Supply chain risk management

Supply chain risk management (SCRM) is "the implementation of strategies to manage both everyday and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity".

In other words, SCRM is to collaboratively with partners in a supply chain or on your own, apply risk management process tools to deal with risks and uncertainties caused by, or impacting on, logistics related activities or resources in the supply chain.

SCRM attempts to reduce supply chain vulnerability via a coordinated holistic approach, involving all supply chain stakeholders, which identifies and analyses the risk of failure points within the supply chain. Risks to the supply chain range from unpredictable natural threats to counterfeit products, and reach across quality, security, to resiliency and product integrity. Mitigation plans to manage these risks can involve logistics, cybersecurity, finance and risk management disciplines; the ultimate goal being to ensure supply chain continuity in the event of a scenario which otherwise would have interrupted normal business and thereby profitability.

Sometimes, it's possible for supply chain logistics techniques such as supply chain optimization to prejudice contingency planning which would otherwise reduce the overall risk level for that particular supply chain. It's also becoming more common among businesses especially manufacturers to employ a supplier quality management software, which integrates all phases of the supply chain cycle. This approach is shown to increase transparency, reduce overhead costs, and improve operational efficiency.

Supply chain risk management typically involves four processes: identification, assessment, controlling, and monitoring of supply chain risks. However, due to the complexity of many supply chains, these processes might not be sufficient to ensure that all eventualities are prepared for. Therefore, the concept of supply chain risk management, which is cause-oriented, is often combined with the concept of supply chain resilience, which is aims to ensure that the supply chain can bounce back from risks irrespective of their cause. Hereby, Wieland & Wallenburg (2013) distinguish between proactive and reactive elements of supply chain resilience. Durach et al. (2015) provide a systematic overview of proactive resilience, which they call supply chain robustness.

Some options to engineer an acceptable risk level include:

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