Supply-Chain Risk Management Model

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RESEARCH PROJECT

Final year project report

Project title: An investigation into the application of the System-oriented supply chain risk management model in manufacturing Small and Medium Enterprises (SMEs)

Project supervisor: Ms. Bernadette Sunjka

Date: 22 August 2012

Student: Dale Miller

Student number: 0702740W ii University of the Witwatersrand, Johannesburg

School of Mechanical, Industrial and Aeronautical Engineering

Declaration

Name: Dale Miller

Student no: 0702740W

Course no: MENC4006

Course Name: Research Project

Submission Date: 22/08/12

Project Title: An investigation into the application of the System-oriented supply chain risk management model in manufacturing Small and Medium Enterprises (SMEs)

I hereby declare the following:

In the event of a supply chain related risk occurring it is obvious to assume that there will be some sort of negative impact on the company, i.e. an effect on the company. The risks that occur will have a specific effect by either increasing operational cost, increasing investment costs, insufficient quality, poor delivery lead time and reliability, or result in insufficient flexibility [Oehmen et al, 2009]. These effects mentioned above can also be modeled on specific objectives or Service Level Agreements (SLAs) that the company may have in their supply chain. The negative impacts that the risks cause will ultimately lead to a decrease in Economic Value Add (EVA) for the company through either a loss in sales or an increase in cost. EVA can be replaced with Competitive Advantage as the impacts of the risks can also lead to a decrease in the company‟s competitive advantage, in terms of the vulnerability of SMEs a decrease in the company‟s competitive advantage can have serious implications for that

However, the applicability depended on the level of commitment of the people being interviewed. If they were unable to provide adequate data, the model will not be applicable. The authors also state that sufficient data is required before the workshops to ensure that “rankings and ratings are not developed using opinion alone.” [Bindeman et al, 2011].

2.5 Literature Summary

In this section, a summary of all the relevant literature discussed in the literature review is described.

A supply chain is considered to be a system, which consists of a number of features, that aims to provide a product or a service to a customer. Supply chains today can consist of a number of suppliers and customers; as a result supply chains are becoming increasingly complex. This increase in complexity also increases the number of risks involved with moving a product from its raw material supplier to the final customer.

Supply chain risk is defined by Waters [2011], where the author states, “risks to a SC are unforeseen events that might interrupt the smooth flow of materials”. He goes onto state that they are unforeseen risk because there is no way of predicting what will happen in the future and determining the affect that the risk has on the supply chain. One of the ways identified in