Strengthening supply chain risk management for business continuity ...

7 downloads 0 Views 167KB Size Report
for business continuity: a case study approach', Int. J. Management and ...... can gain insurance against costly supply chain risk planning for all parties involved.
Int. J. Management and Enterprise Development, Vol. X, No. Y, xxxx

Strengthening supply chain risk management for business continuity: a case study approach Ainul Haniza Mohd Rashid and Siew-Phaik Loke* Faculty of Business Management, Universiti Teknologi MARA (UiTM) Perak, Seri Iskandar Campus, 32610 Bandar Baru Seri Iskandar, Perak Darul Ridzuan, Malaysia Email: [email protected] Email: [email protected] *Corresponding author

Keng-Boon Ooi UCSI University, Kuala Lumpur Campus (South Wing), No. 1, Jalan Menara Gading, UCSI Heights, Cheras, 56000 Kuala Lumpur, Wilayah Persekutuan, Malaysia Email: [email protected] Abstract: This research is undertaken to determine the current business supply chain risk management (SCRM) practices in Malaysia’s electronics industry after the Japan earthquake and tsunami through assessment of robustness, resilience, flexibility and agility of the supply chain. In this study, findings of the case studies of buyer-seller (dyadic) relationships conducted on SCRM practices are reported. Three interviews were conducted with senior managers from one of the top Japanese electronics manufacturers as well as its component parts supplier. We observed that while successful SCRM greatly enhances business continuity, securing the supply chain requires a full collaboration among supply network partners, a well-aligned structure and a more dynamic and innovative approach for catastrophic risks management. We also proposed a conceptual framework that can be used in future study for examining the relationship of robustness, resilience, flexibility, agility of a supply chain and firm’s sustainability. Keywords: supply chain risk management; SCRM; business continuity; electronics industry; Malaysia; case studies; enterprise development. Reference to this paper should be made as follows: Mohd Rashid, A.H., Loke, S-P. and Ooi, K-B. (xxxx) ‘Strengthening supply chain risk management for business continuity: a case study approach’, Int. J. Management and Enterprise Development, Vol. X, No. Y, pp.xxx–xxx. Biographical notes: Ainul Haniza Mohd Rashid is a Lecturer in the Faculty of Business Management, Universiti Teknologi MARA (UiTM) Perak, Seri Iskandar Campus, Malaysia. Prior to being an academician, she has worked as a production control executive of a Japanese electronics manufacturing firm (under the supply chain management group). She had gained eight years of industrial experiences focusing mainly on production planning, scheduling and

Copyright © 20XX Inderscience Enterprises Ltd.

1

2

A.H. Mohd Rashid et al. control; costing and quality management (quality circle and training within industry). Her research interests include operations and supply chain management, enterprise wide risk management, business continuity and Japanese manufacturing strategies. Siew-Phaik Loke is a Senior Lecturer in the Faculty of Business Management, Universiti Teknologi MARA (UiTM) Perak, Seri Iskandar Campus, Malaysia. She received her PhD in Management from Graduate School of Management, Universiti Putra Malaysia. Her research interests include strategic alliances, supply chain, business strategy and policy, innovation and sustainability. Keng-Boon Ooi is a Professor at the Faculty of Business and Information Science, UCSI University, Malaysia. He has published over 80 articles in international refereed journals. This paper is a revised and expanded version of a paper entitled ‘Supply chain robustness and resilience for firm’s sustainability: case studies on electronics industry’ presented at the 2014 AAGBS International Conference on Business Management (AiCoBM2014), Bayview Beach Resort, Penang, Malaysia, 7–8 April 2014.

1

Introduction

The current global business ecosystem is more than ever vulnerable to risks from operational and natural mishaps. The powerful 9.0 earthquake and tsunami in March 2011, followed by a nuclear crisis hitting Northeastern Japan aftermath leaves a research gap on the global supply chain from the perspective of managing its profound impact on the business continuity and the related industries sustainability. According to Mohd Rashid and Loke (2014), the catastrophic events such as earthquake affect the entire supply chains globally by breaking down the infrastructure and production. For example, being a major world supplier, the industries of automotive, electronics, semiconductors, steel and chemical in Japan was affected most due to natural disasters. In the wake of the event, the issue of uncertainty caused by exposures to catastrophes has raised the need to develop business continuity plans (BCP). It is crucial for firms to manage its supply chain risk in embracing and competing in the highly unpredictable business environment. The ability to overcome the supply chain disruption is a prerequisite particularly for manufacturing firms that are JIT-based since mere disruption of a single component can cause a breakdown for the entire product line. New solutions are developed to improve the SC performance at minimum costs (Chen et al., 2013). For example, Gunasekaran and Ngai (2014) argued that expert systems and artificial intelligence are an integral component of SC strategy. Firms are facing intense competition due to globalisation, technological changes and better risk management approach are seen to be contemporary factors to derive a competitive edge (Brindley, 2004). Prior researchers such as Manuj and Mentzer (2008), Loke et al. (2012) recognised that firms can derive competitive advantage from a wellmanaged global supply chain. As argued by Wagner and Bode (2008), both practitioners and scholars have dedicated to study the supply chain risk and they asserted that effective supply chain risk management (SCRM) can improve firm’s responsiveness and further

Strengthening supply chain risk management for business continuity

3

lead to greater financial performance. Similarly, Hauser (2003) found that risk adjusted supply chain management lead to a better competitive position. A systematic SCRM is useful for evaluating and monitoring the associated risks in an organised way (Norrman and Jansson, 2004). Why research into supply chain risks of an electronics industry? We aim to examine the supply chain risk practices in Malaysia focusing on the electronics industry after the devastating event. As we move along the path of riskier business landscape, it is increasingly becoming a challenge to formulate a disruption proof supply chain. Blos et al. (2009) highlighted that: “Apparently, the electronics companies are more vulnerable to supply chain risks. One reason is that the high dependence on Asian market and due to the nature of the products, there is a need for careful packing, fragile handling and transportation.” (p.250)

Thus, the ability to bounce back from crisis through an effective SCRM has become a central agenda of business leaders in every industry. The search is on finding a new approach to manage risk within the global supply chain networks. For example, Kristianto et al. (2014) argued that the complex issues resulted from disaster problem or price changes should be taken into consideration in reconfiguration of the SC network design. The ability to respond to a real time risk event is a must to lower the impending impact and it can hasten the recovery process. According to Vanany et al. (2009), their comprehensive review on the SCRM demonstrated that the SCRM is mostly being applied in the electronics and aerospace sectors. Sodhi (2005) found that the electronic industry is more exposed to greater risk because of shortened product life cycle as well as constant fluctuation on customer demands. While the interest in studying the SCRM has been proliferated (Colicchia and Strozzi, 2012), it is essential for us to understand that the awareness of possible negative disasters impacts can be reduced through risk management (Blos et al., 2009). The uncertainty caused by exposures to catastrophes has raised the need to develop a disaster recovery and BCP. Hauser (2003) argued that SCRM is dissimilar to disaster response and it focuses more on keeping the complex process moving efficiently with minimum costs so that the product quality or customer satisfaction can be maintained. Recent studies call for more research on how firm reacts to risk incidents that strike its supply chain (Sodhi et al. 2012). The ability to respond to a real time risk event is a must to lower the impending impact and it can hasten the recovery process. When a firm failed in curbing a risk incident from occurring, it must be responded in a creative and swift manner. Highlighted by Sodhi et al. (2012), only few studies (e.g., Kleindorfer and Saad, 2005; Norrman and Jansson, 2004) have studied the catastrophic risks. In this study, we draw findings and conclusion from the literature on SCRM and extensive interviews conducted. The paper is structured as follows: Firstly, the literature that is related to SCRM and business continuity planning is summarised to set a background for the topic discussed. Secondly, the literature review leading to the development of propositions and conceptual model will be presented. After the brief discussion of research methodology, we describe the results of both company’s current approach to SCRM. Moving from there, we include discussions on best practices in SCRM and the research implications. Lastly, the paper finishes by providing a brief conclusion.

