supply chain risk – The OM Blog by Heizer, Render, & Munson

Guest Post: Cyber-Enabled Cargo Theft On The Rise

Temple U. Professor Misty Blessley shares her insights with us today.

In Chapter 11 of your Heizer/Render/Munson textbook, cargo theft is identified among many risk categories. Given tracking and tracing technologies along the supply chain, how is cargo theft possible? Because thieves can outsmart digital logistics technologies.

Victims Guy Fieri and Sammy Hagar recently had two semitrailers carrying roughly 24,000 bottles of their Santo tequila vanish en route to a warehouse in Pennsylvania. Valued at over $1,000,000, only 11,000 bottles were recovered. It was not a smash-and-grab hijacking. To manipulate the logistics process, the thieves orchestrated a high-tech ruse by creating false shipping companies, spoofing GPS signals, and sending phony mechanical breakdowns. The drivers were diverted to a fake warehouse, but believed they were following valid instructions.

In such schemes, criminals exploit fragmented and non-transparent logistics networks—double brokering loads, creating illegitimate carrier identities, and manipulating tracking data. Cargo theft incidents involving fraud are on the rise, with the food and beverage sector being a frequent target. Here are two examples:

Yogurt/Plant-based Milk Heist: A load of refrigerated yogurt and plant-based milk was stolen in a double-broker fraud. Criminals used a stolen motor carrier number and a fake email to win the job, then rerouted the load and held the broker’s reputation hostage, threatening losses unless paid off.

Energy Drink Heist: A shipment of energy drinks was stolen after criminals used email spoofing and fake carrier identities in which the fraudsters created a near-perfect replica of a trusted company. They listed themselves on online load boards, won the contract, and successfully arranged pickup of the shipment. The load was rerouted more than 1,000 miles off course following false delivery instructions.

Supply chain managers must treat theft risk as integral to their supply chain risk model. Here are three suggestions:
1. Vet every carrier who will touch your product, including subcontractors and brokers.
2. Use redundant tracking systems.
3. Protect high-value shipments by using escorts and incorporating real-time verification checkpoints.

Reducing this category of risk is increasingly essential in a world where clever cyber-enabled criminals can hijack not with force, but with deception.

Classroom discussion questions:
1. The 11,000 recovered bottles were eventually distributed for sale after being deemed in good condition. Do you agree/disagree with this decision? Why?

2. Of the risk categories identified in the textbook, which risk reduction tactics are also beneficial in reducing cargo theft? How is cargo theft different from the other risk categories?

Guest Post: Teaching Supply Chain Risk Management Through the Risk Matrix

Dr. Andy Hill and Dr. Rosie Cole are both Senior Lecturers at the University of Surrey in the UK.

Supply chain risk management (Chapter 11) is critical, but often difficult for students to grasp. Risks can range from supply delays and demand shocks to extreme events like pandemics. A risk matrix is a visual tool to help firms prioritize and understand potential risks, and then make informed decisions about how to manage them. Plotting likelihood against impact offers a simple way to see these uncertainties. Its color-coded heatmap (see Module G) makes it an engaging teaching tool.

But risk matrices are riddled with three problems:(1) mathematical compression. Because the scales for likelihood and impact are simplified, rare but catastrophic events often get downplayed. The extremes are squeezed into narrow categories, which means the true scale of a severe event is not represented accurately; (2) presence of ambiguous categories. The labels “low,” “medium,” and “high” are not always clear-cut, and the boundaries between them often overlap. Different managers could look at the same scenario and classify the risk differently, leading to inconsistent decision- making; and (3) false objectivity. Many risk matrices attempt to turn qualitative judgements into numbers, for example by multiplying likelihood and impact scores. While this looks precise, the numbers are often arbitrary and can give a misleading sense of accuracy.

Here are two straightforward fixes for supply chain risk managers: (1) drop the semi-quantitative version and stick with qualitative categories: (2) align categories with probability–impact logic. Using orders of magnitude for likelihood and clearer thresholds for impact makes the tool more reliable. As a classroom exercise, you could ask students to critique a flawed risk matrix, or redesign one so categories are consistent and meaningful.

Perhaps the bigger lesson is that people, not algorithms, make decisions. Managers often rely on heuristics and intuition when assessing risk. This makes risk perception an important teaching point. Why do some managers ignore low-probability but catastrophic risks? How does education or experience shape perceptions? These questions move students beyond the tool itself into understanding decision-making behavior.

