Risk Management Midterm
Cards (130)
- the system and network behind getting a product from its initial materials to the final customer.
- them to the end user.
- a crucial aspect of operations management that involves identifying, assessing, and mitigating risks associated with a company’s supply chain.
- The goal of SCRM is
- KEY COMPONENTS OF SUPPLY CHAIN RISK MANAGEMENT:
- This involves recognizing potential risks that could affect the supply chain. These risks could be operational (like manufacturing delays), strategic (like changes in market demand), or external (like natural disasters or political instability).
- Once risks are identified, they must be evaluated in terms of their likelihood of occurrence and their potential impact on the supply chain. This assessment helps in prioritizing which risks require immediate attention and resources.
- Based on the assessment, strategies are developed to manage, reduce, or eliminate risks. This could involve diversifying suppliers, increasing inventory levels, investing in robust IT systems, or developing contingency plans.
- The supply chain environment is dynamic, so continuous monitoring of risk factors is necessary. This component ensures that new risks are detected early and that mitigation strategies remain effective under changing conditions.
- These practices are often pursued to leverage external expertise, reduce costs, or focus on core competencies.
- involve a relationship between two or more companies where they agree to share resources to achieve a common goal. These partnerships can take various forms, such as joint ventures, licensing agreements, or simply contractual agreements to work together on specific projects.
- Risks Associated with Strategic Partnerships
- Partners may have different goals, priorities, or business practices, which can lead to conflicts and inefficiencies in the partnership.
- Relying heavily on a partner for critical aspects of the business can be risky if the partner faces financial difficulties, changes their business strategy, or becomes unable to fulfill their obligations.
- relationship.
- Sharing sensitive information and intellectual property with partners can lead to potential leaks or misuse, especially if the partnership ends.
- Navigating the regulatory environments of different countries can be complex, and non-compliance can lead to legal penalties and reputational damage.
- involves contracting out business processes or production tasks to third-party vendors, either domestically or internationally. This can include manufacturing components, assembly, or even entire business functions like IT services and customer support.
- Risks Associated with Outsourcing
- Outsourcing business functions can lead to reduced control over the processes, quality of work, and timeliness of deliveries, which can affect the final product or service quality.
- Differences in quality standards between the hiring company and the outsourced provider can result in products or services that do not meet the expected criteria, potentially damaging the company’s reputation.
- which increases the risk of data breaches and information theft.
- Adding more links to the supply chain through outsourcing can introduce delays, increase the risk of disruptions, and complicate logistics and coordination.
- hidden costs such as management overhead, training, and integration costs, offsetting the expected savings.
- agreement should typically cover:
- Clearly defines what services will be outsourced, specifying tasks, responsibilities, and expected outcomes.
- Establishes the length of the contract, including start and end dates, and any conditions for extension.
- Details the specific services to be provided by the outsourcing partner.
- Sets out any limitations or requirements for subcontracting tasks to other parties, often including the need for approval from the primary contracting organization.
- Describes the financial arrangements such as fixed fees, variable costs based on service levels, or performance-based payments.
- Specifies the performance standards and benchmarks that the service provider must meet.
- Outlines the metrics and KPIs (Key Performance Indicators) to assess service effectiveness and efficiency.
- ADVANTAGES OF OUTSOURCING
- Outsourcing can significantly reduce costs associated with hiring, training, and maintaining employees. By outsourcing non-core activities, companies can save on wages, benefits, and operational costs such as office space and equipment. This is particularly effective for functions like IT support, human resources, and customer service.
- Outsourcing gives businesses access to expert skills and technologies without the need to invest heavily in hiring and training. For example, a small firm can outsource IT services to a provider with specialized skills in cybersecurity or cloud computing that it might not have internally.
- Outsourcing companies often have specific expertise and can perform tasks better than the company itself can. By leveraging specialized capabilities of outsourcing firms, companies can improve the quality of their services and products, which can lead to higher customer satisfaction and loyalty.
- Outsourcing can help spread risk. By having certain functions managed by external specialists, companies can reduce the impact of failures in non-core areas on their main operations. For example, outsourcing hazardous chemical processes can reduce health and safety risks.
- reduce risks that may occur in daily business operations.