4

2

A.H. Mohd Rashid et al.

Literature review

This section of the paper discusses concepts related to the SCRM as covered in most of the recent literature, namely supply chain risks, robustness, flexibility, agility, responsiveness and business continuity management (BCM).

2.1 Risk and supply chain risks Previous scholars (e.g., Hallikas et al., 2002; Shapira, 1995; Yates and Stone, 1992) acknowledged that risk is associated with the probability of occurrence of a detrimental event that leads to a hike in the costing aspect (Zsidisin et al. 2004). The supply chain risk has been well conceptualised in the body of literature (Jüttner et al., 2003; Zsidisin et al., 2004). A company’s risk can be classified according to their sources. In our paper, we adopted similar classification by Christopher and Peck (2004). The sources of risk for a company are: 1

process and control risks within the company

2

supply chain risks that derived from disruption on the flows of material, information and capital among partners

3

environment risks that are triggered from potential damage caused by socio-political, microeconomic or technical changes.

Anthropogenic catastrophes such as terrorist attacks of 11 September or catastrophic risk sources like tsunamis fall in this category (Kersten et al., 2007; Wagner and Bode, 2006). Jüttner (2005) further noted that exposure to such extreme external threats which are influenced by natural disasters, epidemics, or terrorist attacks would bring negative implication towards the logistics system and inflict global supply chains realignment. According to Lassar and Kerr (1996), the notion of agency theory lies on the delegation of work from one party (the principle) to another (the agent). Within a buyer-supplier setting, the purchasing firm is viewed as the principle and the supplier is the agent. Managing the buyer-supplier relationship require skills and commitment where outcome uncertainty, goal conflict and even relationship length can impact such link (Logan, 2000). Risk and uncertainty in supply chain management remained as a vital aspect in the decision and control of management specifically with the proliferation of global contract manufacturers and suppliers (Vanany et al., 2009). While implementation of supply risk assessment seems reasonable when evaluating new or prospective supplier firms that provide critical inbound supply (Kraljic, 1983), extensive risk valuation for established supplier partners often imposes inefficiency in resource allocation (Zsidisin et al., 2004). March and Shapira (1987, p.1404) provided the definition of risk as “the variation in the distribution of possible supply chain outcomes, their likelihoods, and their subjective values”. Supply chain risk is defined as “any risks for the information, material and product flows from the original supplier to the delivery of the final product for the end user” [Jüttner et al., (2003), p.200]. Faisal et al. (2006) identified two components for risk characterisation: impact and likelihood of occurrence. Peck (2006) adopted a more holistic approach in examining the supply chain risk and its management. He argued that addressing supply chain risk requires cross-functional perspective, rather than a view from the functional SCM alone. Deleris and Erhun (2011) identified supply chain risks

Strengthening supply chain risk management for business continuity

5

from the perspectives of production, operation or technology, social, natural, economy, government and legal. Under the natural category, they have included risks from hazardous events such as fire and wild fire, severe thunderstorm, flood, monsoon, blizzard, ice storm, drought, heat wave, tornado, hurricane, typhoon, earthquake, tsunami, epidemic, famine and avalanche. Global sourcing has placed even greater challenges and exposing these firms to higher risk from catastrophes (Faisal et al., 2006). While these risks are impossible to be totally eliminated from supply chains, managers can formulate and implement appropriate strategies to overcome them only if the risks associated within the supply chain are well-comprehended.

2.2

Supply chain risk management

SCRM generally emphasise on managing the supply chain and its risks that are affecting the firms (Norrman and Lindroth, 2002). Neiger et al. (2009) noted the increased popularity of SCRM which called for new strategy to identify and analyse ways to minimise supply chain vulnerability and risk. SCRM focuses on collaboration among supply chain partners aiming to apply risks and uncertainties caused by supply chain activities (Norrman and Lindroth, 2002). Kajüter (2003) referred SCRM is a collaborative and structural risk management approach in the process of planning and control in the supply chain. The SCRM targets to manage risks that may bring adverse effect that disrupts the accomplishment of the supply chain objectives. According to the Association for Operations Management (APICS, 2011), risk management helps to generate best practices within the supply chain environment; and firms that are embracing such practices are able to react rapidly and derive competitive advantages from these competencies. Supply chain risk analysis aims to estimate any future event and trend that could affect the firms so that managers are well-prepared with the strategies to overcome these risk-related issues (Norrman and Jansson, 2004). Tang (2006b) systematically addressed the SCRM risks as supply chain risk and its mitigation approach. SCRM involves a firm’s effort to: 1

recognise and identify the risk

2

evaluate and assess the risk

3

mitigate the risk

4

respond to risk incident for both operational risks and catastrophic risks (Sodhi et al., 2012).

2.3 Robustness What is robustness? It is reflected through a firm’s endurance to the environmental changes without adaptation (Asbjørnslett, 2008). Robustness is the capability to accommodate any unpredictable future happenings so that the initial desired outcomes can be maintained. A robust supply chain sustains the material and information flow within the supply chain or supply network. Tang (2006a) outlined and proposed nine ‘robust’ strategies for firm so that they can efficiently overcome the supply chain disruptions and sustain its operations. They are postponement; strategic stock; flexible

6

A.H. Mohd Rashid et al.

supply base; make-and-buy; economic supply incentives; flexible transportation; revenue management; dynamic assortment; and silent product rollover. Tang (2006a) further explained that a robust strategy is valuable for managing and monitoring regular fluctuations under normal circumstances even there is little occurrence of major disruptions. Firms can thus manage their demand and/or supply by adapting to the robust strategies so that they can shift production plan (e.g., adjust order quantity and product configuration) and respond to customer and market demands quickly (e.g., change mode of transport and influence customer product selection dynamically). Firms that are equipped with a robust supply chain can plan and execute the contingency plans more efficiently in the event of disruption. Therefore, Tang (2006b) argued that a robust supply chain lead to a firm’s resilience.

2.4 Resilience When a firm is bound to deal with unexpected disruption in its supply chain, how well this firm survives despite severe impact is known as resilience (McManus et al., 2007). It is a firm’s ability to return to its initial functioning state after disturbance (Christopher and Peck, 2004). Coutu (2002) described it as the capability “to bounce back from hardship”. According to Senior Vice President for the Council on Competitiveness, van Opstal (2007) resilience refers to the system capability in survival, adaptability and development when facing unpredictable encounters, including the times of catastrophe. A resilient supply chain, even when it was affected, can return to its original state including disruptions caused by natural disaster or losing its one and only supplier. Based on the empirical findings, previous researchers such as Rice and Caniato (2003), Christopher and Peck (2004) and Sheffi (2005) concluded that a firm’s capability to overcome the disruptive changes require inputs from the resilience strategies. Supply chain resilience specifically enhances manufacturer’s ability in the preparation for unpredictable circumstances; in responding to interferences and ultimately to recover from these situation (Ponomarov and Holcomb, 2009). Scholars relied on the assumption that some risk events are inevitable when examining the supply chain resiliency (Jüttner and Maklan, 2011).

2.5 Flexibility Firms are dealing with constant changing business environments and thus it is crucial for them to be flexible. Upton (1994) defined flexibility as “the ability to change or react with little penalty in time, effort, cost or performance” (p.73). While flexibility is viewed as a contingency action (Tomlin, 2006), it also helps firms to redeploy previously committed capacity (Rice and Caniato, 2003). Supply chain flexibility provides firm a greater ability in responding to any sudden events that are unforeseen during the strategy formulation and planning stage (Welch and Welch, 1996). Tang and Tomlin (2008) proposed five basic flexibility strategies for reducing supply chain risks: 1

acquire and source from multiple suppliers

2

secure the flexible supply contracts

Strengthening supply chain risk management for business continuity 3

maintain flexible manufacturing process

4

adopt flexible product strategy through postponement

5

set a well-responsive pricing.

7

Tang and Tomlin (2008) further suggested that, when implementing a particular strategy, the firm should create a structured evaluation process so that the activities of identifying, assessing and mitigating the risks with contingency planning can be completed efficiently. While most managers favour high flexibility supply chain, these supply chains are often more expensive as compared with those that are less flexible (Merschmann and Thonemann, 2011).

