Global Supply Chain Risk Management Strategies

Christophe CermolacceSchool of Economics and Management, Tongji University, Shanghai, ChinaEcole Supérieure de Commerce, Euromed Management, Marseille, FranceAnovo France, China’s branch representative

Supervisor: Professor WU SI ZONG, Tongji University, Shanghai, China

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Why SCRM strategies and China?

• China = world’s first exporter• Lliterature = poor• Last decade = numerous risk events• Not well considered by managers and

organizations

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Goal

• Based on Manuj and Mentzer 2008 Research• Refine, infirm, confirm their finding within the

scope of SC with suppliers located in China

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Methodology

• Based on Manuj and Mentzer 2008 Research• Grounded theory• In-depth interviews with professionals

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What is risk?

• “A state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome” Douglas Hubbard, 2007

• Risk = PxL or Risk =∑[PxL] (P: probability of the accident occurring, L: expected loss in case of the accident)

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What is risk? Based on interviews

• 4 dimensions1. Potential losses2. Likelihood of those losses3. Speed

1. Speed of the event leading to loss2. Speed at which losses happen3. “How quickly the risk event is discovered”

4. Frequency

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What is Global Supply Chain?• A complex system• Involves

– Organizations (Companies and governments)– People– Technology– Activities– Information– Resources

• Moving a product, service along a the chain between supplier and customer

• An ever changing path• Risky

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What is SCRM?Global Supply chain risk management is the identification and evaluation of risks and consequent losses in the global supply chain and implementation of appropriate strategies through a coordinated approach among supply chain members with the objective of reducing one or more of the following – losses, probability, speed of event, speed of losses, the time for detection of the events, frequency, or exposure – for supply chain outcomes that in turn lead to close matching of actual cost savings and profitability with those desired

– Ila Manuj and John T, Mentzer, 2008 –

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Global Supply Chain risk events and China

1. Currency2. Transit time variability3. Forecasts4. Quality5. Safety6. Business disruption7. Survival8. Ownership9. Culture10.Dependency and opportunism

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11. Oil price fluctuation12. Raw material price

fluctuation13. Non-payment situations14. Abandonment of goods15. Political/Legal16. Cheating17. Overzealousness18. Staff motivation

Global Supply Chain risk events and ChinaCCIRM 2011

Supply Chain risk Management strategiesCCIRM 2011

AntecedentsTemporal focusSC FlexibilitySC environment-SlDl-ShDl-SlDh-ShDh

Risk Management OutcomesTotal and Per Unit CostTotal and Per Unit ProfitAverage inventoryDisruptionsTotal inbound Lead TimeDelays to customersStock-outsFill RatePremium Freight UsageCash-to-cash cycle timeExposure

Strategy selectionPostponementSpeculationHedgingControl/Share/TransferSecurityAvoidance

Team composition Supply Chain ComplexityInter-organizational Learning

Low supply risk High supply risk

Low demand risk

High demand risk

SlDl

SlDh

ShDl

ShDh

Supply Chain risk Management strategiesCCIRM 2011

Antecedents

Temporal focusP0.a. The shorter the delays, the harder the management of riskP0.b. Shorter delay does not mean lower importance of riskP0.c. Delays hard to implement risk management strategies

Flexibility•Adaptability•Alignment•AgilityP0.d. Flexibility softens SCRMP0.e. Good relations with the members of the SC improves flexibility

Supply Chain risk Management strategiesCCIRM 2011

Postponement & Speculation

P1. Supply chains facing SlDh and ShDh environments are more likely to adopt form postponement strategies than those facing SlDl and ShDl environments.P2. Supply chains facing SlDl and ShDl environments are more likely to adopt a speculation strategy than supply chains facing SlDh and ShDh.P1.b. Supply chains facing ShDh and environments are more likely to adopt manufacturing, logistics and form postponement strategies than those facing SlDl and ShDl environments

Supply Chain risk Management strategiesCCIRM 2011

Hedging

Offsetting losses at some points by gains at others

P3. Supply chains facing ShDl and ShDh environments are more likely to adopt hedging as compared to supply chains facing SlDl and SlDh environments

Supply Chain risk Management strategiesCCIRM 2011

Control/share/transfer

•Control : forward or backward integration or virtual integration fthrough contracts and partnerships•Sharing : involves contracts and partnerships•Transfer : involves disintegration and outsourcing.

P4. Supply chains facing ShDl environment are more likely to adopt backward integration, supply chains facing SlDh environment are more likely to adopt forward integration, and supply chains facing ShDh environments are more likely to adopt both backward and forward integration.P4.b. Supply chains facing ShDl environment are more likely to adopt virtual backward integration and higher control strategy by outsourcing than those facing SlDh and SlDl environments.

Supply Chain risk Management strategiesCCIRM 2011

Security

P5. All types of supply chains will increase the use of security strategies.

Supply Chain risk Management strategiesCCIRM 2011

Avoidance

Type1: avoid buying from China to reach a 0 risk situationType2: reduce, prevent risk by controls

P6. Supply chains operating in all types of environment adopt avoidance strategies. Type 1 avoidance strategy is adopted when a supply chain has an option not to enter a high demand or supply risk environment. Type 2 avoidance strategy is adopted when a supply chain has no option but to enter a high demand and/or supply risk environment

Supply Chain risk Management strategiesCCIRM 2011

Moderators

Team composition

P7. Team composition strongly affects the relationship between the antecedents and the strategy selected.

Supply chain complexity

P8. Greater supply chain complexity lessens the relationship between supply chain risk strategies and risk-related outcomes.

Implications

• Risk events introduction• Testimonies for managers• 16 propositions

– 5 on antecedents– 9 on strategies– 2 on moderators

• Validation of Manuj and Mentzer’s models and propositions

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Thank you, 谢谢

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