Supply Chain Risk Management

25

2

Supply Chain Risk Management

The As- Is Landscape

In this chapter we provide an overview of the growth of supply chain risk

management (SCRM) during the last few years and provide additional

insight into who is talking about SCRM, what they are saying, and the

tone of the dialogue. We will provide a summarized view of SCRM top-

ics, announcements, articles, reports, and survey results that help dene

the state of SCRM today. We will also share a perspective on SCRM

through a dierent prism: the Four Pillars of SCRM. We will then provide

a maturity level for each pillar. e chapter concludes with discussion of

SCRM adoption.

A CHRONOLOGY OF SUPPLY CHAIN

RISK MANAGEMENT

Let’s start by providing a sense of the growth of SCRM in terms of aware-

ness, discussions, articles, papers, surveys, solutions, tools, and more.

During our research for this book we compiled hundreds of reference

works in order to provide a comprehensive, end- to- end perspective of

SCRM. Using these reference works and our experience, we have com-

piled a chronology of the growth we’ve witnessed and the tone and tenor

of the dialogue.

While many risk management studies and surveys were conducted dur-

ing 2000–2010, our focus starts with the latter part of that decade. Most

supply chain executives became interested in SCRM aer the nancial

meltdown of 2008. Company aer company watched, almost helplessly, as

26 • Supply Chain Risk Management: An Emerging Discipline

customer orders were canceled, suppliers entered bankruptcy, and com-

modity markets became increasingly volatile. For many, 2008 was the

genesis of their risk management eorts.

2009

Most operations management and supply chain management profession-

als are familiar with the International Organization for Standardization

(ISO) Group and its set of standards that revolve around quality control

and process reliability, such as ISO 9000. In 2009, the ISO Group delivered

its rst set of standards directly relating to supply chain risk, which was

a major recognition of the importance of SCRM. ese standards include

ISO 73 and ISO 31000. ISO 73 proles the vocabulary and taxonomy of

risk within the supply chain, and ISO 31000 provides insight into the prin-

ciples, practices, and guidelines to eectively identify, assess, mitigate, and

manage supply chain risk.

A key report during this period was Accenture’s 2009 Managing Risk for

High Performance in Extraordinary Times.

1

is global report, which sur-

veyed 260 CFOs, chief risk ocers, and other executives across 21 coun-

tries, came right aer the 2008 nancial meltdown. is report explored

the details of what was going on around the globe relative to risk and its

impact on businesses and supply chains. It was one of the rst compre-

hensive analyses of the cause and eects of risk to global supply chains.

is report revealed that 85% of executive respondents said their com-

pany needed to overhaul its approach to risk management; 40% said their

companies already had increased or would increase their investments in

broader risk management capabilities; 41% stated their risk management

costs increased by at least 25% over a three- year period; and only 27%

said their risk management function was involved, to any great extent, in

objective setting and performance management.

Accenture concluded that steps needed to be taken to manage supply

chain risk to protect a company’s competitive advantage, reputation and

branding, and credit ratings; to maintain positive comments by ana-

lysts; and to ensure access to capital over time at a reduced cost. Overall,

Accenture reported that many companies had a long way to go before they

should feel comfortable about their company’s state of risk management.

AMR released a report on risk in U.S. manufacturing to get a sense of

how businesses feel about the future and what they saw in terms of risk. e

top three concerns of U.S. manufacturers were supplier quality failures,