System-oriented supply chain risk management

Abstract

Due to increasing turbulence in global sales and supply markets, today's supply chains are exposed to numerous risks. Companies have discovered that a systematic management of potential incidences, e.g. supplier failures and unexpected demand changes, holds a competitive advantage. However, risk management in global supply chains is very complex. This article contributes to the existing literature by making this complexity more manageable through the introduction of a system-oriented view into supply chain risk management (SCRM). Two new, interrelated modelling approaches are proposed: a Supply Chain Risk Structure Model describes the system that determines the causes and effects of supply chain risks, i.e. the factors and their relationships. The second model, the Supply Chain Risk Dynamics Model, is used to model the possible dynamics of the risk development. This article also demonstrates how these models integrate into a SCRM process framework. A case study with three companies shows the feasibility of the approach.