply chain

247
 Supply chain risk management (SCRM)
Mauricio F. Blos, Mohammed Quaddus, H.M. Wee and Kenji Watanabe
Figure 1 Supply chain risk management
management and SCRM, it appears that one can address the
issue of SCRM along two dimensions:
1 Supply chain risk. Operational risks or disruption risks.
2 Mitigation approach. Supply management, demand
management, product management, or information
management.
Many supply chain scholars believed that companies could
only mitigate supply chain risk but loss and damage could not
be avoided when accident happens. However, supply chain
risk management (SCRM) has become effectively to reduce
loss and damage.
This paper presents an empirical study of SCRM in
automotive and electronic industries in Brazil. The scope is
formed by research methodology and results. A supply chain
vulnerability map with conclusions and future directions are
given in the final section.
Research methodology
Since only limited empirical research on how companies deal
with SCRM has been found, an explorative investigation based
on a supply chain vulnerability map (SCVM) is conducted in
this study. The main objective is to define the necessity of
applying SCRM. This SCVM based on Sheffi (2005) is divided
in four quadrants as discussed in the next section.
The focus of this study is manufacturer and dyadic
supplier-manufacturer (automotive and electronic industry)
relationship for big and medium-size enterprises. Therefore,
the units of analysis in this research are purchasing,
production, and supply chain managers.
A total of 72 questionnaires were developed, tested and
distributed to the automotive related industries in Sao Paulo,
Rio de Janeiro and Rio Grande do Sul, Brazil. A total of 30
questionnaires were distributed to the electronic related
industries in Manaus Free Trade Zone. Positive and negative
statement is used to simplify the validation of questionnaire to
build the supply chain vulnerability map. The survey sent the
questionnaires via e-mail to the targeted respondents and
some of them included face-to-face interview. The returned/
replied questionnaires, 32 from the automotive industry and
14 from the electronic industry, represent a total response rate
of approximately 45 percent.
The following four questions are very important in building
the SCVM. They are: “What are the types of events that can
disrupt the supply chain?”, “What are the characteristics of
supply chain disruptions?”, “What is the likelihood it will take
place?”and “How severe will it be?”. We then identify
potential risks and their possible ramifications.
Descriptive analysis is used to analyze the profile of the
companies and respondents. The responses were mainly from
the purchasing managers (44 percent), supply chain managers
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(20 percent) and production managers (36 percent). The 46
returned/replied questionnaires helped to identify the supply
chain risks through a developed supply chain vulnerability
map and the investigated managers (purchasing managers,
supply chain managers and production managers) believed
that their respective company would fulfill the demand
although a disruption of supply chain risk occurs.
Most of the investigated industries believe that SCRM is
important to fulfill demand, reduce high cost and reduce loss
profit if the companies suffer supply chain disruptions.
In the following section, survey results are presented.
In this section we investigate the specific supply chain
vulnerabilities by considering the automotive and the electronic
industries in Brazil. Then we quantify them in Figure 2.
Financial vulnerability
With the complexity of the global market, there are some
disruptions that complicate financial flows and cash
management in Brazil. Of the finished goods cost, 4 percent
or more is spent on supply chain. That is a significant drag on
cash flow and effective management of working capital.
Strategic vulnerability
According to the investigated companies, most of the time this
kind of vulnerability appears when there is a “new model
introduction” (during program launch) and some failures
happen with the project management plan.
Poor-quality goods supplied were identified as one major
problem for the electronic industry. Most of the electronic
companies that have quality assurance from its Asian’s
suppliers do not need to inspect the goods 100 percent and as
a result, the defective parts are detected during production
time. As a countermeasure, the quality control department is
called and the production line is stopped until some corrective
action (re-work) is taken.
Sometimes, re-work is needed to solve the problem. Of
course there is also the problem of production delay, but it
can be settled later, as one manager from one investigated
company suggested. When the problems are not simple, the
parts are scraped and the production is postponed until the
arrival of a new shipment.
Hazard vulnerability
Hazard vulnerability includes internal risk drivers: malicious
disruptions such as international terrorism to external risk
drivers: natural hazards such as flooding, hot weather and
heavy rain/thunderstorm. One foreign electronic company
investigated said that to protect the organization from hazards
that might result in future disasters, general hazard
information and warnings are two separable types of risk
communication. Natural processes are an enduring condition
around the human environment. Natural hazards become
disasters when they intersect with the human environment
(Natural Hazards Review, 2005).
With global warming, the number of natural disasters, such
as floods and droughts has increased year by year. In 2004, a
cyclone destroyed 21 municipal districts in the south part of
Brazil. Inundations in the metropolitan areas seem to be the
big negative effect for the road shipments. It promotes
interruption and/or delay for delivers.