2.6 Agility Christopher and Peck (2004) are contented that resilience, particularly within the supply chain, implies agility, the firm’s capability to rapidly react to the fluctuated demand and supply patterns. The concepts of agility and resilience seemed intertwined. Lee (2004) apply the terminology of ‘triple A’ supply chain (agility, adaptability and alignment), where agility is the ability of the firm in preserving its operational and competitive position. More than two decades ago, Goranson (1999) considered agility as the unplanned and unscheduled adaptability to unpredicted and unanticipated external conditions. Supply chain agility can minimise the negative effects of changes in market demands. Lee (2004) highlighted six ways that supply chain partnering firms can do in order to promote agility: •

ancillary flow of information at the right time



steady and committed collaborative relationships



redesign of production processes to accommodate deferment



effective inventory buffers and management



establishment of a reliable logistics system and network



development of contingency plans and teams to manage crisis and unexpected event.

Overall, an effective supply chain agility requires dependable supply chain partners (Narasimhan and Jayaram, 1998; Olhager and Selldin, 2004) and a strong collaborative relationship through sharing of information among them (Thomas, 2008).

2.7 Business continuity management A firm’s long-term success is largely dependent on its sustainability. Business continuity involves effective strategy formulation and implementation to provide alternatives to modulate operational interruption (Hiles and Barnes, 2001). Risk management is valuable to help the firm to mitigate the consequences of an unforeseen event and to minimise its negative impact on the business activities. BCM is generally related to management techniques and strategy that aims to sustain the firm’s business functions and operations.

8

A.H. Mohd Rashid et al.

The Chartered Management Institute (2002) as cited in Norrman and Jansson (2004) stated that: “Business continuity management includes crisis management (overall processes to manage the incident), disaster recovery (recovery of critical systems, applications, data and networks), business recovery (recovery of critical business processes) and contingency planning (recovery from impact external to the organization).” (p.439)

Norrman and Jansson (2004) argued that BCM focuses on restarting the interrupted businesses. The strategic action plans developed for BCM is referred to as business continuity planning which aims to safeguard the firm’s operational routine under the impact of any catastrophic events (Norrman and Jansson, 2004). Such planning is more than just a mere disaster-recovery planning. It comprised efforts to plan and coordinate resources availability as well as ensure continuity of crucial services in the event of unforeseen interruptions. A BCP enhances firm’s competitiveness by preparing a blueprint to guide and bring the firm back on track from disasters or other significant disruptions (Zurich, 2011). Rowbottom et al. (2011) cited one example of ‘best practice’ BCM, that is the coupling of demand forecast with an intelligent supplier management function, which enables automated visibility, monitoring and control of supplier’s quality and delivery promise.

3

Conceptual research framework

The relationships between SCRM and business continuity are illustrated in this framework as shown in Figure 1. Figure 1

Conceptual research framework

Supply Chain Risk Management

Robustness Resilience

P1 P2 P3

Flexibility

Business Continuity

P4

Agility

SCRM involves risk management through greater collaborative efforts between the supply chain partners in protecting the firm’s sustainability (Christopher, 2010; Brindley, 2004; Tang, 2006a). Based on the literature review, our propositions are as follow: Proposition 1

The robustness of SCRM is positively related to business continuity.

Proposition 2

The resilience of SCRM is positively related to business continuity.

Proposition 3

The flexibility of SCRM is positively related to business continuity.

Proposition 4

The agility of SCRM is positively related to business continuity.

Strengthening supply chain risk management for business continuity

4

9

Research methodology

We have found that there is limited empirical research on SCRM implementation in companies to represent a buyer-seller relationship, in particularly on the dyad perspective. Thus am explorative approach has been selected. Dyadic relationship is reflected through two parties within a supply chain, which are the buyer and supplier. In this study, the dyadic relationship is illustrated as follows: Figure 2

Dyadic relation of the manufacturer and its supplier

The Electronic Manufacturer

The Component Parts Supplier

Empirical research is useful for theory building and verification that serves to be the backbone for research advancement in the operations management field (Flynn et al., 1990). However, we have conducted semi-structured and in-depth qualitative interviews in person with the supply chain senior managers of two companies in the Malaysian electronic industry in this study. These managers have worked with several different companies and industries and were able to offer greater insights to enrich our study because they have witnessed the companies move through several transformations. Telephone and email contacts were initiated to secure the participation of the managers. We have ensured the interviewees on the issues of anonymity and permission of using recording during the interview sessions. The discussions focused on how natural catastrophes cause the risk in supply chain and their implications.

5

Results from case studies

This section provides findings on the case studies of two Malaysian electronics companies, in which the purpose is to derive some managerial insights on how to manage supply chain risks under operational catastrophes. The profiling of these two companies is presented in Table 1. The identities of the organisations involved in this study were not revealed to protect their commercial confidentiality.

10

A.H. Mohd Rashid et al.

Table 1

Profiling of company A and company B

Company A

Company B



A Malaysian manufacturer of audio visual products.



A Malaysian semiconductor manufacturer and supplier.



The company started its operation as a manufacturer of consumer audio and video products, manufacturing and selling consumer audio and video service parts.



Established in 1993, the company is an overseas subsidiary of a Japanese electronic components manufacturer for production and sales having foothold in South East Asia and the rest of the world.



A subsidiary of a Japanese corporation.





Presently, it manufactures the audio equipment such as home audio systems; Hi-Fi amplifiers, receivers, CD and DVD players and digital sound projectors.

The company manufactures power inductor and EMI suppression filter.



The supply of the final component parts are made through the international procurement centre. 30% of the materials are sourced locally whereas 70% are Japan-made.



Most of the electrical parts are imported from the main players for semiconductors; either from China, Philippines and only a small percentage is made in Malaysia.



High graded parts are sourced from Japan and some from the USA. On the other hand, almost 100% of mechanical parts are locally produced.

5.1 Sourcing 5.1.1 Single sourcing The Japan earthquake and tsunami incident was regarded as an eye opener on the SCRM issue for company A. The main problem on supply side delved on single source parts which are being under the control of the parent company in deciding upon the alternative or substitute parts. In urgent cases, the involvement and support from local designers and engineers are needed to propose other alternative parts available at the soonest time possible. The worst effect prior to the catastrophic event was on the supply of one customised IC produced by a supplier in Japan, for company A’s new circuit of new high-end model series. Being newly launched, the customised IC’s were just started to be supplied before it was disrupted, leaving the local designers unable to decide overnight on the other alternatives. While waiting for the supplier to recover, at the same time not being able to source out the part’s substitute due to major design changes needed, the company had to wait for two months and had to delay the production of the new models as a result. The management needs a lean supply chain to drive out excessive inventory, to minimise risk and costs. This leaves little buffer for the company to react during supply disruption and thus opening the door for an improved strategic supplier relationships. While prediction for natural disasters to happen is difficult, the management can often gauge the likelihood of occurrence based on geographical location of a supply source and to identify high risk suppliers. Company should perform risk assessment on the suppliers that significantly contribute to its profitability.

Strengthening supply chain risk management for business continuity

11

Chopra and Sodhi (2004) grouped both the firm’s dependency on one source of supply and its capability in finding a replacement as a disruption risk together with other events such as natural disaster, labour strike, terrorists and wars. According to Christopher and Peck (2004), building the supply chain resilience relies on managers’ understanding on the business and supplier networks and how they affect one another. Technology with mapping tools can be useful to identify the important paths and links. Evidenced in the case of company A, the critical path occurs when having a single source of supply without substitute in place. While single sourcing can benefit the firm in terms of cost reduction, Christopher and Peck (2004) warned that it is dangerous in terms of resilience. Interestingly, Wagner and Bode (2006) did not share a similar view. They argued that single sourcing is harmless as compared to general dependence on some suppliers. This is because single sourcing approach shapes a much closer relationship between two firms which require joint efforts and commitment that may lead to a winwin situation that the supply risk, perhaps, is absorbed along the process. Subsequently, the IC production was transferred to another area in Japan and it took another five months for supply to stabilise. As for other semiconductor standard parts affected like transistors, the purchasing department managed to get the support of local designers through product design changes for parts substitution. For incidents where the original parts list have no alternate parts, actions need to be taken to include the alternate parts in the parts list. Based on this experience, designers have now opted to source for localised parts primarily as compared to Japan made parts and quoting from the managing director, the purchasing manager (sourcing and expediting) said, “..the best production should be in Malaysia.”

