What Is Supply Chain Risk Management?

The supply chain system is a complex system. Foreign scholars' research on supply chain risk begins with research on supply risk. Metchell believes that it is caused by the differences in the education level and country of employees in member companies and the characteristics of the supply market (such as the stability of market structure). , Changes in market interest rates, etc.) affecting the risk of insufficient supply. Zsidisin et al defined supply risk as "deterioration of the quality of goods and services caused by untimely supply." Philip 0'Keeffe divides supply chain risks into controllable and uncontrollable risks according to the general method of risk. Uncontrollable risks such as terrorist acts, severe labor shutdowns, natural disasters, etc., and controllable risks such as supplier qualification , Products and services from the source.

Supply chain risk

(Business term)

Domestic research on supply chain risks began in the late 20th century and early 21st century.

Divided into four stages

The risk of supply chain is assessed by the following steps:

Supply chain risk risk management

The supply chain from procurement, production to sales is a serial or parallel hybrid network structure formed by the joint participation of multiple node enterprises. One of these tasks may be completed by one enterprise or by multiple enterprises. The overall efficiency, cost, and quality indicators of the supply chain depend on node indicators. Because the overall risk of the supply chain is passed from the risk of each node. Therefore, by identifying and judging the risks of node enterprises, and carrying out risk adjustment and optimization, the risk control of the entire supply chain will be greatly strengthened.

Supply chain risk emergency mechanism

The supply chain is a complex system with multiple links and multiple channels, which is prone to some unexpected events. Therefore, it is necessary to establish corresponding early warning systems and emergency systems. In supply chain management, we must be fully prepared for emergencies. For some occasional but destructive events, contingency measures can be formulated in advance, work procedures for responding to emergencies, and teams for contingency events can be established. At the same time, a set of early-warning evaluation index systems must be established. When more than one of the indicators deviates from the normal level and exceeds a certain "critical value", an early-warning signal is issued. After the early warning system gives a warning, the emergency system responds to emergency and emergencies in time to avoid serious consequences for the supply chain enterprises.

Supply chain risk communication sharing

Improve information communication efficiency.

The application of information technology can strengthen the communication capabilities of enterprises and largely overthrow the "thick wall" that previously hindered the flow of information between functional departments within the enterprise. Supply chain companies should eliminate information distortions through the establishment of multiple information transmission channels, strengthen information exchange and communication, increase the transparency of the supply chain, and increase the degree of information sharing, such as sharing information about expected demand, orders, and production plans, thereby reducing Uncertainty and reduced risk. In general, the information between upstream and downstream companies has advanced communication methods, timely feedback mechanisms, and standardized processing procedures. The supply chain risk is small, and vice versa.

Supply chain risk strengthens incentives

Due to the imperfect social integrity mechanism of Chinese enterprises, it is difficult to avoid moral hazards among supply chain enterprises. In order to prevent the occurrence of defeat, the asymmetry of information should be eliminated as far as possible, and certain incentives and mechanisms should be actively adopted so that partners can obtain greater benefits than defeats to eliminate the risk of defeat. .

Supply chain risk optimization cooperation

Supply chain partner selection is an important part of supply chain risk management. On the one hand, it is necessary to make full use of the complementarity of each other to give play to the competitive advantages of the cooperation, and on the other hand, it is also necessary to consider the cooperation cost and agility of the partners. Partners should consider the supply chain as a whole, rather than separate block functions consisting of procurement, production, distribution, and sales. Only when partners on the chain adhere to and ultimately execute strategic decisions on the entire supply chain, can the supply chain truly exert its cost advantage and occupy market share.

Selecting a partner must examine its comprehensive qualities, such as the core resources and geographical location of the partner, business performance, R & D, site management, quality system, cost control, user satisfaction, etc., and the partner must have a good business reputation and Credit level. Attention should be paid to identifying the motivation for partners to join the supply chain and the possibility of speculative behavior. By establishing a minimum creditworthiness for entering the supply chain, enterprises above the minimum creditworthiness can become true partners of the supply chain, which will maximize Potentially dangerous people are excluded from the supply chain system.

Because the supply chain strategic alliance is an organization form based on contracts (or agreements), it is not enough to rely on contracts to avoid risks. Supply chain companies need to strengthen trust incentives based on the effective distribution of cooperative benefits. On the one hand, they must ensure the supply chain. In the distribution of total income, the benefit sharing among partners, that is, each member is "profitable". On the other hand, it is necessary to restrict the behaviors of various manufacturers by formulating strict standards and requirements, and encouraging and two-pronged incentive measures will greatly reduce the moral hazard facing the supply chain, increase the emotional connection and trust between partners, and consolidate strategic partnerships. .

