An Integrated Risk Management Framework for Global Supply Chains

Abstract

In this study, a risk management framework is developed to support risk management decisions in global supply chains. The proposed framework covers all phases of risk management, namely, risk identification, risk mitigation and control. In the risk identification phase of the framework, the supply chain is decomposed into either material-level or product-level sub-networks according to the decision maker’s preference. Afterwards, the most critical sub-network is modelled to evaluate different risk mitigation strategies. In particular, a combination of redundancy and flexibility strategies is considered for risk mitigation. These strategies are evaluated by simulation models in terms of their effectiveness and efficiency. While inventory holding cost is used as efficiency measure, effectiveness of the strategies is measured by premium freight ratio. The proposed framework provides a comprehensive and reliable decision support since it covers all phases of risk management and relies on quantitative data, and statisti-cal analysis in risk modelling. Moreover, it is flexible as it can be easily adapted to any change in supply chain environment and strategy. In order to show the applicability of the framework, a practical demonstration is pre-sented for an automotive supply chain. The obtained results indicate that the proposed framework improves the supply chain performance in terms of efficiency and effectiveness.