Ideally, the aim is to localise all the parts. However at the moment, on case by case basis and in certain conditions, it is not feasible to have all parts locally produced. Company A still needs technology and technical dependence from Japan on critical parts like IC, microprocessor, transformer and power supply. Also company A’s suppliers have even learned and shared on efforts and initiatives to reduce Japan-made parts; hence when producing the parts, suppliers would ensure other factories are able to run production for the component supplied. Wagner and Bode (2006) found that global sourcing poses greater risks to firms due to catastrophic events. Since global sourcing strategy extents the geographical coverage, the information and material flows within these supply chains are under greater challenges with more threat events. Wagner and Bode (2006) further provided empirical evidence to conclude that greater supplier dependence can reduce the risk exposure to catastrophic events. Tang (2006a) also suggested having flexible supply base as one of the ‘robust’ strategies for firm’s to overcome the supply chain disruptions and to sustain its business operations. The experience of company A which is in a module business is different from company B which is in the component business. The major raw material being the ceramic core is not as critical as compared to the assembly business. Company B operates on a two-factory policy, which means that when the earthquake took place in Japan, the parent factory transferred the production function to another factory in another region, unaffected by the disaster. Hence company B was not severely impacted since the good materials were already transported to the second factory within four days of transition period. Company B however experienced six months of supply hiccups as a result of the monsoon season in Thailand back in 2011, where the country is responsible for 25% of the global hard disk supply. Company B could not increase the production level due to

12

A.H. Mohd Rashid et al.

shortage in supplies from suppliers in Thailand. As a result, the costs for hard drive increased leading to lower computer sales.

5.1.2 Alternate part Moving away from single sourcing, company A also continues to practice having alternate part A and alternate part B, and having to purchase both parts at the same time with the difference only in the volume. In contrary to the previous practice of choosing only to buy from the best suppliers or the best-priced parts, company A needed to maintain having part A, part B or part C where necessary, and only regard one as the active part in the materials requirement planning (MRP) system. This is to secure against claims of no initial order from suppliers which would be a disadvantage in supply negotiations should the need arises in critical times. Hence, even when the second parts supplier is not so competitive, the company would still buy in small quantity. Therefore in cases where something unforeseen happens to part A, the company may switch over to part B. No switching cost is involved, only in the difference in price offered.

5.1.3 Local R&D decision-making function The decision to re-operate the R&D department at company A is expected to enhance the company’s competitive advantage especially in speeding up in-house approval of locally produced parts and to resort to design change matter is the most appropriate action as compared to the waiting time on decisions from the parent company previously.

5.2 Open market trading In line with new emerging trends being practiced in the face of supply breakdown, company A adapted to acquiring parts from the trading companies in the open market including from Europe and Hong Kong. Although considered as the fastest way to replenish standard component parts, materials are being purchased immediately with a higher price to the extent of paying triple the value from the current market price. Purchase of this sort in the company is called political orders which only requires direct approval from the managing director of company A once the necessary parts have been identified available in the open market thus enabling the company to secure the parts supply and to resume production soonest possible. Buying from the open market would only involve internal authorisation without the approval from the parent company. Also political orders would not be reflected in the material system’s requirement but will be shown as extra orders. In urgent situations, trading companies in the open market would have the advantage in supplying certain parts that are highly sought for. Hence it is vital to maintain a good relationship with a pool of trading companies for this matter. At one level, the trading companies also approaches company A to request for purchase of any excessive or redundant parts available. The company policy does not allow sales of excessive or redundant parts to these third party companies, but the parts will be scrapped. The purchasing manager of company A further added, “Our policy still does not allow us to sell, we only can buy, but we cannot sell.”

Strengthening supply chain risk management for business continuity

13

Purchase of parts from trading companies in the open market can be done through direct purchase as well as through any key suppliers’ accounts since it is a one-time buy which includes 1 to 2% mark-up. This additional cost for material acquisition is not being absorbed into the final product and is not being charged to the end user but is being considered under the company’s total manufacturing cost.

5.3 Supplier management 5.3.1 Flexibility of supplier base Being asked on the flexibility of supplier base, company A suggested three as the maximum number of supplier base for a component part. It is argued that if there are more than three alternate suppliers and if the delivery and price is not competitive, no further purchases should be made. Moreover there is no point in maintaining too many substitute parts in the system but only keeping a few of qualified suppliers. Sheffi (2001), Kleindorfer and Saad (2005), Rice and Caniato (2003) and Zsidisin et al. (2004) concluded that the most common way for supply chain risk reduction is to engage multiple suppliers for strategic parts. Tang (2006b) added that a flexible supply base in a firm not only supports the handling of regular demand fluctuation; it also serves to sustain the material supply uninterruptedly in times of grave interruption happens. The robust supply chain strategy with its flexible supply base increases ability of the firm in supply management and it enables the firm to shift their production among suppliers in a prompt manner in the aftermath of grave disruption. According to Berger et al. (2004), dual sourcing can be used as in the prevention of risks of quality, quantity, disruption, price, variability in performance and opportunism; however, single sourcing needed more cost in terms of investment. In the study conducted by Manuj and Mentzer (2008), the managers mentioned keeping ‘qualified back-up’ suppliers due to their supply chains being unable to withstand any temporary disruptions. One of the supply side risk management strategy is hedging by dispersing the supplier and facilities portfolio across the globe to be ready to face uncalled for events like natural disaster and currency fluctuations. Tang and Tomlin (2008) deemed flexible supply through multiple suppliers as one of the flexible strategies to reduce the adverse effect of supply chain risks. However they propose to implement flexibility strategies with restricted flexibility to achieve significant result in firms. Tang and Tomlin (2008) further concluded that most of the benefits are achievable at a low flexibility level and that firm need not invest in high level of flexibility for supply mitigation, process and demand risks. Only when a certain level of flexibility is required in risk mitigation, the firms are advised to increase the flexibility into their supply chain.

5.3.2 Supplier as business partner The notion of ‘supplier as our business partner’ has laid the foundation of trust within the business relationships since suppliers were observed to be willing to render assistance during critical supply shortages by proposing several possible substitute parts. It is agreed that the necessity for a non-adversarial nature and more open communication in both cases. Moreover, Zsidisin et al. (2004) considered the supplier development process as a risk assessment tool because it offers insight into the suppliers’ processes, which includes

14

A.H. Mohd Rashid et al.

capacity of the supplier, technical expertise, and ability to make volume and mix changes. Lee (2004) also highlighted the importance of having agility in the supply chain by having steady and committed collaborative relationships in order to preserve the firm’s operational and competitive position. The speed with which the company reacts and responds can mean the difference between an insignificant risk signal and a full-scale crisis.

5.3.3 Requirement for BCPs Company B realised the necessity and the demand of having BCP from the component part buyers, in case of any major disaster (Nokia, Apple, Sony, Motorola and European-based companies). Company B is in the initial stage of developing a BCP after a few consultation sessions. In the events of any disaster, company B would firstly assess the impact resulting from the supply chain disruption. SCRM tool is useful as it can detect and signal the supply disruptions and its potential adversity to the business. Rice and Caniato (2003) and Zsidisin et al. (2004) pointed out that the supply chain risk assessment programme also serves to initiate the firm to develop plans during contingent times on top of meeting the compliance of legality for example the Sarbanes-Oxley Act (2002) (US) and KonTraG (1998) (German).

