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Activities

Supply Chain Risk Management

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Introduction

 

 Supply Chain Risk Management

In recent years, the industry was severely affected by violent incidents, health

crises, and natural disasters. These incidents have a huge impact on economic

activity, for example, Ericsson lost 400 million EUR after their suppliers of

semiconductor plant caught fire in 2000, and Apple has lost order of DRAM in

Taiwan in 1999 after an earthquake [8]. British petroleum has lost more than 1.5

billion USD after the Texas City Refinery explosion in 2005 that was considered as

the worst industrial disasters in recent US history. Another example, the impact of

Japanese earthquake and tsunami (Japan 2011) on industrial production is

estimated at (-17%) between the prediction of the Japanese ministry of economy

trade and industry and the achievement, the breaking of production chains is

considered as the main channel of transmission of the disaster on the Japanese

economy. The consequences of these accidents are uncertainly, for this reason, the

risks management in the industries has emerged as an essential topic in the global

logistic chain, indeed, the risk is absolutely linked with the uncertainty [27, 28].

Risk is defined as possible events whose unfavorable consequences are difficult to

accept or are even unacceptable [24]. Nowadays, the risk assessment is an

important research theme because the risks were always present in the industrial

activity [30]. In the literature, we find several studies on risk management, these

studies focuses only in downstream risks or upstream risks or production risks.

This distinction does not a meaning when we talk about logistic chain and logistic

risk. Moreover, this distinction does not consider the interaction can be exist

between all the risks at the level of the links of the logistic chain, in this context it

is preferable to use the concept of Supply Chain Risks Management (SCRM) and

not risks management.

The risk

The thematic of risk management is not new, but it is recent and not very studied in

logistic chain (or supply chain), the first work that explicitly addresses for the risk

management in the supply chain dating from 2003 [27]. The risk is present in many

activities including the logistic in which one consequence of the risk that it is

increasing and affect around all the logistic networks, therefore the managers need

to make a great deal of effort to identify and manage risks. The meaning of risk can

be differ from one person to another depending on their point of views, attitudes

and experience what makes the study of risk more and more complex.

Aven [34], proposed a basic risk theory based on brief selected review that over the

last 15-20 years and he presented the evolution of risk concept in Oxford English

Dictionary since 1679, we think that definition followed the environment

evolution. Veland and Ave [14], proposed the same based classification of risk

given by Aven [34] and they used theses definition to discuss how the risk

perspectives influence the risk communication between the decision-makers, the

risk analysts, experts and lay people. Indeed, for Karimiazari et al [3], engineers,

designers and contactors view risk from the technological perspective, lenders and

developers tend to view it from the economic and financial side. So, the question

is: what is a risk? The first answer, the risk is the probability that an event or action

may adversely affect the organization [37]. For Mazouni [25], the risk is an

intrinsic property of any decision, it is measured by a combination of several

Standard Occupational Health and Safety Assessment Series), the risk is a

combination of the likelihood of an occurrence of a hazardous event or exposures

to danger and the severity that may be caused by the event or exposure. In this

context (BS OHSAS 18001), the concept of risk asks two oriented question: 1.

What is the probability that a particular hazardous event or exposure will actually

occur in the future? 2. How severe would the impact on health and safety be if the

hazardous event or exposure actually occurred? The risk can be defined as an

uncertain event or set of circumstance which, should it occur, will have an effect on

achievement of one or more objectives [10]. For Marhavilas et al [29], the risk has

been considered as the chance that someone or something that is valuated will be

adversely affected by the hazard, where the hazard is any unsafe condition or

potential source of an undesirable event with potential for harm or damage. For

Bakr et al [5], the word “risk” means that uncertainty can be expressed through

probability. We can concluded that the risk is an probabilistic event that can exist

and affect the activity of an organization positively (opportunity) or negatively

The risks management in the supply chain

The concept of risk management in the supply chain has developed rapidly over the

recent decades and has become very important, we can consider, if we refer on

Lavaster et al [26], that the paper of Jutter et al in 2005 “Supply Chain Risk

Management: outlining an agenda for future research” was the first scientific

researcher in the Supply Chain Risk Management (SCRM), furthermore and

according to Fekete [2], risk management is an area with conflicting terms, and

there is a widely acknowledged need for a critical reflection of its definition, core

contents, principles and regulation. According to Lavaster et al [26], the first

definition of SCRM was given by Juttner 2005, “the SCRM is the identification

and management of risk for the supply chain, through a co-ordinate approach

amongst supply chain members, to reduce supply chain vulnerability as a whole”.

The SCRM plays a major role in successfully managing business processes in a

proactive manner.

Supply chain risk management is defined as the process of risk mitigation achieved

through collaboration, co-ordination and application of risk management tools

among the partners, to ensure continuity coupled with long term profitability of the

supply chain. The SCRM can be defined as a structured and synergic process

throughout the supply chain, which seeks to optimize the totality of strategies,

processes, human resources, technology and knowledge in the aims are to control,

monitor and evaluate supply chain risk and to safeguard continuity and maximize

profitability [15].

Risk management is the process whereby decisions are made to accept a known or

assessed risk or the implementation of action to reduce the consequences or the

probability of occurrence of an adverse event [35]. Risk management refers to

strategies, methods and supporting tools to identify and control risk to an

acceptable level [31].

In accordance with ISO 31000:2009 (Risk management: principles and guidelines),

risk management refers to a coordinated set of activities and methods that is used to

direct an organization and to control the many risk that can affect its ability to

achieve objectives.

Based on the literature review of SCRM, we can give this definition, the SCRM is

a cooperative process between contributors (partners) in the supply chain in order

to put the risks under control and to cope with their negative consequences. The

risk management in the organization allows to assure that the decision-maker

knows and understand the risks and prepare the necessary plan that can prevent

disasters or reduce their impact. The risk management process is executed in four

steps

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