Global Supply Chain Risk Management Strategies Christophe Cermolacce School of Economics and Management, Tongji University, Shanghai, China Ecole Supérieure de Commerce, Euromed Management, Marseille, France Anovo France, China’s branch representative Supervisor: Professor WU SI ZONG, Tongji University, Shanghai, China CCIRM 2011

Why SCRM strategies and China? China = world’s first exporter Lliterature = poor Last decade = numerous risk events Not well considered by managers and organizations CCIRM 2011

Goal Based on Manuj and Mentzer 2008 Research Refine, infirm, confirm their finding within the scope of SC with suppliers located in China CCIRM 2011

Methodology Based on Manuj and Mentzer 2008 Research Grounded theory In-depth interviews with professionals CCIRM 2011

What is risk? “A state of uncertainty where some of the possibilities involve a loss, catastrophe, or other undesirable outcome” Douglas Hubbard, 2007 Risk = PxL or Risk =∑[PxL] (P: probability of the accident occurring, L: expected loss in case of the accident) CCIRM 2011

What is risk? Based on interviews 4 dimensions 1.Potential losses 2.Likelihood of those losses 3.Speed 1.Speed of the event leading to loss 2.Speed at which losses happen 3.“How quickly the risk event is discovered” 4.Frequency CCIRM 2011

What is Global Supply Chain? A complex system Involves –Organizations (Companies and governments) –People –Technology –Activities –Information –Resources Moving a product, service along a the chain between supplier and customer An ever changing path Risky CCIRM 2011

What is SCRM? Global Supply chain risk management is the identification and evaluation of risks and consequent losses in the global supply chain and implementation of appropriate strategies through a coordinated approach among supply chain members with the objective of reducing one or more of the following – losses, probability, speed of event, speed of losses, the time for detection of the events, frequency, or exposure – for supply chain outcomes that in turn lead to close matching of actual cost savings and profitability with those desired – Ila Manuj and John T, Mentzer, 2008 – CCIRM 2011

Global Supply Chain risk events and China 1.Currency 2.Transit time variability 3.Forecasts 4.Quality 5.Safety 6.Business disruption 7.Survival 8.Ownership 9.Culture 10.Dependency and opportunism CCIRM Oil price fluctuation 12.Raw material price fluctuation 13.Non-payment situations 14.Abandonment of goods 15.Political/Legal 16.Cheating 17.Overzealousness 18.Staff motivation

Global Supply Chain risk events and China CCIRM 2011

Supply Chain risk Management strategies CCIRM 2011 Antecedents Temporal focus SC Flexibility SC environment -SlDl -ShDl -SlDh -ShDh Risk Management Outcomes Total and Per Unit Cost Total and Per Unit Profit Average inventory Disruptions Total inbound Lead Time Delays to customers Stock-outs Fill Rate Premium Freight Usage Cash-to-cash cycle time Exposure Strategy selection Postponement Speculation Hedging Control/Share/Transfer Security Avoidance Team composition Supply Chain Complexity Inter-organizational Learning Low supply risk High supply risk Low demand risk High demand risk SlDl SlDh ShDl ShDh

Supply Chain risk Management strategies CCIRM 2011 Antecedents Temporal focus P0.a. The shorter the delays, the harder the management of risk P0.b. Shorter delay does not mean lower importance of risk P0.c. Delays  hard to implement risk management strategies Flexibility Adaptability Alignment Agility P0.d. Flexibility softens SCRM P0.e. Good relations with the members of the SC improves flexibility

Supply Chain risk Management strategies CCIRM 2011 Postponement & Speculation P1. Supply chains facing SlDh and ShDh environments are more likely to adopt form postponement strategies than those facing SlDl and ShDl environments. P2. Supply chains facing SlDl and ShDl environments are more likely to adopt a speculation strategy than supply chains facing SlDh and ShDh. P1.b. Supply chains facing ShDh and environments are more likely to adopt manufacturing, logistics and form postponement strategies than those facing SlDl and ShDl environments

Supply Chain risk Management strategies CCIRM 2011 Hedging Offsetting losses at some points by gains at others P3. Supply chains facing ShDl and ShDh environments are more likely to adopt hedging as compared to supply chains facing SlDl and SlDh environments

Supply Chain risk Management strategies CCIRM 2011 Control/share/transfer Control : forward or backward integration or virtual integration fthrough contracts and partnerships Sharing : involves contracts and partnerships Transfer : involves disintegration and outsourcing. P4. Supply chains facing ShDl environment are more likely to adopt backward integration, supply chains facing SlDh environment are more likely to adopt forward integration, and supply chains facing ShDh environments are more likely to adopt both backward and forward integration. P4.b. Supply chains facing ShDl environment are more likely to adopt virtual backward integration and higher control strategy by outsourcing than those facing SlDh and SlDl environments.

Supply Chain risk Management strategies CCIRM 2011 Security P5. All types of supply chains will increase the use of security strategies.

Supply Chain risk Management strategies CCIRM 2011 Avoidance Type1: avoid buying from China to reach a 0 risk situation Type2: reduce, prevent risk by controls P6. Supply chains operating in all types of environment adopt avoidance strategies. Type 1 avoidance strategy is adopted when a supply chain has an option not to enter a high demand or supply risk environment. Type 2 avoidance strategy is adopted when a supply chain has no option but to enter a high demand and/or supply risk environment

Supply Chain risk Management strategies CCIRM 2011 Moderators Team composition P7. Team composition strongly affects the relationship between the antecedents and the strategy selected. Supply chain complexity P8. Greater supply chain complexity lessens the relationship between supply chain risk strategies and risk-related outcomes.

Implications Risk events introduction Testimonies for managers 16 propositions –5 on antecedents –9 on strategies –2 on moderators Validation of Manuj and Mentzer’s models and propositions CCIRM 2011

Thank you, 谢谢 CCIRM 2011