5.3.4 Supplier award In order to motivate suppliers of company A, a yearly vendors’ conference is organised. Here, suppliers are presented with their ‘report card’ as the result of the Supplier Evaluation being carried out following the company’s fiscal year from April this year to March next year. The three main criteria for supplier selection and performance measurement are still quality, cost and delivery (QCD). If the supplier falls under the poor performer level, the supplier needs to call for a meeting to present countermeasures in addressing the quality, cost and delivery issues. On the other hand, if the supplier is categorised as an excellent performer, the best supplier award would be given to the top three suppliers. Christopher and Peck (2004) strongly encouraged the inclusion of supplier’s risk awareness as one of the key criteria for selection. Firms are urged to be proactive in helping their main suppliers to develop better SCRM practices.

5.4 Inventory management and delivery 5.4.1 Close monitoring on conditions of the critical parts The higher the uncertainty, the higher the supply risk may occur. Supply risk may be reduced through close monitoring of the parts delivery lead time especially on certain special parts required. Having going through several supply disruption experiences resulting from earthquake and tsunami in Japan, flood in Thailand and tornado in Canada, Company A would assess the supply chain risk exposure by initially communicating with suppliers through emails requesting for declaration of parts condition whether being affected by the natural disasters or not. Mitigation capabilities can be enhanced through closer collaborative relations among supply chain partners. Company A uses a ‘critical items’ tracking list’ as a tool in information sharing with the parent company and other internal departments such as R&D and production control. Countermeasures would be expedited based on the priority of the affected production

Strengthening supply chain risk management for business continuity

15

batches and other design change updates and parts delivery status. The company also commits to buying certain quantities from suppliers to keep as back up, known as economic supply incentives. Here, purchases of bulk orders are made not following the exact quantity in the MRP system so as to secure the critical parts for a few months’ supply.

5.4.2 Vendor managed inventory With the aim of reducing cost without compromising on quality and delivery issues of parts, Company A adopted the vendor managed inventory (VMI) system. Stocks of certain parts are being sent with a minimum of 2–3 weeks in advance by suppliers to be kept in the company’s warehouse without involving any payment and under the supplier’s cost. Only when the parts are picked up for production, then the company would request for the supplier to bill them. Vendor is responsible to replenish and can also make plans based on their operational needs and the customers’ production planning needs. This approach provides visibility to inventories or to production plans (Waller et al., 1999; Disney and Towill, 2002; Kaipia and Holmström, 2007). It is one of the most extensively deliberated multi-firm supply chain efficiency improvement partnering initiatives.

5.4.3 JIT delivery of bulky parts According to Vokurka and Davis (1996), just-in-time (JIT) is a production technique which aims to eliminate waste in the form of time, energy, material and error, quality improvement, reduction of work in-process inventories, small batches, short production lead time and stable production. Through arrangements being made with suppliers of bulky component parts for the JIT delivery, company A continues to monitor that their suppliers are keeping at least three days of buffer stock at their respective sites on worst case scenarios. Should any mishap occurs, company A would be able to cushion any supply chain shocks in the next three days.

5.4.4 Stability in parts delivery The main emphasis for material supply is stability in delivery. A large number of supply chain personnel are given the responsibility to keep an update on outstanding purchase orders (PO) in their day to day operation. The shortage parts list issued to production would be updated with three days of buffer should there be any line down.

5.4.3 Make or buy decision Backed by top management support, company A conducts studies from time to time to determine possible parts for in-house production in order to secure smoother supply of essential parts and for cost reduction purposes. Company A makes in-house production process of plastic moulding for front panels as well as jumper wire electrical process. The selection for make or buy would be based on economic feasibility and only for high quantity models running production on a daily basis. According to Tang (2006a), a supply chain has higher resiliency when they encounter possible interruption of supply if some products are produced in-house whereas others outsourced to external suppliers.

16

A.H. Mohd Rashid et al.

5.5 Role of forecasting The MRP system inputs five months ordering quantity including for confirmed and forecasted orders, but in the current situation suppliers are insisting on nine months ordering quantity. Forecasting of orders during natural disasters is unpredictable. Several manufacturers have since reversed to using common parts rather than specialised and single sourced parts from Japan following the catastrophic event as a move to ensure a more robust supply chain. In moving towards ensuring a stable supply, the role of forecasting is seen as an enabler in avoiding risk and transferring risk. It is important to communicate with suppliers in advance when and what is the schedule of new product models to be launched. Effective communication and the maintenance of good rapport between the suppliers and the company’s sourcing team is vital and frequent visits should be arranged on both sides. According to Hale and Moberg (2005), they realised that single-sourcing decisions and inventory management policies has the inclination to support in maintaining the sustainability of the supplies in forthcoming disaster, specialists have clearly shown the importance of managing risk in supply chain in improving the firm’s disaster management planning. Hence, key industry players in the electronics industry in Malaysia should continue to proactively seek for innovative risk mitigation and response strategies and tools quickly so that they could recover from supply chain shocks. Smeltzer and Siferd (1998) stated that “proactive purchasing management is risk management”. Future efforts should focus on strengthening awareness and implementation of risk management strategies company-wide. A few suggestions have been made to mitigate the supply chain risk. First, collaborative works with the experts within the firm are valuable to strategise a more robust mitigation technique. Second, rapid responses to the event would enhance the effectiveness of the supply chain risk management strategy. Finally, alternative perceptions are needed during evaluation process so that the proposed strategy can be validated and key improvements can be derived. In the same way, to respond to catastrophic event such as the Japan earthquake and tsunami, collaboration with the needed knowledge experts ensures effective response alternatives can be created. Often, different approaches on mitigation strategies are welcomed to resolve any potential problems. Continuous risk analysis is crucial in identifying potentially disruptive supply chain events including operational and catastrophic risks should be considered. Furthermore, the collaboration with suppliers and customer whenever it is possible usually comes in handy. By practicing joint planning can gain insurance against costly supply chain risk planning for all parties involved. Most importantly, it is vital to take possible ripple effects and risk from mutual dependencies into considerations in a cross-company manner (Norrman and Lindroth, 2004; Chopra and Sodhi, 2004). Appropriate methods should be applied to measure their risk potentials and its impact towards the business. The result may then be used to assess the overall risk and vulnerability within the extended supply chain.

5.6 A benchmarking of best practices on SCRM “Best practices don’t just happen by throwing a lot of money at your supply chain problems. Improvements come through strategies that identify and track key supply chain processes early and often.” [Blanchard, (2010), p.11]

Strengthening supply chain risk management for business continuity

17

A firm’s good business practices often receive great deal of attentions especially from its competitors. This is because successful imitation of these strategies can lead to competitive advantage. While best practices can be examined from various format as they appear on different levels (Netland et al., 2007), they also evolve through further development and testing. What are the characteristics of a good SCRM? This study demonstrated that the risk mitigating responses for dyad relationships require high quality of information sharing, relationship development and management such as joint reviews on product scheduling. Our observations are consistent with the findings by Ritchie and Brindley (2007) where risk management responses such as joint efforts (e.g., joint proactive assessment and strategies, inter-partnership structures and relationship marketing initiatives) are crucial. Close collaboration with effective communications clarify the roles of each supply chain partners to reduce any disputes and conflicts (Lee, 2004). The preparation and active engagement with the firm’s supply chain partners stabilise the relationship that lead to better management of risk disruption (Kleindorfer and Saad, 2005). Interestingly, Tang (2006a) noted that disruptions such as hurricanes and earthquakes can become a significant threat to the business continuity. Elkins et al. (2005) suggested 18 best practices to mitigate supply chain risks and improve SCRM capabilities. According to the Supply Chain Risk Leadership Council (2011), proper measures that ensure securing the product and its components from sourcing to finishing point must be incorporated in any effective SCRM programme. Risk mitigation approach is needed to share supply chain risks and disperse losses (Ritchie and Brindley, 2007; Manuj and Mentzer, 2008; Jüttner and Maklan, 2011). Norrman and Lindroth (2004) proposed a comprehensive SCRM from the dimensions of risk handling focus, type of risk and unit of analysis. Chopra and Sodhi (2004) recommended two approaches prior to constructing a SCRM strategy. They are: 1

conducting a stress testing of the supply chain (using ‘what if’ scenarios)

2

tailoring risk mitigation.

