Recovering From ‘Glitches’: Recovery is a Competitive Capability
Introducing a Supply Chain Risk Management Framework—Design for Resilience and Mitigation The economic pressure described in the previous section is inexorable; it is forcing companies to increase customer choice and service while at the same time reducing cost. The question is how does a company assess, internalize and mitigate the associated risks? Work at Cranfield on behalf of a British Government Department (v) developed a classification of the types of risk to which a business is exposed. Risk was classified into those external to the firm, through demand, supply and environmental factors, and those which are internal, and potentially self-inflicted, through processes, controls and lack of risk management. This concept is illustrated in figure 4, which contains a brief description of the types of risk in each segment. Mitigation is the most crucial segment in this model since it introduces the idea that risks can be identified and managed, down if not out, through design of the chain and the way in which it is set up and operated. A workbook was created to support the process of identifying risks and is a helpful resource in this process.
Figure 4: The dimensions of supply-chain risk
The workbook invites management teams to consider their supply chains in a structured way in order to identify their risks and vulnerabilities in terms of the scale, cost, duration and recovery actions that would be needed should risk turn to reality. This provides a cost and time estimate for each potential failure irrespective of its probability which, by definition, is low. Alongside this estimate the process invites the team to consider the mitigating actions through which they can design out the risks together with the costs of such measures.
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