For teaching OM, the risk matrix remains a useful entry point into supply chain risk management. It should be framed not as a perfect solution, but as a way to sort risks into acceptable, unacceptable, and “needs more analysis.” Educators can use the risk matrix to teach critical thinking about tools, not just how to apply them.

OM Podcast #32: Supply Chain Risk Management

In today’s podcast Barry Render interviews George Zsidisin, the John W. Barringer III Professor of Supply Chain Management at the University of Missouri – Saint Louis. George is author of several books on Supply Chain Risk, our topic in this episode.

Heizer Render OM Podcast · OM Podcast #32: Supply Chain Risk Management

Transcript

A Word document of this podcast will download by clicking the word Transcript above.

Prof George Zsidisin at U. Missouri-St. Louis

Have you subscribed to this podcast on Apple podcasts? Just go to your Apple podcasts app, search “Heizer Render OM Podcast,” and subscribe to get all

our podcasts on your mobile device as soon as they come out!

Instructors, assignable auto-graded exercises using this podcast are available in MyLab OM. See our earlier blog post with a recording of author and user Chuck Munson to learn how to find these, or contact your Pearson rep to learn more! https://www.pearson.com/en-us/help-and-support/contact-us/find-a-rep.html

Guest Post: Developing a Magnet Supply Chain in the U.S.

Dr. Misty Blessley is Associate Professor of Supply Chain Management at Temple University

The American war machine depends on tiny bits of metal, some as small as dimes. Rare-earth magnets are needed for F-35 jet fighters, missile-guidance systems, Predator drones and nuclear submarines.

Although crucial to many industries, the U.S. lacks a robust domestic magnet supply chain. A recent Wall Street Journal article underscores the significance of regionally producing or nearshoring magnet production. China holds 92% of the global market share for rare-earth magnets. This figure increases when considering magnets produced in other countries but containing materials sourced or processed in China.

The U.S. looks to establish ‘Mine-to-Magnet’ supply chain for rare-earth magnets

China’s dominance in the industry enables it to set prices so low that potential competitors are discouraged from entering the market. One U.S. company is set to mass-produce magnets, but at costs estimated to be 50% higher than the Chinese equivalent. Abiding by costly mining and processing regulations contributes to the disparity. In addition, the U.S. lacks expertise in magnet production.

Although regional or nearshore production is important for national defense and clean energy sectors, the prospect of higher-priced magnets poses challenges. Faced with higher costs, manufacturers in defense industries may witness reduced orders from customers unwilling to bear the increased costs. Similarly, major users such as electric vehicle and wind turbine manufacturers would need to be willing to accept higher costs in exchange for the benefit of having a supply chain decoupled from China. Currently, only General Motors has committed to purchasing the American-made magnets.

The U.S. Government is actively supporting efforts to develop a domestic magnet industry by extending support to domestic firms from mine to magnets. But after three decades of post-Cold War deindustrialization, rebuilding the industry—against China’s market heft—is an uphill battle, even with government help.

Classroom discussion questions:

What are the benefits and costs of regional or nearshore magnet production?
In Chapter 11 of your Heizer/Render/Munson text, Figure 11.1 is of a beer supply chain that exemplifies a multi-tier supply chain. Magnets produced outside of China may still contain material sourced or processed in China, demonstrating the importance of looking beyond tier-one suppliers. What do you think the role of firms, governments and trade associations is in investigating multi-tier supply chains? Why?

OM in the News: The Shifting Supply Chain Winds

The world economy is undergoing significant changes as we shift from a global approach to one focused on regional and national production, reports Industry Week (Feb. 21, 2023). Demographic, geographic and political factors are reshaping our world and driving the change. Going forward, companies will need to continue to navigate supply chain disruptions, China risk, and concerns about capital outlays. The new model will not be defined by the globalization that dominated the last half-century. Here are four of the challenges the article presents:

The American China Crisis The post-COVID world has escalated tensions between the U.S. and China, with allies involved on both sides. Consumers still want the low-cost products they can get through the Chinese manufacturing value chain. But companies that ignore the post-China supply chain plan are putting their companies’ futures at risk with a clear and quantifiable situation.

Regional Industrial Labor and Skill Shortage Companies are looking to low-cost manufacturing zones in North America and Europe in an effort to move higher-value production to the region. Much of the shift to date has been items where a logistics penalty supported a more rapid move. Challenges exist for smaller commodity components with low margins, which are currently manufactured in China. These parts, mostly taken for granted, will likely stress supply chains in the near future. Purchasing teams need to regionalize their value chains. Mexico continues to shine as the heart of the North American low-cost manufacturing engine.