 Supply chain risk management (SCRM)
Mauricio F. Blos, Mohammed Quaddus, H.M. Wee and Kenji Watanabe
Figure 2 Supply chain vulnerability map
Operations vulnerability
Because of dealer distribution network failures, the
investigated companies have problems of lead times. And
when it happens, the real production forecasted is substituted
for an estimated production date. Moreover, it is harder for
the finance department and the banks to have clear financial
commitments. Container accident is a vulnerability that
happens due to operator error during the transportation
process. When a container accident occurs, the purchaser can
deny receiving the cargo (Law No. 9.611, 1998, February 19,
Regulation Disposes on the Cargo Road Transportation).
Because of government requirements, clearing goods on
time can be a problem. In this case, the content of goods
imported may diverge from the documentation of importation
(packing list). It happens many times because a supplier does
not proceed according to the local legislation (data collected
from the investigated companies).
Survey results and analysis
Several significant risks that could severely disrupt supply
chain operations were identified. The supply chain
vulnerability map developed here integrates the supply chain
business-process model with a diagnostic model that laid out
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Supply Chain Management: An International Journal
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four categories of vulnerability (Elkins, 2003): financial
vulnerability, strategic vulnerability, hazard vulnerability and
operations vulnerability (Figure 2). Each of the categories has
a property to find, quantify and minimize supply chain risk.
Using a series of questions and predefined decision rules built
into the model, risks are identified and flagged from the first
level to the last level; the vulnerabilities come from within the
company and proceed to the outside.
From the supply chain vulnerability map, we found out
from the sample of 46 returned/replied questionnaires, 9
percent of them represented a high level of knowledge on the
SCRM issues, 50 percent represented a lack of knowledge
(even for SCM), and 41 percent represented having a
superficial knowledge of SCRM. This concludes that the
investigated industries need to implement supply chain risk
management because of the increasing supply chain risk
sources.
During the phase of SCRM implementation, most of the
investigated companies pointed out three major practices: a
better supply chain communication, supply chain risk
management (SCRM) and business continuity management
(BCM) training program, and a creation of a chief risk officer
(CRO) (Table I).
 Supply chain risk management (SCRM) Supply Chain Management: An International Journal
Mauricio F. Blos, Mohammed Quaddus, H.M. Wee and Kenji Watanabe Volume 14 · Number 4 · 2009 · 247 –252

Table I Significant practices for SCRM implementation

Percentage of agreement
Type of practice Automotive (%) Electronic (%)
A better supply chain communication 21 33
Supply chain risk management (SCRM) and business continuity management (BCM) training program 15 15
Chief risk officer (CRO) creation 20 22

The effects resulted from the imperfect communication Table II Vulnerable impact rate
between the supply chains partners are as follows:
1 The investigated companies recognized that they have lost AIa (%) EIb (%)
some control over key processes, such as: loss of control Financial vulnerability
over inventory, yield, track and trace issues. 1 Debt and credit rating 35 33
2 From the last ten years, the investigated companies have 2 Liquidity/cash 20 21
increased their risks due to problems of visibility, partner 3 Economic recession 10 11
performance, uncertainty and lack of clarity over who is 4 Financial market instability 9 9
responsible for what. 5 Currency and foreign exchange rate fluctuations 8 8
3 Part of the problem with partner relationship is because 6 Fuel prices 7 7
the processes are not always in alignment with business 7 Adverse changes in industry regulation 6 6
objectives, and the investigated companies do not leverage 8 Credit default 5 5
information system based capabilities.
4 Visibility, performance and uncertainty are identified as Strategic vulnerability
major issues for the electronic industries with their trading 1 Union regulations 27 25
partners, especially those from Asia. 2 Dealer relation 17 18
SCRM and BCM training program will create a relationship 3 Supplier relation 15 14
model between the business processes of critical business 4 Customer relation 13 12
activities and required resources to analyze the impact that 5 Program launch 12 12
resource damage will have on a business. 6 Source supplier 9 9
A CRO position will be in charge to anticipate the possible 7 Technology decision 5 6
chain reaction of any event, the ripple effect from one 8 New or foreign competitors 2 4
business unit to another.
