Case Study 1

Automotive European Vehicles (AEV) manufactures and assembles cars and is highly dependent on
its supply chain for raw materials, parts and components. AEV has a mature approach to supply
chain risk management taking care in its choice of suppliers. AEV’s business operates on ‘just in time’
delivery. The supply chain and vehicles sales network are all subject to regular audits in terms of
financial health, business ownership and contract terms. There is also ad hoc sampling and testing of
imports for maintaining quality.

Vehicle manufacturing requires many components to be integrated during the vehicle assembly
stage. The supply chain is global, with certain countries or regions having a niche to supply specific
parts e.g. Japan is a major first party supplier of electronics and navigation systems for AEV. The end
customers are large automotive dealers throughout Europe who handle vehicle sales.

Legislation focusses on reducing the overall carbon footprint of the global supply chain. While AEV is
aware there needs to be increasing transparency and better supply chain risk management, a change
of suppliers is generally cost driven rather than by improved competitiveness.

Raw material requirements for AEV include steel, glass, rubber, crude oil and numerous parts such
as engines, instrument panels and interiors. This means AEV is reliant on several fairly complex
supply chains. New or increasing legislation impacts on quality control and compliance and AEV
builds procedures into its operations to produce safe, reliable and high standard performance
vehicles.

One of the challenges AEV has to contend with is holding the right amount of inventory. Stock levels
need to be sufficient to keep pace with production while maintaining good liquidity. The
complexities of inventory are compounded by the occasional delivery shortage, increasing product
recalls and demand by AEV’s automotive competitors.

Raw materials are also prone to price volatility which needs to be accounted for in the ‘end point’
vehicle price. In 2017 steel prices from AEV’s main importer, China, rose significantly while oil prices
fell sharply at the start of the year but rose steeply toward the end of the year, with China being the
biggest exporter.

Question 45: Which of the following is a risk prevention measure for AEV in managing its supply
chain risk?
a. Establishing standards of quality assurance with its suppliers
b. Implementing sensor tracking on freight for transportation.
c. Having procedures in place to manage vehicle recalls.
Question 46: Which events would be categorized as operational risks within AEV’s supply chain
network?
1. A major fire ignites at one of AEV’s supplier’s premises.
2. The cost of the manufacturing process for producing glass increases.
3. Vehicle production slowdown due to shortage of wheel nuts.
Select one:
a. 1 and 2
b. 2 and 3
c. 1 and 3
Question 47: Which of the following should AEV include in the market analysis section of its
commodity risk assessment?
Select one:
a. Likelihood of a supplier failing to maintain the correct legal documents required for exports.
b. Calculating the current demand for vehicle sales by country, split by volume and model.
c. Back up sourcing of an engine supplier as a contingency for the sole Japanese supplier.

Question 48: What measures should AEV take to mitigate risk in its supply chain?
1. Carry out financial health checks on its suppliers.
2. Cross-train employees to work on all parts of vehicle production.
3. Preapprove substitute materials.
4. Engage outside contractors to train employees on health and safety procedures.
Select one:
a. 1, 2 and 4
b. 3 and 4
c. 1 and 3

Case Study 2

NicNak Ltd, an emerging player in the UK convenience market, has been growing at an impressive
rate over the past five years since recruiting a new sales director who arrived with a first-class team
of buyers. One of the key growth areas for the company has been in the Far East, particularly China,
where numerous new products are designed and mass produced by several companies, purchased
at very competitive rates, and sold in the UK with good margins. Within the Board of Directors, there
is some concern at the dependence on this market and how any disruption to the supply chain of
goods from China could impact the business. In particular, the Board of Directors is concerned at the
complexity of the supply chain. It worries that disruption could be caused by transport delays, such
as problems with goods clearing the many ports due to localized strikes, resulting in goods not
arriving on time.

NikNak Ltd has recently appointed a supply chain risk manager, Joe Smith, to review the business
and report back with proposals of how to introduce policy, review strategy and advise the Board to
reduce the risks that exists in the business’s supply chain.

Joe’s report highlights the following points.

1) The reliance on China has been driven by cost reduction and he believes a more collaborative
approach will reduce risk by widening the supplier base.

2) The supply chain is too complex due to the way the company has expanded through acquisition.

3) Within NikNak Ltd there is a lack of understanding by managers outside the supply chain of
their required involvement and responsibilities across functional and organizational boundaries.

Below are several questions the risk manager is considering.

Question 49: What category of risk is the possible transport delay that concerns the Board?
Select one:
a. Hazard
b. Financial
c. Operational
Question 50: Which of the following would be considered a risk specific to the globalization of the
supply chain that NikNak Ltd has followed?
Select one:
a. Number of transportation touch points.
b. Compliance of suppliers to ethical standards.
c. Ability of suppliers to upscale at short notice.
Question 51: What are the key benefits of NikNak’s collaboration with suppliers?
1. Reduced research and development costs.
2. Process improvement in supply chain.
3. Better supply and demand planning.
4. Reduced costs of transportation.
Select one:
a. 1, 2, 3 and 4
b. 2, 3 and 4
c. 1, 2 and 3

