Introduction
A number of issues such as changes in product design, branding and employee are likely to cause risks that threaten supply chain. Risk management in this field is a fundamental activity at the executive level in most organizations.
Several studies have developed various models and theories that attempt to provide an explanation of the need for supply chain management in reducing risks. The purpose of this paper is to review and analyze some research articles from various authors with an aim of exploring theories and models developed over the last few decades.
Model and theory analysis: Review of research
Lin and Zhou (2011) carried out a study to address the impact that product design changes have on supply chain, with a special focus on the risks involved. Using a case study, the researchers developed some concepts that attempt to explain how supply chain runs under risks when the product design changes significantly.
The theory attempts to show that such changes predispose an organization to a number of risks in supply, policy and delivery. Moreover, this theory suggests that change in product design leads to an array of risks at the internal level, which in this case involves research and design, production, planning, organization and information.
This theory seems to indicate that any change in the product design that may have a significant impact on the customer and retailer’s perception of a product is likely to expose the supply chain system to these risks, which means that both customer-requested and company-initiated change in product design exposes the supply chain system to these risks.
Using an in-depth longitudinal case study, Khan, Christopher and Burnes (2012 examined the impact of product design on the supply chain risk. The case study was based on a major cloth retailer in the United Kingdom. The researchers aimed to address the questions associated with the increasingly important issues of the impact of product design on the risks involved in supply chain management. The case study leads to a concept that was used to explain the impact of product design in the supply chain and the associated risks.
The researchers theorize that risk management in supply chain is heavily dependent on the product design, where recognition of a design is a creative function of managing risks. In addition, the theory attempts to show that recognizing product design is a fundamental platform, on which risks are managed with ease and effectiveness.
This concept attempts to show that recognition of product design must be one of the major activities as well as requirements for risk management at the executive level. In addition, this theory seems to have closer association with the theory developed by Lin and Zhou (2011), as both of them emphasize on the need to consider product design as one aspect or factor that may lead to risks as well as effective management of risks in the supply chain.
Christopher and Peck have attempted to present a good analysis on how supply chain management can effectively control risks by building a resilient supply chain system. Although the research is an analysis of findings rather than an empirical study, it provides the reader with some important theories that attempt to explain how product design impacts the supply chain in modern organizations.
An important model developed in this article is the argument that building a resilient supply chain depends on a number of features that can be engineered into the supply chain to improve resilience. Among these factors is the need to focus on product design, which should be incorporated into the general designing for the supply chains in organizations.
In addition, the concept argues that product design plays a major role in the process of understanding the supply chain and its structure. According to the article, products are the major aspect of a supply process, which means that their nature and impact on the whole process are fundamental. Therefore, failure to focus on product design when engineering supply chains is likely to involve risks that threaten the integrity and effectiveness of a supply chain management in a globalized business environment.
This theory is important in providing some background information on the need to focus on product design when managing and engineering supply chains. In fact, it shows the important role that product design plays in mitigating risks in supply chains.
The article by Chopra and Sodhi (2005) is based on real-life examples of how risk management in supply chain poses threats to the business process in a modern business environment. The authors used two cases in which an electricity supply plant operated by Royal Philips Electronics in Albuquerque, New Mexico, was hit by a lightning in 2000.
The massive surge the impact of the lightning caused at the grid started a fire that completely destroyed the plant’s microchips. Nokia Corporation was one of the major customers of the Royal Philips at the time. The impact of the lightning caused a massive reduction in the number of microchips at the Royal Philips stock, which made corporations like Nokia and others find it difficult to deal with the company.
However, it is worth noting that Nokia Corporation had more than one supplier in its supply chain strategy, which made it possible to switch from ordering chips from the Royal Philips on a temporary base. This proved effective in risk mitigation.