Supply chain can recuperate swiftly from a major disruption if a recovery planning system is in place (Tang, 2006b) whereas Blos et al., (2009) suggested that having a better supply chain communication, SCRM and BCM training programme and creation of a chief risk officer (CRO) are major practices for firms implementing SCRM. In addition, global sourcing risk mitigating strategy is found to be one of the most common practices within today supply chain contexts (Christopher et al., 2011). The companies best able to recover from a supply chain challenge are those that are prepared. However, despite the best planning and preparation, sometimes an unanticipated event occurs or, an anticipated event occurs but the mitigation strategy does not work as planned. In either situation, companies need to be able to react quickly by assessing the impact, by determining the best responses and by implementing those responses in a timely manner. Hence it is essential to deeply and broadly understand and analyse the different approaches instantaneously taken by firms in the face of uncontrollable external supply disruptions through the critical lenses of robustness, resilience, flexibility and agility for business continuity.

18

6

A.H. Mohd Rashid et al.

Research implications

This paper has presented two empirical cases in the electronics industry in Malaysia in which their supply chain was affected by the Japan earthquake and tsunami in 2011. We have illustrated their approaches and practices in managing the supply chain risks. The primary aim of SCRM is to protect firms against any negative effects from adverse events (Colicchia and Strozzi, 2012). In moving towards ensuring an effective risk management for supply chains within the electronics industry, our preliminary findings suggest that a structured business continuity planning is needed for firms to better prepare and overcome supply chain risks caused by possible natural disasters. This paper enriches current literature on SCRM in describing the risk mitigation strategies and analysing their strategic direction in terms of robustness, agility, flexibility and resilience. We strongly believe that the SCRM practices enhance our focus on risk which thus leads to more successful ways to mitigate risks. Other advantages include minimising some potential costs, unpredicted interruption and at the same time to help firms regain operation in a short duration. According to March and Shapira (1987), since goal achievement is an important element of management, certain performance targets should therefore be embraced in SCRM strategies. An effective SCRM generate better management of supply chain events and their associated risk elements leading to an improved overall supply chain performance. Findings from our case reveal that the electronics manufacturer experienced great pressures for contingency planning. It is crucial to think of where else the disruptions will come from so as to better understand the impact of disruptions to the business operation despites the availability of reliable suppliers that are strongly committed to the firm. An ideal approach to manage supply chain risk extends to the entire supply chain where all partnering firms are working collectively in SCRM (Pfohl et al., 2010). Lowering the supply chain risks, e.g., through joint planning, help to build mutual trust among these firms to continue to enjoy all the collaborative advantages (Laeequddin et al., 2009). Similarly, Peck (2005) highlighted the importance of reducing the risks throughout the entire supply chain network. Thus, risk mitigation and event responses in supply chains should not merely focus on it firm itself, rather to the suppliers and sub-suppliers. Previous study demonstrated the need for firms to cooperate in overcoming issues in SCRM, BCP as well as to include such requirements into the supply contracts (Norrman and Jansson, 2004). In our case study, we observed that company A preferred suppliers that are reliable, trustworthy and whom are strongly committed to a long-term relationship. Such observed behaviours are found in line with Norrman and Jansson (2004) where these suppliers are very proactive and willing to secure the supply chain collectively through better SCRM. Prevalent themes in both case studies demonstrated the desire to transform from the traditional purchasing function to supply chain and moving towards BCP between the manufacturing firm and its component parts suppliers. We realised that it seems to be insufficient if only risks from the perspective of the manufacturing firm are analysed. This is because, as argued by Pfohl et al. (2010), we might miss the potential domino effects that could affect all partners within the supply chain. In further developing our conceptual framework, we urge researchers to explore in depth on risk component and business continuity within different supply chain structures. Pfohl et al. (2010) highlighted that accurate and complete knowledge about their supply chain partners’ visibility is a pre-requisite for a firm’s success. And we believe the

Strengthening supply chain risk management for business continuity

19

research design for future study should incorporate how the supply chain risk is managed during an event detection including instant alert notifying supply disruption. Sheffi et al. (2012) demonstrated how software applications and tools are being used in supplier risk assessment through IBM’s classification of risky suppliers, where crucial information are processed in real-time, integrating supplier information, product information and incidents information. A comprehensive supply chain analytics must be in place in order to model the SCRM tool so that management can identify when the potential supply chain event takes place. While our paper focuses on the electronic manufacturer and its suppliers, potential research areas may include large-scale multiple, empirical case study approach of other industries and service firms to shed new light on the SCRM. With strong risk mitigation strategies in place, a company is more ready to handle a variety of supply chain events. And when the unanticipated events occur, a company must be prepared to respond quickly and effectively or risk suffering financial and customer service losses.

7

Conclusions

SCRM is a corporate strategy and therefore risk considerations should be across the boundaries of a firm. It should not only be initiated by purchasing/supply chain but also production control as the anchor unit for forecast and confirmed order receiving centre. Issues and expectations for SCRM must be properly handled by the senior management “to walk the talk at the top” (Opstal, 2007) by inspiring cultural transformation to create a vision for the enterprise wide approach that engages the entire workforce. Ideally the entire supply chain partners, whether upstream or downstream, must collectively utilise the SCRM system where general standards, definitions, structures and processes are in place to secure the whole supply chain. This is because supply chain risks impose a direct threat to a firm’s existence (Jüttner et al., 2003). Firms thus should therefore be on a constant look out for innovative risk management strategies and to redesign their supply chain to be more robust, resilient, agile and flexible. Currently we are in the midst of developing a thorough SCRM model that incorporates such concepts. We aim to further examine the proactive mitigation strategies through empirical evidence to illustrate how firms conduct evaluation of the risk exposed in their supply chain and the development of mitigation abilities collaboratively with their partners.

References APICS (2011) Supply Chain Risk Challenges and Practices (n.d.), from APICS The Association for Operations Management website [online] http//www.apics.org/industry-contentresearch/research-overview/members-only-research - 13k, http://media.apics.org/wufoo_ downloads/FINALRiskReportR05.pdf (accessed 22 March 2012). Asbjørnslett, B. (2008) ‘Assessing the vulnerability of supply chains’, in Zsidisin, G.A. and Ritchie, B. (Eds.): Supply Chain Risk: A Handbook of Assessment, Management and Performance, Springer, New York, NY. Berger, P.D., Gerstenfeld, A. and Zeng, A.Z. (2004) ‘How many suppliers are best? A decision-analysis approach’, Omega, Vol. 32, No. 1, pp.9–15. Blanchard, D. (2010) Supply Chain Management Best Practices, John Wiley & Sons Inc., New Jersey.

20

A.H. Mohd Rashid et al.

