On March 17, 2000, lightning hit a power line in Albuquerque, New Mexico. The strike caused a massive surge in the surrounding electrical grid, which in turn started a fire at a local plant owned by Royal Philips Electronics, N.V., damaging millions of microchips. Scandinavian mobile-phone manufacturer Nokia Corp., a major customer of the plant, almost immediately began switching its chip orders to other Philips plants, as well as to other Japanese and American suppliers. Thanks to its multiple-supplier strategy and responsiveness, Nokia’s production suffered little during the crisis.
In contrast, Telefon AB L.M. Ericsson, another mobile-phone customer of the Philips plant, employed a single-sourcing policy. As a result, when the Philips plant shut down after the fire, Ericsson had no other source of microchips, which disrupted production for months. Ultimately, Ericsson lost $400 million in sales.1 (Ericsson has since implemented new processes and tools for preventing such scenarios.2)
These two dramatically different outcomes from one event demonstrate the importance of proactively managing supply-chain risk. Supply-chain problems result from natural disasters, labor disputes, supplier bankruptcy, acts of war and terrorism, and other causes. They can seriously disrupt or delay material, information and cash flows, any of which can damage sales, increase costs — or both. Broadly categorized, potential supply-chain risks include delays, disruptions, forecast inaccuracies, systems breakdowns, intellectual property breaches, procurement failures, inventory problems and capacity issues. Each category has its own drivers (see “Supply-Chain Risks and Their Drivers,” p. 54) and mitigation strategies (see “Assessing the Impact of Various Mitigation Strategies,” p. 55).
How a company fares against such threats depends on the type of disruption and the organization’s level of preparedness. To prevent the kind of heavy sales losses suffered by Ericsson after the Philips plant fire, managers must perform a delicate balancing act to keep inventory, capacity and other elements at appropriate levels across the entire supply chain in a dynamic, fast-changing environment. Dell, Toyota, Motorola and other leading manufacturers excel at identifying risks to their supply chains, and at creating powerful mitigation strategies that neutralize potentially negative effects. With a clear understanding of the types of supply-chain risks, managers in many types of industries can tailor effective risk-reduction approaches to their own companies.
A Variety of Risks
Managing supply-chain risk is difficult because individual risks are often interconnected. As a result, actions that mitigate one risk can end up exacerbating another. Consider a
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Hi! I have been a member for a long time but with each passing year you seem to be changing the rules, restricting access or creating new levels of access. This is making it very difficult to rely on your website to get papers or cases. I love the journal but if I have to get the papers from the on-line libraries, what is the point of my keeping my membership with you? Today I wanted a paper from 2004 (Managing Risk to Avoid Supply-Chain Breakdown By Sunil Chopra and ManMohan S. Sodhi)which I have accessed and referred to many times in the past, but I cannot access it now. This is really ridiculous.
This does not earn you money, it loses you money as I will not renew my membership when it ends and get the articles from the aggregators.
Kindly think about it – your earlier website was more useful to researchers and academics and was well organized and things were easy to find.
Regards,
Anshuman
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Prof. Anshuman Khare
Athabasca University