The SCVM developed laid out the specific risks associated Hazard vulnerability
with the supply chain business process in Brazil, which in turn 1 Property damage 23 21
helps to identify potential risks more easily. 2 Building or equipment fire 15 15
All the investigated companies appeared to be overly 3 Lightning strikes 15 14
exposed to risks that can temporarily disrupt or even shut 4 Wind damage 9 10
down its supply chain for an extended period of time. 5 Boiler or machine explosion 9 9
Therefore, the investigated companies should have knowledge 6 Loss of key facility 7 8
on the SCRM issues. 7 Land, water, atmospheric pollution 7 7
The automotive companies have the suppliers located near 8 Cargo losses 3 4
the manufacturing companies and this facilitates the modular 9 Geopolitical risks 3 3
consortia to work with the complex production forecast. 10 Flooding 3 3
Apparently, the electronic companies are more vulnerable 11 Sabotage 3 3
to supply chain risks. One reason is that the high dependence 12 Heavy rain/thunderstorm 3 3
on the Asian market and due to the nature of the products,
there is a need for careful packing, fragile handling and Operations vulnerability
transportation. 1 Theft 17 18
Many of the investigated companies are concerned about 2 Operator errors/accident damage 15 16
the investment costs in SCRM, even though it should be 3 Loss of key personnel 11 13
visualized as investment that will sustain supply chain 4 Computer virus 9 10
performance. 5 Poor-quality 9 10
Table II shows the vulnerable impact rate, which is defined 6 IT systems failures 9 8
as an “exposure to serious disturbance, arising from risks 7 HR risks 9 8
within the supply chain as well as risks external to the supply 8 Loss of key supplier 5 4
chain”. Such data was collected from the automotive and 9 Logistics route or mode disruptions 4 4
electronic industries via survey. As described in the following, 10 Loss of key equipment 4 3
it is shown that the numbers between the two companies are 11 Logistics provider failures 4 3
very close. 12 Utilities failures 4 3
For the automotive industry, the four quadrants show that: Notes: a AI ¼ Automotive Industry; b EI ¼ Electronic Industry
in financial vulnerability, debt and credit has the highest

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 Supply chain risk management (SCRM)
Mauricio F. Blos, Mohammed Quaddus, H.M. Wee and Kenji Watanabe
impact with the vulnerable percentage of 35 percent; liquid/
cash has an impact of 20 percent and the lowest impact is
credit default with 5 percent. The second quadrant is strategic
vulnerability and the union regulation has the highest impact
with the vulnerable percentage of 27 percent; dealer relation
has impact of 17 percent and the lowest impact is new or
foreign competitors with 2 percent. The third quadrant is
represented by hazard vulnerability, where property damage is
responsible for 23 percent of vulnerability impact and it
represents the highest percentage from the group followed by
building or equipment fire with a vulnerability impact of 15
percent. The lowest impact is heavy rain/thunderstorm with 3
percent. The fourth and last quadrant shows operations
vulnerability and accounts for theft as the highest vulnerable
impact with 17 percent following by operator errors/accident
damage with 15 percent. And the lowest impact is utilities
failures with 4 percent.
For the electronic industry, the four quadrants show that: in
financial vulnerability, debt and credit has the highest impact
with the vulnerable percentage of 33 percent; liquid/cash has
impact of 21 percent and the lowest impact is credit default
with 5 percent. The second quadrant is strategic vulnerability
and the union regulation has the highest impact with the
vulnerable percentage of 25 percent; dealer relation has
impact of 18 percent and the lowest impact is new or foreign
competitors with 4 percent. The third quadrant is represented
by hazard vulnerability, where property damage is responsible
for 21 percent of vulnerability impact and represents the
highest percentage from the group following by building or
equipment fire with a vulnerability impact of 15 percent. And
the lowest impact is heavy rain/thunderstorm with 3 percent.
The fourth and last quadrant shows operations vulnerability
and account for theft as the highest vulnerable impact with 18
percent following by operator errors/accident damage with
16 percent. And the lowest impact is utilities failures with 3
percent.
With the implementation of SCRM, the investigated
managers (purchasing managers, supply chain managers and
production managers) believed that their respective company
would fulfill the demand although a disruption of supply
chain risk occurs:
.
For the automotive industry (Figure 3), this is shown by
the highest percentage of agree and strongly agree with the
statement in which, strongly agree (29 percent), agree (58
percent), and only 18 percent respondent answered
disagree. For reducing the cost, 35 percent indicates
Figure 3 Urgency of SCRM (automotive industry)
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Supply Chain Management: An International Journal
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they strongly agree with the statement, agree (53 percent),
and only 12 percent respondents disagree. Most of the
managers answered not sure on the impact on the loss
profit. This is shown by strongly disagree (24 percent),
disagree (65 percent), and agree (12 percent)). On the
other hand, most of the managers disagree that they have
to develop the risk assessment and contingency plan
program (strongly disagree (47 percent) and disagree (53
percent)).