Blos, M.F., Quaddus, M., Wee, H.M. and Watanabe, K. (2009) ‘Supply chain risk management (SCRM): a case study on the automotive and electronic industries in Brazil’, Supply Chain Management: An International Journal, Vol. 14, No. 4, pp.247–252. Brindley, C. (2004) Supply Chain Risk, Ashgate Publishing, Aldershot. Chartered Management Institute (CMI) (2002) Business Continuity and Supply Chain Management [online] http://www.thebci.org/2809-01%20Nus%20Continuity%20Summ.pdf (accessed 5 April 2013). Chen, J.C., Cheng, C.H. and Huang, P.B. (2013) ‘Supply chain management with lean production and RFID application: a case study’, Expert Systems with Applications, Vol. 40, No. 9, pp.3389–3397. Chopra, S. and Sodhi, M. (2004) ‘Managing risk to avoid supply-chain breakdown’, MIT Sloan Management Review, pp.53–61. Christopher, M. and Peck, H. (2004) ‘Building the resilient supply chain’, International Journal of Logistics Management, Vol. 15, No. 2, pp.1–14. Christopher, M. (2010) Logistics and Supply Chain Management, Financial Times/Prentice Hall, Upper Saddle River, NJ, USA. Christopher, M., Mena, C., Khan, O. and Yurt, O. (2011) ‘Approaches to managing global sourcing risk’, Supply Chain Management: An International Journal, Vol. 16, No. 2, pp.67–81. Colicchia, C. and Strozzi, F. (2012) ‘Supply chain risk management: a new methodology for a systematic literature review’, Supply Chain Management: An International Journal, Vol. 17, No. 4, pp.403–418. Coutu, D.L. (2002) ‘How resilience works’, Harvard Business Review, Vol. 80, No. 5, pp.46–56. Deleris, L.A and Erhun, F. (2011) ‘Quantitative risk assessment in supply chains: a case study based on engineering risk analysis concepts’, in Planning Production and Inventories in the Extended Enterprise, A State-of-the-Art Handbook, Vol. 2, pp.105–131, Springer, New York, USA. Disney, S.M. and Towill, D.R. (2002) ‘A procedure for the optimization of the dynamic response of a vendor managed inventory system’, Computers & Industrial Engineering, Vol. 43, No. 1, pp.27–58. Elkins, D., Handfield, R.B., Blackburst, J. and Craighead, C.W. (2005) ‘18 ways to guard against disruption’, Supply Chain Management Review, p.46. Faisal, L.M., Banwet, D.K. and Shankar, R. (2006) ‘Supply chain risk mitigation: modelling the enablers’, Business Process Management Journal, Vol. 12, No. 4, pp.535–552. Flynn, B.B., Sakakibara, S., Schroeder, R.G., Bates, K.A. and Flynn, E.J. (1990) ‘Empirical research methods in operations management’, Journal of Operations Management, Vol. 9, No. 2, pp.250–284. Goranson, H.T. (1999) The Agile Virtual Enterprise: Cases, Metrics, Tools, pp.109–156, Greenwood Publishing Group, Greenwood Publishing Group Inc., USA. Gunasekaran, A. and Ngai, E.W.T. (2014) ‘Expert systems and artificial intelligence in the 21st century logistics and supply chain management’, Expert Systems with Applications, Vol. 41, No. 1, pp.1–4. Hale, T. and Moberg, C.R. (2005) ‘Improving supply chain disaster preparedness: a decision process for secure site location’, International Journal of Physical Distribution & Logistics Management, Vol. 35, No. 3, pp.195–207. Hallikas, J., Virolainen, V.M. and Tuominen, M. (2002) ‘Risk analysis and assessment in network environments: a dyadic case study’, International Journal of Production Economics, Vol. 78, No. 1, pp.45–55. Hauser, L.M. (2003) ‘Risk-adjusted supply chain management’, Supply Chain Management Review, Vol. 7, No. 6, pp.64–71. Hiles, A. and Barnes, P. (2001) The Definitive Handbook of Business Continuity Management, J. Wiley & Sons, Chichester.

Strengthening supply chain risk management for business continuity

21

Jüttner, U., Peck, H. and Christopher, M. (2003) ‘Supply chain risk management: outlining an agenda for future research’, International Journal of Logistics: Research and Applications, Vol. 6, No. 4, pp.197–210. Jüttner, U. (2005) ‘Supply chain risk management – understanding the business requirements from a practitioner perspective’, International Journal of Logistics Management, Vol. 16, No. 1, pp.120–141. Jüttner, U. and Maklan, S. (2011) ‘Supply chain resilience in the global financial crisis: an empirical study’, Supply Chain Management: An International Journal, Vol. 16, No. 4, pp.246–259. Kaipia, R. and Holmström, J. (2007) ‘Selecting the right planning approach for a product’, Supply Chain Management: An International Journal, Vol. 12, No. 1, pp.3–13. Kajüter, P. (2003) ‘Risk management in supply chains’, in Seuring, S. et al. (Eds.): Strategy and Organization in Supply Chains, pp.321–336, Physica-Verlag, Heidelberg and New York. Kersten, W., Böger, M., Hohrath, P. and Schröder, K. (2007) ‘An empirical analysis of supply chain risk management – a theoretical and application-oriented approach’, Proceedings of the 2nd International Conference on Operations and Supply Chain Management, Vol. 18, p.20. Kleindorfer, P.R. and Saad, G.H. (2005) ‘Managing disruption risks in supply chains’, Production and Operations Management, Vol. 14, No. 1, pp.53–68. Kraljic, P. (1983) ‘Purchasing must become supply management’, Harvard Business Review, Vol. 61, No. 5, pp.109–117. Kristianto, Y., Gunasekaran, A., Helo, P. and Hao, Y. (2014) ‘A model of resilient supply chain network design: a two-stage programming with fuzzy shortest path’, Expert Systems with Application, Vol. 41, No. 1, pp.39–49. Laeequddin, M., Sardana, G.D., Sahay, B.S., Waheed, K.A. and Sahay, V. (2009) ‘Supply chain partners’ trust building process through risk evaluation: the perspectives of UAE packaged food industry’, Supply Chain Management: An International Journal, Vol. 14, No. 4, pp.280–290. Lassar, W.M. and Kerr, J.L. (1996) ‘Strategy and control in supplier-distributor relationships: an agency perspective’, Strategic Management Journal, Vol. 17, No. 8, pp.613–632. Lee, H.L. (2004) ‘The triple-A supply chain’, Harvard Business Review, Vol. 82, No. 10, pp.102–113. Logan, M.S. (2000) ‘Using agency theory to design successful outsourcing relationships’, International Journal of Logistics Management, Vol. 11, No. 2, pp.21–32. Loke, S.P., Downe, A.G., Sambasivan, M. and Khalid, K. (2012) ‘A structural approach to integrating total quality management and knowledge management with supply chain learning’, Journal of Business Economics and Management, Vol. 13, No. 4, pp.776–800. Manuj, I. and Mentzer, J.T. (2008) ‘Global supply chain risk management strategies’, International Journal of Physical Distribution & Logistics Management, Vol. 38, No. 3, pp.192–223. March, J.G. and Shapira, Z. (1987) ‘Managerial perspectives on risk and risk taking’, Management Science, Vol. 33, No. 11, pp.1404–1418. McManus, S., Seville, E., Brunsdon, D. and Vargo, J. (2007) Resilience Management: A Framework for Assessing and Improving the Resilience of Organisations, Resilient Organisations Research Report. Merschmann, U. and Thonemann, U.W. (2011) ‘Supply chain flexibility, uncertainty and firm performance: an empirical analysis of German manufacturing firms’, International Journal of Production Economics, Vol. 130, No. 1, pp.43–53. Mohd Rashid, A.H. and Loke, S.P. (2014) ‘Supply chain robustness and resilience for firm’s sustainability: case studies on electronic industry’, Conference Proceedings for 2014 AAGBS International Conference on Business Management (AiCoBM2014), 6–8 April, Bayview Beach Resort, Penang.

22

A.H. Mohd Rashid et al.

