SUPPLY CHAIN RISK MANAGEMENT

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SUPPLY CHAIN RISK MANAGEMENT
Claudia COLICCHIA Carlo Cattaneo University - LIUC
NESA, Helsinki 9-10 June 2008
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Definitions of risk

• Risk

• Expected probability of an event or condition
  whose occurrence, if it does take place, has a
  harmful or negative effect.

• Supply Chain Risk

• Distribution of the loss resulting from the
  variation in possible supply chain outcomes,
  their likelihood, and their subjective values

• Supply chain vulnerability

• "An exposure to serious disturbance, arising from
  risks within the supply chain as well as risks
  external to the supply chain. " Cranfield
  University

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Why supply chains are now so vulnerable?

• Globalization of supply chains
• Trend towards outsourcing
• Volatility of demand
• Reduction of the supplier base
• Lack of visibility and control procedures
• Focus on efficiency rather than effectiveness

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Supply chain risk management process

• "The identification and management of risks
  within the supply chain and risks external to it
  through a coordinated approach amongst supply
  chain mambers to reduce supply chain
  vulnerability as a whole" Cranfield University

Supply Chain Risk Management
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RISK ASSESSMENT AHP method

• A decompositional technique for multicriteria
  decision-making Saaty 1980, 1990, 1994 that
• Enables people to make decisions in situations
  when multiple and conflicting objectives/criteria
  are present
• Involves making a series of pair-wise comparisons
• Uses
• - Simple mathematics (calculation of the
  principal eigenvector)
• - Criteria ltset by the decision maker gt
• - Preferences of that criteria
• ltalso set by the decision makergt
• - The standard preference table

• 1 equally as important
• 2 equally to moderately more important
• 3 moderately more important
• 4 moderately to strongly more important
• 5 strongly more important
• 6 strongly to very strongly more important
• 7 very strongly more important
• 8 very strongly to extremely more important
• 9 extremely more important

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Our sample problem
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Decision Hierarchy

• Lusoponte project

• GOAL

• Environmental

• Social

• Legal

• Economic

• Political

• Technological

• RISKS

Additional EIS requirements
Expropriation difficulties

• RISK SOURCES

Design Changes



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How it is done
Social,Legal, Economic
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Results
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Future steps

• Introducing the "risk likelihood function"
• Considering interdependencies modifying the
  weight
• Assessing and compare the results (impact on
  overall risk)
• Applying the method in other context using real
  data