Assuring sustainable supply through risk management
Kamau, David Mungai
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In today's highly competitive global marketplace, organisations are under pressure to find new ways to minimize risk and maximize profits. Profits can increase by reducing the cost of inputs or increasing price of the outputs. Hence, procurement contributes by reducing the cost of inputs by sourcing materials at lower costs. Consequently, this creates a challenge to the buyer as supply risk issues are more likely to occur with lower cost sources that might include new suppliers or unreliable sources. Unfortunately, logistics planners, too, drive new initiatives intended to be cost effective such as "Just-in-Time" (JIT) manufacturing. This adds an additional challenge to the buyer of ensuring uninterrupted supply while the system has actually eroded the supply buffer that would have enabled achieving the goal of low cost supply at lower risk. Hence, supply managers have to deal with the ever-increasing challenges in pursuit of a balance between supply risk and lower cost of supplies while ensuring sustainable supplies. For these reasons, this study aims to develop an implementation plan for the supply risk management. The plan developed from a case study undertaken at Safripol, a large manufacturing chemical company located in Sasolburg, South Africa. The complete study of the implementation plan, from the literature to empirical studies, were conducted by various means, including a study of journals and procurement textbooks, analysis of the supply data of Safripol, an experiment of a proposed plan, and a survey. The literature study initially discusses various approaches suggested by other writers and finally concludes with a proposition of a seven-step process. The process starts with (1) human resource allocation, (2) supply base categorisation, (3) vulnerability assessment, (4) evaluation of the implication, (5) cost/benefit analysis, (6) risk treatment, and it finally ends with the strategic alignment (7). These steps address the major issues that are critical to successful implementation of supply risk management, particularly in large manufacturing companies like Safripol. However, the empirical study went further to investigate the application of the seven-step process. This involved commissioning of a multi-disciplinary team to review the process. The team applied the seven-step process in conducting a full assessment and evaluations of supply risks for four selected suppliers of specific material. The team composed of Safripol employees who are involved in the supply chain of the specific material reviewed. In addition, the analyses of the steps were captured, and stored in a tool developed in Excel worksheets. That enabled the process to be systematic, repeatable and easier to apply. Populated worksheets resulted in a formal knowledge resource database that will enable Safripol to manage supply risk plans and execute action plans in case of supply interruptions. Finally, the study indicated that the seven-step process is practical and applicable to Safripol. In addition, the study found that the process adds value in managing supply risks. Thus, the study achieved its goal of developing an implementation plan for supply risk management. However, the study concludes by providing future fields of study and recommendations in an effort to contribute further to development of supply risk management.