Narasimhan, R. and Jayaram, J. (1998) ‘Causal linkages in supply chain management: an exploratory study of North American manufacturing firms’, Decision Sciences, Vol. 29, No. 3, pp.579–605. Neiger, D., Rotaru, K. and Churilov, L. (2009) ‘Supply chain risk identification with value-focused process engineering’, Journal of Operations Management, Vol. 27, No. 2, pp.154–168. Netland, T.H., Alfnes, E. and Fauske, H. (2007) ‘How mature is your supply chain? A supply chain maturity assessment test’, Proceedings of the 14th International EurOMA Conference Managing Operations in an Expanding Europe, pp.17–20. Norrman, A. and Jansson, U. (2004) ‘Ericsson’s proactive supply chain risk management approach after a serious sub-supplier accident’, International Journal of Physical Distribution & Logistics Management, Vol. 34, No. 5, pp.434–456. Norrman, A. and Lindroth, R. (2002) ‘Supply chain risk management: purchasers’ vs planners’ views on sharing capacity investment risks in the telecom industry’, Proceedings of the11th International IPSERA Conference, 25–27 March, Enschede, The Netherlands, Twente University, pp.577–595. Norrman, A. and Lindroth, R. (2004) ‘Categorization of supply chain risk and risk management’, in Brindley, C. (Ed.): Supply Chain Risk, pp.14–27, Ashgate Publishing Ltd., Hampshire, England. Olhager, J. and Selldin, E. (2004) ‘Supply chain management survey of Swedish manufacturing firms’, International Journal of Production Economics, Vol. 89, No. 3, pp.353–361. Opstal, D.V. (2007) The Resilient Economy: Integrating Competitiveness and Security, Council on Competitiveness, Washington DC, USA. Peck, H. (2005) ‘Drivers of supply chain vulnerability: an integrated framework’, International Journal of Physical Distribution & Logistics Management, Vol. 35, No. 4, pp.210–232. Peck, H. (2006) ‘Reconciling supply chain vulnerability, risk and supply chain management’, International Journal of Logistics: Research and Applications, Vol. 9, No. 2, pp.127–142. Pfohl, H.C., Köhler, H. and Thomas, D. (2010) ‘State of the art in supply chain risk management research: empirical and conceptual findings and a roadmap for the implementation in practice’, Logistics Research, Vol. 2, No. 1, pp.33–44. Ponomarov, S.Y. and Holcomb, M.C. (2009) ‘Understanding the concept of supply chain resilience’, International Journal of Logistics Management, Vol. 20, No. 1, pp.124–143. Rice, J.B. and Caniato, F. (2003) ‘Building a secure and resilient supply network’, Supply Chain Management Review, Vol. 7, No. 5, pp.22–30. Ritchie, B. and Brindley, C. (2007) ‘Supply chain risk management and performance: a guiding framework for future development’, International Journal of Operations & Production Management, Vol. 27, No. 3, pp.303–322. Rowbottom, U., Buntrock, C. and Hannesson, H. (2011) ‘Three steps to supply chain resilience’, Logistics & Transport Focus, Vol. 13, No. 7, pp.42–44. Shapira, Z. (1995) Risk Taking, Russell Sage Foundation, New York, USA. Sheffi, Y. (2001) ‘Supply chain management under the threat of international terrorism’, International Journal of Logistics Management, Vol. 12, No. 2, pp.1–11. Sheffi, Y. (2005) The Resilient Enterprise: Overcoming Vulnerability for Competitive Advantage, MIT Press Books, Cambridge, Massachusetts. Sheffi, Y., Vakil, B. and Griffin, T. (2012) Risk and Disruptions: New Software Tools [online] http://www.web. mit.edu/sheffi/www/documents/Risk_and_Disruptions_V9.pdf (accessed 19 October 2013). Smeltzer, L.R. and Siferd, S.P. (1998) ‘Proactive supply management: the management of risk’, Journal of Supply Chain Management, Vol. 34, No. 1, pp.38–45. Sodhi, M.S. (2005) ‘Managing demand risk in tactical supply chain planning for a global consumer electronics company’, Production and Operations Management, Vol. 14, No. 1, pp.69–79.

Strengthening supply chain risk management for business continuity

23

Sodhi, M.S., Son, B.G. and Tang, C.S. (2012) ‘Researchers’ perspectives on supply chain risk management’, Production and Operations Management, Vol. 21, No. 1, pp.1–13. Supply Chain Risk Leadership Council (2011) Supply Chain Risk Management: A Compilation of Best Practices [online] http://www.kinaxis.com/whitepapers/supply-chain-riskmanagement.cfm (accessed 5 May 2013). Tang, C.S. (2006a) ‘Robust strategies for mitigating supply chain disruptions’, International Journal of Logistics: Research and Applications, Vol. 9, No. 1, pp.33–45. Tang, C.S. (2006b) ‘Perspectives in supply chain risk management’, International Journal of Production Economics, Vol. 32, No. 2, pp.451–488. Tang, C.S. and Tomlin, B. (2008) ‘The power of flexibility for mitigating supply chain risks’, International Journal of Production Economics, Vol. 116, No. 1, pp.12–27. Thomas, R. (2008) ‘Exploring relational aspects of time-based competition’, International Journal of Physical Distribution & Logistics Management, Vol. 38, No. 7, pp.540–550. Tomlin, B. (2006) ‘On the value of mitigation and contingency strategies for managing supply chain disruption risks’, Management Science, Vol. 52, No. 5, pp.639–657. Upton, D. (1994) ‘The management of manufacturing flexibility’, California Management Review, Vol. 36, No. 2, pp.72–89. Vanany, I., Zailani, S. and Pujawan, N. (2009) ‘Supply chain risk management: literature review and future research’, International Journal of Information Systems and Supply Chain Management (IJISSCM), Vol. 2, No. 1, pp.16–33. Vokurka, R.J. and Davis, R.A. (1996) ‘Just-in-time: the evolution of a philosophy’, Production and Inventory Management Journal, Vol. 37, No. 1, pp.56–59. van Opstal, D. (2007) The Resilient Economy: Integrating Competitiveness and Security, A publication by the Council on Competitiveness [online] http://www.compete.org/ publications/idea/2/risk-and-resilience/ (accessed 12/6/2013). Wagner, S.M. and Bode, C. (2006) ‘An empirical investigation into supply chain vulnerability’, Journal of Purchasing and Supply Management, Vol. 12, No. 6, pp.301–312. Wagner, S.M. and Bode, C. (2008) ‘An empirical examination of supply chain performance along several dimensions of risk’, Journal of Business Logistics, Vol. 29, No. 1, pp.307–325. Waller, M., Johnson, M.E. and Davis, T. (1999) ‘Vendor-managed inventory in the retail supply chain’, Journal of Business Logistics, Vol. 20, pp.183–204. Welch, D.E. and Welch, L.S. (1996) ‘The internationalization process and networks: a strategic management perspective’, Journal of International Marketing, Vol. 3, No. 4, pp.11–28. Yates, J.F, and Stone, E.R. (1992) ‘The risk construct’, in Yates, J.F. (Ed.): Risk-taking Behaviour, pp.1–25, Wiley, Chichester. Zhang, H.P. and Huang, D.C. (2011) ‘Plan and coordination of agile supply chain based on multi-agent’, Energy Procedia, Vol. 13 No. 1, pp.10134–10142. Zsidisin, G.A., Ellram, L.M., Carter, J.R. and Cavinato, J.S. (2004) ‘An analysis of supply risk assessment techniques’, International Journal of Physical Distribution & Logistics Management, Vol. 34, No. 5, pp.397–413. Zurich, N.A. (2011) Supply Chain Resilience 2011 – BCM and Supply Chain Continuity Risk, White paper, from Zurich NA [online] http://www.zurichna.com/zna/risk_engineering/ strategicriskservicesandenterpriseriskmana gement.htm (accessed 17 May 2012).

24

A.H. Mohd Rashid et al.

Further reading Basu, G., Ben-Hamida, M., Butner, K., Cope, E. Dao, H., Deleris, L., Dong, J., Helander, M., Katircioglu, K., Ray, B and Torpy, J. (2008) Supply Chain Risk Management: A Delicate Balancing Act – A Multi-Faceted View on Managing Risk in a Globally Integrated Enterprise, White paper, IBM Global Business Services [online] http://domino.research.ibm.com/ library/cyberdig.nsf/papers/2A4BBFF62659E48B852573 A1007488DF (accessed 3 February 2013). Blos, M.F., Wee, H.M. and Yang, W.H. (2012) ‘Supply chain risk management: resilience and business continuity’, Handbook on Decision Making, pp.219–236. Springer, Berlin Heidelberg. Craighead, C.W., Blackhurst, J., Rungtusanatham, M.J. and Handfield, R.B. (2007) ‘The severity of supply chain disruptions: design characteristics and mitigation capabilities’, Decision Sciences, Vol. 38, No. 1, pp.131–156. Kern, D., Moser, R., Hartmann, E. and Moder, M. (2012) ‘Supply risk management: model development and empirical analysis’, International Journal of Physical Distribution & Logistics Management, Vol. 42, No. 1, pp.60–82. Narasimhan, R. and Talluri, S. (2009) ‘Perspectives on risk management in supply chains’, Journal of Operations Management, Vol. 27, No. 2, pp.114–118.