On the other hand, the authors compared this situation with the impact of the problem at Telefon AB Ericsson Corporation, another major customer of the Royal Philips Corporation. This company had a single provider of chips in its supply chain. The company suffered from the problem, which led to a complete shut down of operations until the Royal Philips resumed production.
From the two examples, the authors attempt to develop a theory, in which they explain the need for an effective design in the supply chain system. In this theory, the authors argue that corporations that use multiple designs for a product that is either sold or outsourced are likely to mitigate the risks involved when one product line or design is affected by any problem that may arise. In other words, this theory hypothesizes that multiple supply chain designs are more effective in risk management and mitigation than single-design supply chains.
Supply chain management in the process of supplying and delivering high risk products such as oil and gas proves to be one of the most crucial aspects of managers in these corporations.
In fact, high risk but, at the same time, high profitable oil and gas production and supply provide a good example of how risk management in the supply chain can be enhanced with product design. Vosooghi, Fazli and Mavi (2012) used this example to develop additional concept of product design and its impact on supply chain management in the oil supply industry.
The researchers use the fuzzy analytical hierarch process (FAHP) to weigh and analyze the risks related to crude oil supply chain. The study, carried in Iran, developed some theory that can be used to explain how risks can effectively be managed and mitigated in crude oil supply process.
This model argues that regulation and environmental risks as well as cooperation polices can be viewed from a design perspective. Although the theory does not deal with product design, the conclusions made in the article indicate that the way, in which the product is designed, usually influences the effectiveness of risk management in the supply chain.
The aerospace industry is another high-risk field that requires attention when studying risk management and product design. Sinha, Whitman and Malzahn (2004) developed a study, in which they aimed at explaining how risk management can be effected in aerospace industry. The researchers argue that most of the supply chain systems involve a single supplier, which is likely to increase risks involved.
Therefore, risk management proves to be an important area of management in companies that adopt this system. The researchers’ aim was to develop a model that can mitigate risks in supply chains adopted by aerospace companies. The results of the study have provided some models that can be used to mitigate risks in these companies.
According to the study, IDEF0 concept is a model that mitigates risks in the aerospace supply chains. The model has five stages: risk identification, risk assessment, planning, and failure analysis and continuous improvement. Although this model focuses on a number of issues, it is worth noting that the design of the products in the supply chain system is a fundamental aspect of the model.
Tang (2007) published an article that explains the risks involved in supply chains and how they can be managed with effectiveness even during crisis. The researcher develops a model that attempts to show how supply chain managers can enhance the supply chain to navigate through major disruptions whenever they occur.
According to this model, inherent fluctuations are the first aspect that increases the risks, which implies that they should be the first issues to address in management. Secondly, the model indicates that corporations must design and reengineer their supply chain systems to enhance resilience and the ability to withstand the impacts of major disruptions. In addition, the model indicates that enhancing residence is strongly linked to the process of retaining apprehensive customers.
Goh, Lim and Meng (2007) developed a study, in which they attempted to develop a model for enhancing risks management in globalized supply chain networks. The study, carried out in Singapore, provided a scholastic model that indicates the need for risk management in supply chain to reduce the threats involved in globalized organizations.The model, known as multi-stage global supply chain network, incorporates a number of supply chain aspects in a globalized business system.
For instance, it considers a new focus on related risks such as supply, demand, disruption and exchange as the most important areas of focus in managing risks.
In addition, the model provides a new solution methodology that makes use of Moreau-Yosida regulation, design and logarithm that enhances the process of risk management and mitigation in diagnosing risk associated problems in globalized and multi-staged networks. Although this model is difficult to implement, it is highly effective in managing and mitigating risks in supply chains.
Sheffi (2001) takes a different approach to developing a model for risk management and mitigation in supply chains. In this article, Sheffi (2001) takes an example of risks posed by terrorism as a major threat to modern supply chain systems. The author analyzes the companies that were affected by the 9/11 terrorist attacks in the US. Using several examples, the researcher develops a model for explaining the importance of supply chain management in risk mitigation.