Shifts in the Semiconductor Industry The semiconductor life cycle has historically been cyclical, and this time is no exception. COVID drove a rapid expansion in consumer electronics, pulling this cycle ahead. Automotive companies suffered, but availability is temporarily increasing. However, with the shift to EVs requiring a growing number of semiconductors per vehicle, constraints will re-emerge. The U.S. has taken steps to engage allies and block further development of a Chinese semiconductor industry.

The War in Ukraine The Russian war in Ukraine continues to be a serious crisis with disruptions across Europe. Neon gas supplies remain tight, impacting semiconductor production. Companies should be evaluating a shift to military and government production if the Ukraine war breaks out to a larger conflict in Europe. There is a short window for companies to re-engineer value chains for risk mitigation.

The Industry Week article concludes that “2023 is an opportunity for companies to work together to restructure and regionalize their manufacturing value chains.”

Classroom discussion questions:

Why is Mexico a popular regional option?
What factors are impacting the China supply chain?

OM in the News: Supply Chain Risks on the High Seas

When we discuss supply chain risks and mitigation tactics in Chapter 11, natural catastrophes makes the list of ten risks. The Wall Street Journal (Jan. 22, 2021) confirms our point with the headline: “Maersk Ship Loses 750 Containers Overboard in Pacific Ocean.“ The Maersk Essen lost the massive boxes (out of 13,000 on board) in the Pacific Ocean while sailing through heavy seas from China to Los Angeles. This marks the latest in a spate of incidents in which boxes carrying millions of dollars’ worth of goods have gone overboard.

The One Apus container vessel, operated by Singapore-based Ocean Network Express, lost around 2,000 boxes in November when it hit a storm off Hawaii on its way to Long Beach, Calif., from Yantian, China. The ship eventually sailed to Kobe, Japan, with hundreds of tipped-over containers sitting precariously onboard and remains there for repairs. That claim alone could reach $220 million.

Dislodged containers on the One Apus, berthed at Kobe

Losing boxes in harsh weather is relatively rare, but incidents this winter have been on the rise, especially in the Pacific.

Earlier this month, 76 containers fell off a vessel operated by ZIM Shipping en route from South Korea to North America. On Dec. 31, a boxship from Taiwan’s Evergreen Marine lost 40 containers off the coast of Japan while heading across the Pacific.

As ships become bigger and containers are stacked high as multistory buildings, a vessel’s stability may come under greater pressure from pitching and rolling. One veteran Greek captain said the threat can come without warning, even when waves aren’t very high. “If you don’t catch it early on and change course, the ship can roll from side to side as it steams forward and things fall over.”

Classroom discussion questions:

What tactics can be taken to reduce this kind of risk? (Hint: see Table 11.3)
Identify several risks to a COVID vaccine supply chain.

OM in the News: Hacking the Covid Vaccine Supply Chain

Cyber attackers have targeted the cold supply chain needed to deliver Covid-19 vaccines, reports Financial Times (Dec. 3, 2020). The hackers appeared to be trying to disrupt or steal information about the vital processes to keep vaccines cold as they travel from factories to hospitals and doctors’ offices. The attacks highlight the importance of cyber security diligence at each step in the vaccine supply chain.

Many of the Covid-19 vaccines have to be kept cold to keep them from spoiling. Pfizer and BioNTech’s vaccine must be kept between -70C and -80C, while Moderna’s needs to be transported at minus 20C.

Hackers appeared to be trying to disrupt the vital processes to keep vaccines cold

IBM’s head of threat intelligence said he believed the hackers were either looking to disrupt the vaccine delivery process or steal intellectual property. “One side of it is cyber espionage: How do you get vaccines out? How is the manufacturing process working for refrigeration? How are you managing the entire logistics chain? There’s also potential for disruption, being able to launch attacks that disrupt vaccines, and their distribution to undermine trust in them.” He added that it was vital to treat the vaccine supply chain as “a new type of global critical infrastructure” to help them secure the products that could help end the pandemic. “These refrigeration companies are not going to have the same security tools that advanced financial institutions have.”

No matter who conducted the attacks, they underscore how everything about coronavirus vaccines — how to make them, test them and move them — has become vital information around the globe. A year ago, nations including Russia and China were focusing their covert efforts on stealing secrets about missiles and AI advances; 6 months ago, intelligence agencies shifted their focus to obtaining, or defending, proprietary vaccine research.