Supply chain risk softening design

There is demand and supply uncertainty in supply chain cooperation, which is an objective law. In the cooperation process of supply chain enterprises, it is necessary to provide flexibility to each other in the design of contracts, which can partially eliminate the impact of external environmental uncertainties and transfer supply and demand information. Flexible design is an important means to eliminate the factors of change caused by the uncertainty of the external environment. In addition, today's supply chain management emphasizes the JIT method and reduces inventory to reduce costs. This mode of operation will appear inflexible in the event of emergencies or large fluctuations in demand. Chameleons live long because of their ability to respond. Therefore, while focusing on efficiency, the supply chain should remain moderately flexible.

Supply chain risk strategic cooperation

To achieve the expected strategic goals, supply chain companies objectively require supply chain companies to cooperate to form a win-win situation in which profits are shared and risks are shared. Therefore, establishing close partnerships with other member companies in the supply chain has become a very important prerequisite for the successful operation of the supply chain and risk prevention. The establishment of a long-term strategic partnership requires the members of the supply chain to strengthen their trust; secondly, the exchange and sharing of information among members should be strengthened; and thirdly, a formal cooperation mechanism should be established to realize benefit sharing and risk sharing among members of the supply chain. Fourth, strengthen the construction of norms such as contractual provisions and encourage partners to coordinate their cooperative attitudes and behaviors with each other in an honest and flexible manner.

In addition to choosing a good cooperative enterprise, choosing a circulating product is also an important way.

Construction of supply chain risk culture

Create common values.

A good supply chain culture will form a strong cohesion within the system, strengthen unity and cooperation among member companies, reduce unnecessary conflicts and conflicts, thereby reducing internal friction, and form a mutual trust, mutual respect, co-creation, A win-win relationship of common development and shared results; making members of the supply chain have the same interest requirements and common value standards as the whole, thereby maintaining the stability and development of the supply chain.

Supply chain risk optimized distribution

The production of enterprise products is based on the premise of procurement. Procurement is not only the beginning of the internal supply chain of an enterprise, but also the bridge between the enterprise and the supply chain. It has an important role in reducing costs, improving operational efficiency and enhancing competitiveness. The complexity of the procurement environment and the weakening of the function of the procurement management system are the reasons for the formation of procurement risks. The prevention of procurement risks should be based on the selection of supply channels or suppliers and the strengthening of procurement system control. Large enterprise groups have a large procurement market for materials, involving equipment, steel, wood, pond materials, indigenous materials, tools, chemical raw materials and other industries and fields. Bidding or price comparison procurement has prompted hundreds to thousands of suppliers to compete. On-the-spot supply and reliable service of high quality and cheap materials, on the one hand, we must implement the supplier admission system, set the qualifications and conditions for supplier admission, and reject suppliers with poor quality, low credit, and inadequate service. On the other hand, it is necessary to establish a supplier credit evaluation information database, implement dynamic follow-up evaluation of the basic situation of the supplier, product quality, price, delivery timeliness, and after-sales service, and use the survival of the fittest mechanism to ensure that the enterprise group always has an optimal The combined supplier team guarantees the reliable supply of various materials for the group companies. Strengthening the control of the procurement system should be promoted from strengthening the construction of procurement teams, strict procurement procedures, and implementing effective supervision.

The flexible supply mechanism of multiple suppliers in the supply chain can effectively prevent the channel from being blocked under a single supplier structure, which can affect the supply risk of the entire supply chain. To this end, the company must select more than two suppliers from different regions for the supply of key materials, and track and evaluate the supply of each supplier to ensure the safety and stability of the supply of materials. Logistics distribution is an important part of supply chain operations. Depending on professional and strong third-party logistics, companies can focus on core business, optimize business processes, reduce operating costs, and diversify and enhance their ability to resist logistics distribution risks.

Supply chain risk risk prevention

The supply chain is a complex system of multi-node enterprises joining together in series and parallel connection. Any problem in any link on the chain will affect and affect the entire supply chain. To this end, group companies must work with upstream and downstream supply chains to formulate risk prevention plans, establish a simple, sensitive, and effective risk prevention mechanism, and use supply indicators such as product quality, contract performance, inventory turnover, and customer satisfaction to monitor supply chain risks. Identification, evaluation, and early warning to achieve timely prevention, control, and transfer of risks, to ensure the continuous, smooth, and efficient operation of the entire supply chain, and to realize benefit sharing and risk sharing.