This model focuses on two issues. First, it argues that corporations must adopt strategies to set certain operational redundancies in order to enhance their preparedness for risks. Secondly, it focuses on reduction of reliability on lead time and certain demand scenarios. The model suggests that private public partnership is the best way, trough which companies can organize themselves into networks that will enhance risk management and mitigation.
In 2007, American corporations IBM, KPMG and ACE sponsored a study with an aim of revealing the best practice for managing risks in supply chains. The researching institute, the Economic Intelligence Unit, developed a comprehensive study and a report that show their hypothesized model for managing supply chain risks in the modern concept. In its simplest form, the model suggests that risk management is a discipline that has moved from loss avoidance to assume a new position as the key contributor to market advantage.
According to the model, this is achieved through improved corporate reputation and better stand among the companies with the role of oversight such as rating industries. In addition, the model hypothesizes that risk management in supply chains has become an area that needs both technology and workmanship, because ideas must be generated, devised and implemented.
In addition, it indicates that technology is an additional source of risk for supply chains, especially at a time when supply of products has gone virtual thanks to the internet technology. However, the author’s model does not imply that technology should be avoided. Rather, it suggests that technology and workmanship should be integrated to provide the best method for mitigating and managing risks in supply chains.
Conclusion
From this analysis, a number of aspects should be noted. For instance, the models developed over the years to enhance risk management in supply chains tend to focus on the product, product delivery and internal aspects of the management. They incorporate the ideas of understanding the risks, developing prior knowledge of the risks, ensuring everyone is involved, company-company or company-public sector relations and the use of technology.
Although the models are different, most of them attempt to show that supply chain is one of the areas of corporate management that runs under high risks due to the link between the company and other parties in its supply chain system.
Therefore, changes in product design, branding and employees are likely to cause risks that threaten supply chain. Risk management in this field is a fundamental activity at the executive level in most organizations. These models/theories have attempted to provide an explanation of the need for supply chain management in reducing risks.
References
Chopra, S & Sodhi, M, 2005, “Managing Risk To Avoid Supply-Chain Breakdown”, MIT Sloan Management Review, vol. 3, no. 1, pp. 53-64.
Christopher, M & Peck, H, 2004, “Building the resilient supply chain”, International Journal of Logistics Management, vol. 15, no. 2, pp. 1-13,
Economist Intelligence Unit, 2007, Best practice in risk management: A function comes of age, Economist Intelligence Unit, New York
Goh, M, Limb, J & Meng, 2007, “A stochastic model for risk management in global supply chain networks”, European Journal of Operational Research, vol. 182, no. 1, pp. 164–173
Khan, O, Christopher, M &Burnes, B, 2012, “The impact of product design on supply chain risk: a case study”, International Journal of Physical Distribution & Logistics Management, vol. 38 no. 5, pp. 412-432
Lin, Y &Zhou, L, 2011, “The impacts of product design changes on supply chain risk: a case study”, International Journal of Physical Distribution & Logistics Management, vol. 41, no. 2, pp. 162-186
Sheffi, Y, 2001, “Supply Chain Management under the Threat of International Terrorism”, International Journal of Logistics Management, vol. 12, no. 2, pp. 1 – 11
Sinha, PR, Whitman, LE & Malzahn, D, 2004, “Methodology to mitigate supplier risk in an aerospace supply chain”, Supply chain management: An international journal, vol.9, no. 2, pp. 154-168.
Tang, C, 2007, “Robust strategies for mitigating supply chain disruptions”, International Journal of Logistics Research and Applications: A Leading Journal of Supply Chain Management, vol. 9, no.1, pp. 34-56.
Vosooghi, M, Fazli, S & Mavi, R, 2012, “Crude Oil Supply Chain Risk Management with Fuzzy Analytic Hierarchy Process”, American Journal of Scientific Research, vol. 12, no. 46, pp. 34-42