Classroom discussion questions:

List all of the major risks that vaccine supply chains face. ( Hint: see Table 11.3 on p. 480 of your Heizer/Render/Munson OM text).
Which of the 10 OM decisions (that the text is structured around in Table 1.2) are involved in vaccine preparation and delivery?

Teaching Tip: Teaching Covid and OM

We think that when you review your lecture outlines on supply chains and OM this semester and in Spring, you may find the need for some reworking. As a matter of fact, “the disruption of the pandemic in 2020, coming on top of the uncertainties surrounding trade wars, has helped turn OM/SCM into a theme of growing concern for businesses, business schools and wider society,” reports Financial Times (Oct. 8, 2020).

Shortage of bikes at Walmart during the pandemic

Cross-border trade comprised just 5% of GDP in the mid-20th century but today it is closer to 50%. That has been accompanied by a rapid extension of global supply chains with products and their components often manufactured in numerous countries, driven by cheap labor and easier transport and communication.

London Business School Prof. Jeremie Gallien states: “supply chain management used to be perceived as a ‘somewhat niche component’ of the business education curriculum. In the aftermath of the first Covid wave, many firms found themselves either fighting for survival or realizing the importance of increasing their resilience to reduce the costs they will incur during the next disruption It is harder to get student interest if one teaches supply chain concepts without being able to relate to Covid-19.”

Jay, Chuck, and I agree. And as authors of the top selling OM text in U.S. and global markets, we are here to help make your lectures more timely and relevant. We hope you will incorporate Table 11.3 (“Supply Chain Risks and Tactics”) in Ch. 11 (p. 450) and the section called “Evaluating Disaster Risk in the Supply Chain” in Supp. 11 (p.472-3) into your syllabus.

And to bring more currency into case discussions, we have just written a new case called Premier Bicycle’s COVID Problem. This case will appear in MyOMLab’s Spring edition, but here is the link should you want to preview the case or teach it this term.

Guest Post: Building A Robust Supply Chain During A Pandemic

Today’s Guest Post comes from Prof. Jonathan Opata, who teaches Operations & Supply Chain Management at George Mason University, Southern New Hampshire University and Northern Virginia Community College

China is critical to the supply chains of many companies because it is the world’s leading manufacturer and its 2nd-largest economy. Government directives on strict quarantine measures have led to economic and supply chain disruptions globally. Companies must ensure risk management in the face of the pandemic. This requires integrated supply chain visibility, better forecasting and intelligent capacity building to meet demand.

Currently, many companies have limited access to employees and logistics, and face the closure of factories because of the ongoing measures to control the spread. This has resulted in a bullwhip effect and high product costs. Here are 6 critical areas for organizations to focus on that you can discuss with your students:

1. Develop Alternative Supply Sources: Developing and looking for new sources of supply is the premier strategy.
2. Create Business Continuity Plans: These plans should pinpoint contingencies in critical areas and include backup plans for transportation, communications, supply, and cash flow. Suppliers and customers need be involved in developing these plans.
3. Create a Comprehensive Emergency Operations Center: This operations center will require integration of company-wide data sources to allow visibility into daily operations.
4. Develop a Collaborative Approach to deal with transportation suppliers to increase visibility of shipments in the supply chain pipeline. This means conducting risk analysis and teaming up with all suppliers to act on supply issues.
5. Redesign to Source from Local Content: Companies need to have production facilities with local sources of supply in each of their major markets, to spread the risk.
6. Align the procurement strategy with Supplier Relationships: Companies should rely on small groups of critical suppliers and maintain a mutually win-win relationship with each. Also, companies need to adjust for higher than normal demand and proactively design robustness into the network to minimize the impact of the bullwhip effect.

These strategies are critical for both short-term recovery and longer-term contingency planning. When companies work together, they can withstand this pandemic and come out more reliable than ever.

Good OM Reading: Learning Painful Supply Chain Lessons–Again

After the 2011 earthquake and tsunami in Fukushima, Japan, many multinationals learned painful lessons about the hidden weaknesses in their supply chains — weaknesses that resulted in loss of revenue and market cap. While most companies could quickly assess the impacts that Fukushima had on their direct suppliers, they were blindsided by the impacts on 2nd– and 3rd-tier suppliers in the affected region.

Almost 9 years later, it seems the lessons of Fukushima must be learned anew as many companies worldwide scramble to identify which of their “invisible” lower-tier suppliers — those with whom they don’t directly deal — are based in the affected regions of China. “Many companies are probably also regretting their reliance on a single company for items they directly purchase”, writes this interesting Harvard Business Review (March 5, 2020) article. Supply-chain managers know the risks of single sourcing, but they do it anyway in order to secure their supply or meet a cost target. Often, they have limited options to choose from, and increasingly those options are only in China.