Question 52: Which of the following are recognized ways in which NikNak Ltd could reduce the
complexities in its supply chain?
1. Simplify product design.
2. Tighten legal contracts with suppliers.
3. Rationalize supply base.
4. Setting up cross functional design teams.
Select one:
a. 1, 2 , 3 and 4
b. 1, 3 and 4
c. 1, 2 and 3
Case Study 3

Primary Pharma (PP) is a privately owned pharmacy distributor based in the UK, trading since 2007.
The company employs 1,000 staff and supplies amongst other drugs, specialist vaccines to the
National Health Service (UK’s publicly funded healthcare service). Their products are mainly
imported from suppliers located in one region of a Member Country of the European Union (EU).
Supplies are bought to order rather than held in stock. The company (PP’s) purchasing consists of
medium value priced drugs which are important to the business and in this area of the business,
which is highly competitive, supplier selection is subject to contract price negotiation. The
distribution of vaccine is a newer side of PP’s business, and the company has formed collaborative
relationships with a selection of manufacturers to supply vaccine for distribution in and around the
UK.

An ongoing global pandemic is affecting the supply of vaccines from the European supplier, as well
as world-wide. The supply chain problem is further challenged due to unstable trading relationships
between the UK and the EU.

PP needs to ensure that its supply chain can not only fulfill its contractual arrangements but given
the increased commodity market volatility the company wants to avoid any price increase and open
the door to competitors. Currently, PP remains a stable entity although there has been little growth
in the past three years. The dynamic management team is looking to change this and forecasting an
increasing demand for vaccines in the UK, wants to capitalize on this strategic business opportunity.
The company’s culture has traditionally been more reactive than proactive towards risk
management in the belief that addressing risks may not be cost effective. A new Managing Director
(MD) has been appointed with a more progressive view promoting a proactive approach to risk
management. The MD asks the Supply Chain Manager to review the supply chain concerns.

The Supply Chain Manager has established that the risks from the pandemic and the change in
trading relations with its European supplier are affecting most of their UK competitors and peers
suggesting supplies could continue to be interrupted. The decision is taken to create a protective
barrier against the uncertainty in supply.

Question 53: What risk management approach has the business historically taken in managing its
risk?
a. Tolerating risk.
b. Treating risk.
c. Terminating risk.
Question 54: Why does the Supply Chain Manager’s review conclude that the impact of the change
in trading relations is systemic?
a. PP’s trading could be interrupted due to lack of supplies.
b. Several businesses will be affected as the problem is widespread.
c. EU/UK trading relations are under pressure.
Question 55: In which quadrant of the Portfolio Matrix would you place the supply chain network
for PP’s purchase of the vaccine?
a. Market quadrant win/lose.
b. Leverage quadrant win/win.
c. Critical quadrant win/win.

Question 56: What characteristic in the supply chain could assist PP in pursuing its strategic
objective?
a. Supply chain design flexibility.
b. Volume flexibility.
c. Material flexibility.
Case study 4
For many years FP Stannard Ltd (FP), a large US retailer and wholesaler of office products, has been
under pressure from investors and customers to keep prices low. The U.S.- China trade war of 2019,
and the COVID-19 pandemic of 2020, have led to a major review to reconsider FP’s business
priorities. The risk of supply chain disruption has now become a major concern, along with the rising
cost of manufacturing in China and the long supply lines that result from the current strategy.
On reviewing its longer-term business objectives, FP has decided along similar views to several its
competitors that there is a need to move to dual sourcing of its manufacturing. By splitting the
manufacturing between Asia and the Western countries, PP management considers the risk of
disruption to the supply chain will be reduced especially with one part of the manufacturing
geographically nearer to their targeted consumer markets. FP accepts that supply chain costs may
increase because of this change in strategy.
However, improving availability of products to meet demand is viewed as the main priority and has
the support of their investors. FP knows that the forming of a more diverse sourcing network with
better relationships and improved analytics across the supply chain will be key to its growth
objectives and enhance resilience both of which could help mitigate some of the expected supply
chain increased costs.
To support the aim of better supplier relationships FP will be adopting elements from the
Collaborative, Planning, Forecasting and Replenishment (CPFR) framework. In the first instance they
aim to form agreements with their new manufacturers and produce a joint business plan to include
the sharing of sales and order forecasts for their key product lines.
As part of this new strategy the company plan to share both current and historic sales and customer
related data with their manufacturers. This is a first step toward the investment in Artificial
Intelligence (AI) to radically streamline planning of demand, inventory and supply as well as
influencing new product design. The business anticipates such collaboration will bring them more in
line with some competitors and hopefully ahead of many others.
Question 57: In line with the supply chain risk related framework and standards which planning
horizon is FP currently addressing?
a. Tactical Planning.
b. Strategic Planning.
c. Operational Planning.
Question 58: FP’s approach to compliance with the CPFR model has failed to consider which of the
following?
a. The impact on existing manufacturer’s production and performance.
b. How exceptions in the forecast and order process will be handled.
c. The level of risk of sharing data with third parties.
Question 59: Aside from streamlining the process, what additional benefit will FP expect to gain
from the AI strategy?
a. It will help FP learn from past mistakes and deal with exceptions.
b. It will help FP diversify their supplier network.
c. It will help FP with better sourcing of products.
Question 60: How might the use of AI help FP influence product design?
a. By stronger working relationships with their manufacturers.
b. By quicker processing and better forecasting.
c. By continuous processing of market and customer data.