Supply chain management is undoubtedly one of the most promising and forward-looking areas in the development of modern management strategies – and at the same time, one of the most difficult to apply in practice. The prospects for benefits that seem to be within reach are enormous, especially in terms of gaining a competitive advantage, improving business efficiency, and the need to meet the requirements of the global economy. When considering the various problems encountered in implementing this idea (or perhaps: this management philosophy), it is impossible to ignore the issues of security and vulnerability – especially of global supply chains – seen primarily in the context of intense exposure to various threats, but also as a necessity to adapt to rapidly changing operating conditions and market requirements. This part of supply chain management strategy is addressed by a new, very rapidly developing field of business known as Supply Chain Risk Management (SCRM).
Operating conditions
Modern supply chains operate in conditions that generate an extremely wide spectrum of threats with very diverse sources and characteristics. The process of globalization has unleashed new opportunities and new possibilities for economic development, while at the same time causing an unprecedented increase in the level of risk in international business. This is composed not only of the direct, “natural” consequence of globalization, which is the lengthening and increasing complexity of supply chains and networks that was unimaginable until recently, but also of phenomena related to the political and legal conditions of conducting business, cultural (“cross-culture problems“), and social factors. Changes in management strategies driven by extremely strong pressure to increase competitive advantage force actions and decisions with an increased level of risk. Commonly used practices today such as “lean management“, moving business to new regions with cheaper labor (“low cost country sourcing“, “off-shoring“), reducing the supplier base (“single-sourcing“), or striving for radical cost reduction, for example in warehousing (“Just-in-Time” deliveries, “Vendor Managed Inventory“), undoubtedly bring economic results, but at the same time significantly increase the vulnerability of supply chains and their exposure to threats. The prevalence of outsourcing has its rational premises, but sometimes it leads to far-reaching qualitative changes in the division of roles, and especially in the relationships between partners in the supply chain. Usually, the previously dominant position of the producer, the manufacturer of the product, sometimes changes into the role of a service provider, and the leading enterprise becomes the company that designs and sells the product, providing the brand name (there are known examples here from the footwear or computer equipment market). In such a situation, new qualitative threats related to relationships in the supply chain take on a completely different, very significant meaning. Finally, the explosion of new technologies (including ICT) triggers an unprecedented avalanche of problems and threats – starting from, for example, the “millennium bug” and issues related to the security of data storage and information flows (hackers, viruses, etc.), to nanotechnology, RFID, or bioengineering (with a burden of risks both purely “technical” and others, for example from the sphere of ethics). Extremely strong pressure to shorten the implementation cycles of new technologies as much as possible – which also has its roots in the desire to increase competitive advantage – means that the identification of possible threats and their analysis and assessment are not always given the proper attention, time, and resources.
The outlined picture of the conditions in which modern supply chains have to realize their goals and tasks should also be supplemented with “standard” external threats, such as risks related to natural disasters and cataclysms (hurricanes, floods, fires, earthquakes), as well as phenomena of organized crime (the activity of mafias and criminal groups – for example, robberies and thefts in international transport or maritime piracy) and international terrorism. In this area, too, a noticeable increase in risk has been observed in recent years, which is associated with climate change and global socio-political problems.
The article comes from the magazine “Logistyka” 5/2009.