Risk management principles (which are summarized in Table 11.3 of your Heizer/Render/Munson text) should be applied, at a minimum, to tiers 1 and 2 in company supply chains. Beyond tier 2, the risks should at least be understood. In some cases, it will not be possible to find multiple sources for certain parts or materials. For example, a supplier may possess unique intellectual property; sometimes volumes aren’t sufficient to justify two sources; or multiple sources are simply not available. In these cases, companies need to supplement their traditional sourcing practices with new sources of data and new approaches to understand and mitigate the risks they take on.

When companies have advance knowledge of where the disruption will come from and which products will be impacted, they have lead time to execute avoidance and mitigation strategies immediately — like
shaping demand by offering discounts on substitutes, buying up inventory, booking capacity at alternate sites, or controlling inventory allocations.

This epidemic again teaches that a robust supplier-monitoring system is a basic requirement for today’s supply chain managers.

Good OM Reading: Top 10 Supply Chain Risks for 2019

Today’s economy relies on the smooth operation of sophisticated supply chains. Yet supply chains are vulnerable. Transportation delays, theft, natural disasters, weather, cyber-attacks and unexpected quality issues can disrupt cargo flows, creating short-term costs and delivery challenges. And shifts in local, national and international trade and policies can upset established supply chains. Here are the top 10 threats to global supply chains in 2019 predicted in a new report by DHL:

1. TRADE WARS Global trade tensions have led to new tariffs on a wide range of consumer products and industrial components.

2. RISING DEMAND AND FRAGILE SUPPLY CREATE RAW MATERIAL SHORTAGES While companies are increasingly pursuing regional manufacturing strategies for finished products, the production of many key raw materials remains highly globalized.

3. RECALLS AND SAFETY SCARES PUT QUALITY UNDER SCRUTINY In highly regulated sectors such as pharmaceuticals, airplanes, and medical devices, compliance and quality control is likely to rise, driven by wider public awareness and stricter enforcement.

4. CLIMATE CHANGE IMPACT The changing climate is likely to have wide-ranging effects on global supply chains.

5. TOUGHER ENVIRONMENTAL REGULATIONS In moves to tackle climate change, local air quality, and other forms of pollution, authorities around the world are introducing new regulations.

6. ECONOMIC UNCERTAINTY AND STRUCTURAL CHANGE The global trade war, uncertainty over Brexit, and stricter environmental regulations could become driving factors in putting financial pressure on lower tier industrial suppliers.

7. CARGO CAUGHT UP IN INDUSTRIAL UNREST Industrial action is a perennial risk in transport operations.

8. HAZARDOUS TRANSPORT A number of container ship fires and accidents early in 2019 highlighted what may become more commonplace occurrences.

9. BATTLES AT THE BORDERS INCREASE WAIT TIMES The migration influx to Western Europe and ongoing migrant caravans traveling to the U.S. has increased many countries’ focus on physical border security.

10. DRONES STRIKE A BLOW TO AVIATION SAFETY Airport disruptions related to air traffic safety present a greater risk of disruption to aviation logistics operations.

The full report (March 2019) is available free when you click the link above, but you must provide your name, email, etc., to access it.

OM in the News: Saving Money and the Takata Airbag Crisis

The crisis over exploding Takata airbags does not seem to abate. Even in my own family, three of our cars have been recalled, but we have been waiting for months for replacement parts to become available. (And here in humid Orlando, the tricky properties of the ammonium nitrate propellants, or explosives, which can break down in moisture and warm temperatures, makes many people with these airbags nervous).

The New York Times’ (Aug. 27, 2016) historical article provides a case study of quality, supply chains, and reliability (the topics of Chapters 6, 11, and 17) worth sharing with your students. The Times writes:”In the late 1990s, General Motors got an unexpected and enticing offer. A little-known Japanese supplier, Takata, had designed a much cheaper automotive airbag. So G.M. turned to its airbag supplier, Autoliv, and asked it to match the cheaper design or risk losing the automaker’s business. But when Autoliv’s scientists studied the Takata airbag, they found that it relied on a dangerously volatile compound in its inflater, a critical part that causes the airbag to expand.”

