Reliability and risk are key characteristics of logistics structures, including supply chains. Although there are many publications in the literature on risk in logistics systems, there is little on the reliability of these systems. The vast majority of works on risk management use (rightly) the methodology of risk management in business and engineering. Regarding the problem of risk assessment, all authors accept the well-known formula of “measuring” risk by multiplying losses and the probabilities of threats implying such losses.
The risk of conducting any activity, especially business activity, is inherently associated with threats that can become sources of potential losses, and thus “sources of risk.” Furthermore, every business activity is conducted under conditions of uncertainty and randomness. On the other hand, every analyzed system (object, process) has a greater or lesser sensitivity (resilience) to the destructive impact of all internal (own) and external disturbances. It should also be remembered that the effect of economic (including logistics) decisions can be – in addition to probable threats – also intended successes. The results of “decision games” are successes and/or failures (losses). In system safety management, the term “risk” refers to the results of the latter type.
However, both success and loss depend simultaneously on:
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the ability of the system (object, process) to carry out a task
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the requirements imposed on the system by itself and its environment: near and far.
By defining order relations (greater, smaller) between the capabilities and requirements of the system, one can interpret the concepts of risk and reliability in a new way. The article presents a sketch of a model for such an interpretation of supply chain risk and reliability. The so-called potential-based concept of safety, developed by the author several years ago, was used.
Supply chain as an object of reliability and risk modeling
Modern logistics networks are increasingly complex, which increases their exposure to disturbances and threats. The importance of risk management in such logistics structures is growing. A supply chain is a group of mining, manufacturing, trading, and service companies, as well as their customers, interacting in various functional areas, between which streams of products, information, and financial resources flow. In a structural-subject interpretation, a supply chain can be:
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a single enterprise (internal supply chain)
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a pair or chain of enterprises in supplier-recipient relationships
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a network, i.e., a group of cooperating and/or competing enterprises.
In an object-oriented interpretation, the following flow through the supply chain:
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material goods (materials, semi-finished products, finished products)
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information (including from the market)
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financial resources
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resources (physical, human, technological).
[…] An enterprise can be a link in several logistics chains simultaneously; in that case, it belongs to a so-called logistics network, and one of the effects of such membership can be conflicts between the requirements of neighboring logistics links and the capabilities of the enterprise.
It seems that when decomposing a supply chain, logistics links and logistics tasks are appropriate “levels” in modeling the reliability and risk of supply chains. Therefore, one should speak of the reliability of a logistics link and the risk of a logistics task, and where insufficient reliability results in a loss, both characteristics must be analyzed. As is known, the determinants of reliability and risk in supply chains are “weak links”; therefore, a simplified analysis of supply chain reliability and risk would boil down in particular to the analysis of those links and logistics tasks that have been identified as “weak points” of the chain or logistics network.
The definition of a logistics task implies that operational risk is inherent to it, i.e., the risk of incurring losses resulting from: improper or unreliable internal processes, people, technology, or external events. Strategic risk, on the other hand, is the result of the superposition of all operational risks for all logistics tasks carried out in the long term in the supply chain under consideration.
The article comes from the journal “Logistyka” 2/2010.