.
For the electronic industry (Figure 4), this is shown by the
highest percentage of agree and strongly agree with the
statement in which, strongly agree (30 percent), agree (56
percent), and only 20 percent respondent answered
disagree. For reducing the cost, 37 percent indicates
they strongly agree with the statement, agree (50 percent),
and only 8 percent respondents were disagree. Most of the
managers answered not sure the impact on the loss profit.
This is shown by strongly disagree (27 percent), disagree
(50 percent), and agree (26 percent)). On the other hand,
most of the managers disagree that they have to develop
the risk assessment and contingency plan program
(strongly disagree (40 percent) and disagree (60 percent)).
This shows that managers (purchasing managers, supply
chain managers and production managers) believed that their
companies could reduce the loss in profit if the SCRM is
implemented and develop the risk assessment and
contingency plan program.
This result also described that many companies need to
implement supply chain risk management because many
supply chain risk sources are present in Brazil.
Conclusion
This research analyzes the SCRM and makes reference to the
automotive and the electronic industries in Brazil. A supply
chain vulnerability map which shows the four quadrants
(financial, strategic, hazard and operations) of supply chain
vulnerability from the empirical study on the 46 investigated
industries is developed.
We show the importance of three significant practices in
SCRM implementation as suggested by the respondents: a
better supply chain communication, SCRM and business
continuity management (BCM) training program, and the
creation of a chief risk officer (CRO). These are significant
factors of supply chain risk management practices to reduce
disruptions of supply chain risk. The investigated managers
Figure 4 Urgency of SCRM (electronic industry)
 Supply chain risk management (SCRM)
Mauricio F. Blos, Mohammed Quaddus, H.M. Wee and Kenji Watanabe
(purchasing managers, supply chain managers and production
managers) also believed that their companies could reduce the
loss in profit if the SCRM is implemented and develop the
risk assessment and contingency plan program.
Although natural disasters seldom happen in Brazil,
industries were not prepared for the cyclone that happened
in 2004. The result of this empirical study can contribute to
the awareness of possible disasters through risk management.
References
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Further reading
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Center for the Business of Government, Washington, DC.
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“A framework for supply chain performance
measurement”, International Journal of Production
Economics, Vol. 87 No. 3, pp. 333-47.
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chain risk management: outlining an agenda for future
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Stahl, B.C. (2005), “The responsible company of the future:
reflective responsibility in business”, Futures, Vol. 37 Nos 2/
3, pp. 117-31.
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About the authors
Mauricio F. Blos is currently a PhD student from Nagaoka
University of Technology, Japan (Risk Management) and
Chung Yuan Christian University, Taiwan (Supply Chain
Reengineering). Mr Blos received his M. Eng from Nagaoka
University of Technology. His research interests are in the
field of production/inventory control, enterprise risk
management and supply chain risk management.
Mohammed Quaddus received PhD from the University of
Pittsburgh, MS from University of Pittsburgh and Asian
Institute of Technology. His research interests are in logistics
and supply chain information management, risk management
in supply chain, RFID in supply chain, and information and
decision systems. Dr Quaddus has published over 200 papers
in refereed journals and international conferences. In 1996
and 2005 he received “researcher of the year” award in Curtin
Business School, Curtin University of Technology, Australia.
Currently he is a Professor of Information and Decision
Systems with the Graduate School of Business, Curtin
University of Technology, Australia.
H.M. Wee is a Professor of Industrial Engineering in Chung
Yuan Christian University, Taiwan. He graduated form
Strathclyde (B. Eng (hons)), AIT (M. Eng) and CSU
(PhD). His research interests are in the field of production/
inventory control, optimization, creative-problem solving and
supply chain management. He has published over 300
refereed and conference papers in the area of his research,
edited four books and has served on the editorial board of
Computers and Operations Research, International Journal of
Applied Decision Sciences, International Journal of Applied
Management Science, International Journal of Data Analysis
Techniques and Strategies, Journal of Global Logistics, Journal of
Advanced Engineering and International Journal of Operations &
Supply Chain Management. H.M. Wee is the corresponding
author and can be contacted at: wee@ cycu.edu.tw
Kenji Watanabe is an Associate Professor of Risk
Management, from the Department of Management
Information Science in Nagaoka University of Technology,
Japan. He graduated form Kyoto University (BA in Forestry
Eng), MBA from Southern Methodist University (SMU) and
PhD from Waseda University. His research interests are in the
field of information system risk management, operational risk
management and business continuity management (BCM). In
2003 he received the JSSM award (Japan Society of Security
Management).