RISK MANAGEMENT IN SUPPLY

CHAINS

AADARSH ALI QURESHI

SUPPLY CHAIN RISKS
 Supplier Risk Management
 Management of SC risk through collaboration
or coordination among the supply chain
partners so as to ensure profitability and
continuity
 Risk
 Operational
 Disruption
 Mitigation
 Supply management
 Demand management
 Product management
 Information management
SUPPLY RISK MANAGEMENT
 Supplier relationship

 Trade-offs between flexibility of short-term contracts and price

stability of long term contracts

 Globalization of supply chains allows firms to have multiple

suppliers

 Supplier selection process

 Supplier order allocation

 Supply contracts
SUPPLY RISK MANAGEMENT
 Supplier order allocation

 Demand uncertainty
 Emergency orders

 Supply yields uncertain

 Lead times uncertain

 Supply contracts
DEMAND MANAGEMENT
 Supply side inflexible

 Manage demand uncertainty to match supply and

demand

 Dynamic pricing
 Price Postponement strategy

 Shifting demand across time

 Shifting demand across markets

 Shifting demand across products

DEMAND MANAGEMENT
 Shifting demand across time

 Service marketing
 Revenue management/yield management
 Peak load pricing

 Advance purchase strategies for assured demand

 SCM
 Advance commitment discount
 Retail discounts converting part of uncertain demand to
known demand
 Improves forecast

 Demand postponement
 Discounts for accepting late shipments
 Overbooking in airlines
DEMAND MANAGEMENT
 Shifting demand across markets

 Product roll over strategy

 ‘Solo-rollover by market strategy’

 Selling new product in different markets in non-overlapping
seasons
 Primary and secondary market

 Decisions – how much to order in primary market, how

much to trans-ship
 With no secondary markets, optimal order quantity is high
DEMAND MANAGEMENT
 Shifting demand across products

 Large number of marketing models for pricing and

brand promotion strategies

 SCM
 Product substitution
 Reduces variance of aggregate demand

 Substitute high inventory product with stock out product

 Substitute high quality product with low quality product

 Substitute products through pricing

 Product bundling
PRODUCT MANAGEMENT
 Component commonality

 Postponement strategy

 Make-to-Order systems

 Process re-sequencing
INFORMATION MANAGEMENT
 Innovative Products
 Quick response (Sport Obermeyer)

 Functional Products
 Strategies based on reducing Bull-whip effect
 Information sharing
 Vendor Managed Inventory (Barilla)
 Collaborative Forecasting
 CPFR initiative