RISK MANAGEMENT IN SUPPLY CHAIN

CONTENT

• SUPPLY CHAIN RISK MANAGEMENT

• SUPPLY RISKS

• IDENTIFYING SUPPLY CHAIN RISKS

• MANAGING THESE RISKS

• CONCLUSION
WHAT IS RISK MANAGEMENT IN SUPPLY
CHAIN?

Efforts of an organization to help identify, monitor,

detect and lessen threats to supply chain continuity
and profitability.
 SUPPLY CHAIN RISK LIFECYCLE

• RISK IDENTIFICATION: The only way to address risk is to make sure you’re
identifying it in the first place. The first phase of the risk management lifecycle is
to establish a risk profile and then enact active monitoring to keep it up to date.
• RISK ASSESSMENT: Understand what impact a risk event could have on your
business. Be aware of those partners who have a significant impact on sales,
margins or profit.
• RISK MITIGATION: Define both preventive action plans and reactive action
plans. These are what provide the basis for addressing risk using appropriate
measures to secure supply and protect brand.
 RISK IN SUPPLY

• Depending on few suppliers can be harmful as they can become a threat to

the company
• Transportation issues from one place to another.
• Poor quality product leads to poor production, hence lowering sale and
brand name.
• Management issues occurs when there is lack of communication or poor
communication.
• Lead time variability occurs due to delay or lack of efficiency in
production
 IDENTIFY SUPPLY CHAIN RISK:

• Two main type of risk include:

• INTERNAL SUPPLY CHAIN RISK:
• Manufacturing risk, business risk, planning and control risk.
• EXTERNAL SUPPLY CHAIN RISK:
• Demand risk, supply risk, environmental risk
 INTERNAL SUPPLY CHAIN RISK:

• MANUFACTURING RISK: caused by disruptions of internal

operations or processes.

• BUSINESS RISK: caused by changes in key personnel, management,

reporting structure or business processes.

• PLANNING AND CONTROL RISK: caused by inadequate assessment

and planning , which amount to ineffective management.
 EXTERNAL SUPPLY CHAIN RISK:

• DEMAND RISKS: caused by unpredictable or misunderstood

customer or end customer demand.

• SUPPLY RISKS: caused by any interruptions to the flow of product,

whether raw material or parts, within your supply chain.

• ENVIRONMENTAL RISKS: From outside the supply chain; usually

related to economic, social, governmental , and climate factors,
including the threat of terrorism.
How to manage risk?
•  Get to know your potential suppliers: Be sure to consider
whether your existing supply network can meet your needs before
deciding to bring on a new supplier.
• Make sure you get what you’ve asked for: Carefully monitor the
goods and services you’re receiving to ensure that the quality and
quantity strictly adhere to the requirements set out in your
contract with the supplier. 
• Identify risk: Identify risks that relate to requirements,
technology, materials, budget, people, quality, suppliers,
legislation, and any other element you can think of.
• Transportation:.
Bring inventories closer to the destination. 
 PROBLEM(civic Honda turbo X)

• Honda Atlas Pakistan Limited “HAPL” has been on a serious roller coaster ride
since last year.  The most anticipated launch of the 10th generation Civic
didn’t go well since the start.
• In 2016, Honda Atlas introduced the first locally assembled turbocharged
vehicle in Pakistan.  
• Civic X was offered in three variants, i-VTEC Oriel, Turbo X and i-VTEC. 
•  In March 2018, the staff members said that due to a technical issue, the
production of this car is stopped and will be resumed as per company’s policy.
•  Since its launch, a number of consumers have posted their complaints about
engine knocking at high RPM’s.
 PROBLEM IDENTIFICATION:

• Experts from overseas Honda Thailand [engines are imported from Honda Thailand for
assembly in Pakistan] as well as Honda Japan visited Pakistan, and they investigated this
matter, and a detailed testing was performed. So far and so fully assembled 1.5T Civics’
were shipped to Japan for testing and to investigate the knocking issue. 
• Experts say that there is a possibility that fuel quality is the reason for this problem as
the engine is tuned for high grade (premium) fuel which is not available in Pakistan.
• Thus, the car’s engine needs to be remapped based on the Quality of fuel available in
Pakistan. 
• According to HAPL (Laboratory) in their official filed complaint, they have conducted
tests, and it shows that manganese content is of up to 53 milligrams per kilogram. At
above 24 mg/kg, it becomes dangerous not only for the engine and its components but
also for the environment and human health. Honda has named three big oil companies in
their complaint.
 SOLUTION:

• The good news is that after about a year-long extensive testing, HAPL is now able to
resolve the knocking issue in their turbocharged Civic.
• Fortunately, there is no engine, or other hardware that needs replacement.
• A simple software patch to electronic control unit “ECU” will resolve the persistent
knocking issue.
• Honda dealerships across the country have started contacting the owners of
turbocharged Civic to contact the dealerships immediately and make an appointment
for this software update.
• The software patch named as “Countermeasures Knocking Fix Turbo” will take few
minutes to update the control unit
• Honda dealership then officially launched an update campaign in order to spread
awareness to the previous Civic Turbo owners.
CONCLUSION:

Supply chain risk tends to stop most supply chains, the case is not
hopeless. Successful companies are the ones that break the risk
spiral and restore supply chain confidence throughout the chain.
The benefits are much more than cost reduction, but also, the
reduction of confusion leads to increase in sales and market share,
penetration to new markets, and speedy new product introduction.