In progress Risk Assessment in Global Supply Chains
- ERIM PhD 2010 LIS 08 AV_HD
Supply chain visibility is consistently ranked as a top priority for internationally operating
businesses and for governments that have to perform public supervision tasks on border
crossing goods ows. Information on the operations of the global supply chain will be used
by both businesses and governmental agencies for risk analysis and risk mitigation. For
the business, operational dependency in dierent partner organizations in an SC inevitably
binds their management control eorts together. Therefore, the development of risk analysis
approaches for business that are transparent, objective, repeatable and well documented is
of paramount importance. This approaches will enable them to demonstrate that they will
supervise their own supply chains, so that the government supervisory inspections on them
could be reduced.
Currently there have not been a standardized inter-organizational risk assessment method
to support the risk-related SC collaboration. This PhD research aims at the development of
such a method, with expected contribution in both managerial and technical aspects.
global supply chain; risk assessment; business intelligence; collaborative management control
Time frame2011 - 2015
Businesses operate more and more in global supply chains. In these supply chain, they need to cooperation with many business partners across the world, but also have to interact with respect to the interaction with government agencies, most notably customs. The main problem for both businesses and government agencies is how to evaluate the reliability and security of the flow of goods through the supply chain.
Current developments in inter-organizational systems offer more and more possibilities to generate fuller visibility in global supply chains, across company boundaries. The tools to analyze business and security risks with this type of enhanced visibility data are not readily available and generally accepted in business practice. This project will develop new business intelligence methods for the assessment of risk in global supply chains.
Businesses who are managing global supply chains that link their manufacturing base to their customers’ markets face many challenges in the cooperation with business partners across the world. These challenges consist of, among others, partnership selection, cross-cultural trading and negotiation, and international supply chain fulfillment. Securing effective and efficient flow of goods across borders is a critical capability of such businesses that depends strongly on the degree to which they can inform themselves of the state of play in their supply chains. The degree to which they can maintain visibility on partner performance, progress of goods flows, developing bottlenecks, costs and time is a an important capability of the best in class companies.
In addition to managing supply chains in a global business network, global businesses also have to interact with government agencies in the various countries in which they are active. This concerns mainly the activities of customs agencies, but can also include inspection agencies, licensing agencies, police departments, tax authorities, anti-trust authorities, and so on. Many of these agencies, but especially Customs, perform their own risk assessment to identify hazards that may negatively affect society. For this risk assessment, companies are often forced to provide data about their supply chain in for form of declarations. The activity of satisfying these governmental data demands is called compliance.
Currently, in many supply chains, the processes of supply chain performance and compliance are separated, and fragmented across parties in the supply chain. There are a number of reasons for this, such as the definition of the terms of trade, economic specialization and restriction of liability. Recent developments in the area of inter-organizational systems is moving in the direction of more integrated supply chain systems, data integration and improvement of visibility.
The challenge is how to satisfy the above two bottlenecks in the most efficient manner. The key to answering this challenge is in the development of high quality, transparent risk assessment procedures for businesses. These assessments will help businesses improve their supply chain performance, but their transparency will also instill confidence among government agencies that the underlying data that businesses use is in fact reliable enough to be used for risk assessment at the governmental level as well.
The research project thus needs to focus on the review of current risk assessment measures in IT systems of businesses that are active in global supply chains, and the development of risk assessment approaches that are suitable to be expanded across company boundaries to become supply chain risk assessment approaches.
For this purpose, the project has to take several steps. The first step is to review which tools currently exist in available business software such as Enterprise Resource Planning systems and supply chain IT suites, and identify the current use and reasons why these tools are not fully utilized. The second step is to develop risk assessment approaches that can work in a supply chain context. This means, among others, that these approaches often incorporate data from different sources across the supply chain (which results in data and other compatibility issues) and that different parties at different moments in time may be in the position to perform the risk assessment and act on its outcomes. The third step is to develop a prototype supply chain risk assessment approach that can be shown to work in a real life environment of a specific international tradelane.