Risk and Uncertainty in SCs [Compatibility Mode].pdfVIP

1Risk and Uncertainty in SCs BST137 Strategic Supply Chain Management Drivers of SC vulnerability Increasingly Vulnerable SCs Globalisation Outsourcing Reduction of supplier base Volatility of demand Lack of visibility and control procedures Focus on efficiency rather than effectiveness Focused manuf’ng and centralised distribution 2005 Piracy Attacks ICC commercial crime services, 2011 2010 Piracy Attacks ICC commercial crime services, 2011 Risk and Uncertainty § Uncertainty § The Uncertainty Circle § Identifying and Analysing Uncertainties § Supply Chain Risk Management § Identifying Risk § Analysing Risk § Responding to Risk Uncertainty and Risk ? Uncertainty means that we can list the events that might happen in the future, but have no idea about which will actually happen or their relative likelihoods ? Risk means that we can list the events that might happen in the future and can give each a probability – ‘Risk is an implication of a phenomenon being uncertain’ (Hertland, 2003) – ‘If you don’t know for sure what will happen but you know the odds, that’s risk, and if you don’t even know the odds, that’s uncertainty’ (Knight, 1921) 2Uncertainty What is Uncertainty? ? Uncertainty – ‘ranges from falling short of certainty to an almost complete lack of conviction or knowledgeaboutan outcome or result’ (Merrium-WebsterOnline Dictionary) What is SC Uncertainty? ? “Supply chain uncertainty refers to decision making situations in the supply chain in which the decision maker does not know definitely what to decide as he/she is indistinct about the objectives; lacks information about its environment or the supply chain; lacks information processing capacity; is unable to accurately predict the impact of possible control actions on supply chain behaviour; or lacks effectivecontrolactions” Van der Vorst and Beulens (2002) Uncertainty in SCs The Uncertainty Circle The Uncertainty Circle Black Swans ? The event is a surprise (to the observer) ? The event h