Today, that compound is at the heart of the largest automotive safety recall in history. At least 14 people have been killed and more than 100 have been injured by Takata inflaters that exploded into shrapnel. More than 100 million of its airbags have been installed in cars in the U.S. by G.M. and 16 other automakers. New details of G.M.’s decision-making process almost 20 years ago suggest that a quest for savings of just a few dollars per airbag compromised a critical safety device, resulting in these deaths. (It turns out that workers at the Takata plant in Georgia manipulated tests meant to measure whether inflaters were airtight). Even with the record recall, deadly accidents and research critical of ammonium nitrate, Takata continues to manufacture airbags with the compound — and automakers continue to buy them. The airbags appear in the 2016 models of 7 automakers, and they are also being installed in cars as replacement airbags for those being recalled.

Classroom discussion questions:

Are automakers also to blame ethically in this supply chain issue?
Why is this a continuing problem?

OM in the News: Earthquakes in Japan Expose Supply Chain Fraility

Toyota is halting vehicle assembly across Japan due to earthquake disruptions at an auto-parts supplier, a move that recalls prior supply-chain interruptions — Toyota is halting vehicle assembly across Japan due to earthquake disruptions at an auto-parts supplier

“The vulnerabilities of the tight production supply chains at Japanese companies including Toyota, are back in the spotlight after earthquakes in Japan forced several to curtail output this week”, writes The Wall Street Journal (April 19, 2016). Toyota’s decision to shut 26 car assembly lines this week nationwide due to production halts by a supplier shows how the auto maker’s lean manufacturing system, often viewed as a model of efficiency, can be impacted by disasters. The latest shutdowns drew parallels to the aftermath of Japan’s 2011 earthquake and tsunami.

This is the second time in 3 months that Toyota has had to stop production in its Japanese plants after supplier troubles. The earthquake-affected supplier, Aisin Seiki, made door and engine components, and Toyota has yet to decide when it would resume operations. In February, Toyota lost production of 80,000-90,000 vehicles over a week-long halt after an explosion at a steel supplier. That shutdown weighed on Japan’s industrial output, which fell 6.2% that month.

Shutdowns occur largely because of Toyota’s JIT inventory system, a philosophy at the core of its efficient production method. By keeping as little inventory on site as possible, storage costs can be cut and component quality can be consistent. Toyota plants hold several hours worth of inventory for many parts, relying on a steady feed from suppliers. If suppliers suffer a disaster, Toyota can quickly run out of components.

After 2011, Toyota ensured that multiple suppliers are manufacturing each component. To assess risks, it built a database on suppliers, including on companies down the supplier chain. It also pushed suppliers to diversify production, and compiled scenarios on how parts production could be shifted to different locations in case of emergency.

Classroom discussion questions:

What are the advantages and disadvantages of Toyota’s JIT system?
Do U.S. firms face the same challenges? How?

Guest Post: Tackling Risk in Global Supply Chains

Today’s Guest Post comes from Andreas Wieland, Assistant Professor of Supply Chain Management at Copenhagen Business School.

Managing risks in a global supply chain can be a difficult task. But there are substantial differences between 2 systems: the company and the supply chain. In a company, it might be relatively easy to get an overview about all the risks that might occur. But a supply chain consists of hundreds, sometimes 1,000s of companies. For example, if 30,000 parts are needed to build a car – many of them coming from different suppliers and suppliers’ suppliers – it should become obvious that the scalability of traditional risk management tools becomes quickly limited.

Identifying and assessing all types of risks from all suppliers, their suppliers, and all raw materials suppliers is simply impossible! Plus, doing this is also not always reasonable: many of the supply chain disruptions that happened in recent years were, in fact, caused by risks that had not appeared on risk category lists. Could we really imagine that a Tsunami in Japan would cause a nuclear accident? The harmful thing for Japanese car manufacturers was not that it was an earthquake that had happened. It was that many of their redundant suppliers were located in the same region. Worse, even the non-Japanese plants of these companies were affected, as they had failed to make the supply chains of different regions independent.

It’s not just the design of a supply chain that can help a company become more robust. It’s also the product design. Avoiding materials that can only be supplied from certain regions, such as rare-earth materials, or suppliers of non-standardized parts, can help ward off certain types of risk. Modular product design can help to at least semi-finish a product and to add missing modules at a later stage when they become available again. Such systemic solutions help companies cope with risk in the supply chain without paying too much attention on the exact causes of risk.

In my essay in Delivered (the DHL magazine), Managing the Unknown: How We Should Tackle Risk in Global Supply Chains I list 8 potential ways to increase the supply chain’s ability to avoid and resist risk.