The key points from this module are:

Current day supply chain networks are subjected to disruptions and innovations in the ecosystem
elements, resources and other factors.

Disruptions can originate from the banks, governments, bankruptcy of the supplier's suppliers,
natural disasters, piracy, cyber attacks, port strikes and other unknown factors.

Innovations in products, manufacturing and delivery processes, business models, government to

government relations such as Free Trade Agreements, regulations and deregulations and many
more affect the supply chain.

Global Supply Chain design involves two steps:

1) Global supply chain formation
2) Building Governance mechanisms or frameworks for partner selection, coordination and control

Global Supply Chain Formation:

1) Map the supply chain ecosystem for the industry vertical
2) Formulate the supply chain strategy
3) Select possible locations for the factories
4) Identify the supply chain risks
5) List the feasible supply chain configurations

The Governance Function involves:

Partner selection from group of pre-selected suppliers from Supply Chain Formation stage
Coordination - Determining who does what and when and communicating to everyone
Execution - Build a control tower to monitor order status so that processes work as per plan and
control exceptional events

Business Model Innovation (BMI) is a reconfiguration of activities in the existing business model of a
firm that is new to the product/service market in which the firm competes.

Clusters are geographic concentrations of interconnected companies, specialized suppliers, service

providers, and associated institutions present in a region.

The proximity of companies and institutions in one location fosters better coordination and trust
lowering the transactions costs, minimizing the inventory, importing costs and delays.

Types of Supplier Asset Specificity

Physical asset specificity refers to the mobile and physical features of assets such as specific dies,
molds, and tooling for the manufacture of a contracted product.

Dedicated asset specificity represents discrete and/or additional investment in generalized

production capacity in the expectation of making a significant sale of a product to a particular
customer.

Human asset specificity arises in a learning-by-doing fashion through long-standing customer-

specific operations.

Site asset specificity refers to the successive stages that are immobile and are located in close
proximity to one another so as to economize on inventory and transportation.

Global Competitiveness Indicators - Based on which countries are evaluated include:

- National Policies for Openness in Trade and Markets
- Best Practices for International Trade
- Effective Legal and Enforcement Systems
- Infrastructures for a Global Economy
- Financial Services for Cross-Border Commerce
- Human Capital

Risks to supply chain ecosystems include all possible social, political and environmental risks that
may affect the ecosystem and the flows of goods, information and finance.

Risks to Supply Chains:

- Outsourcing
- Mergers or acquisitions
- Large scale and a high degree of concentration
- Political and societal risk
- Resource intensive shortages

Transaction costs include:

Observable costs - Transport costs, import duties, customs tariffs and other formal trade barriers

Soft costs - Costs for information gathering, negotiation and monitoring contracts, trust building,
networking, risk handling and mitigation, making up for cultural differences and miscommunication,
compliance with safety regulations, labor laws etc.

Three characteristics of transactions affect the transaction costs:

- Asset specificity
- Uncertainty
- Frequency

Transaction Cost Economics (TCE) Theory:

When transaction cost are low, use the spot market governance
When transaction costs are high, hierarchy is efficient
 Asset Specificity: Supply chain specific assets, Resources, Institutions, Delivery infrastructure.

Environmental uncertainty can come from suppliers, customers, competitors, regulatory agencies,
unions or financial markets.

Frequency of interactions between the buyer and supplier is importance for reasons of economies of
scale.

Having completed this module you will be able to:

 Describe the aim of Supply Chain Risk Management.

 List the elements of a Supply Chain Ecosystem.

 Describe and give examples of resource uncertainties.

 Describe and give examples of economic and political related uncertainties.

 List the characteristics of Wicked problems.

 Describe Cyber risks and the elements of a cyber attack.

 List the six strategies to reduce overall risk exposure.