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Challenges in the Era of Globalization - iaabd

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<strong>Challenges</strong> <strong>in</strong> <strong>the</strong> <strong>Era</strong> <strong>of</strong> <strong>Globalization</strong><br />

Edited by Emmanuel Obuah<br />

The manufactur<strong>in</strong>g supply cha<strong>in</strong> risk assessment framework is shown <strong>in</strong> Figure 2. This type <strong>of</strong> risk<br />

assessment framework enables a manufactur<strong>in</strong>g firm to focus on which sources <strong>of</strong> supply cha<strong>in</strong> risk need<br />

to take action to mitigate specific risk types. Also, it affords a manufactur<strong>in</strong>g firm <strong>the</strong> opportunity to<br />

visualize <strong>the</strong> <strong>in</strong>terdependencies among supply cha<strong>in</strong> risks to specific risk types. Accord<strong>in</strong>g to Simchi-Levi<br />

(2010), “controllable risk sources [known-unknowns] with high expected impact can and must be<br />

managed effectively.”<br />

High<br />

Manufactur<strong>in</strong>g Expected impact<br />

Low<br />

Force majeure<br />

Supply<br />

uncerta<strong>in</strong>ty<br />

Demand<br />

uncerta<strong>in</strong>ty<br />

Social-political<br />

actions<br />

Government<br />

policies<br />

Multiple taxes<br />

Commodity<br />

prices<br />

Epidemics<br />

Accidents<br />

Networkrelated<br />

Low Ability to Control High<br />

Figure 2. Risk Assessment Framework – Ability to Control vs. Anticipated Severity<br />

Impact <strong>of</strong> Supply Cha<strong>in</strong> Disruption on Manufactur<strong>in</strong>g<br />

Infrastructure<br />

Currency<br />

exchange rate<br />

Mach<strong>in</strong>e<br />

failure<br />

Bribery &<br />

corruption<br />

Port delays &<br />

high charges<br />

Labor costs<br />

Labor strike<br />

Technology<br />

SCM<br />

knowledge<br />

Import<br />

competition<br />

Energy costs<br />

Access to credit<br />

Eny<strong>in</strong>da et al (2008) noted that global supply cha<strong>in</strong> disruption risks and uncerta<strong>in</strong>ties can have pr<strong>of</strong>ound<br />

implications for global manufactur<strong>in</strong>g firms. Organizations are <strong>in</strong>creas<strong>in</strong>gly susceptible to both highimpact<br />

and low-impact disruptive events (Sheffi and Rice, 2005). Significant supply cha<strong>in</strong> disruptions can<br />

tailsp<strong>in</strong> an organization’s revenue, erode market share, bloat costs and budget, threaten production and<br />

distribution, tarnish credibility with <strong>in</strong>vestors and o<strong>the</strong>r stakeholders, and skyrocket <strong>the</strong> cost <strong>of</strong> capital<br />

(Bosman, 2006). Supply cha<strong>in</strong> disruption risk can precipitate to excess <strong>in</strong>ventory, lead time variance,<br />

protracted cycle times, and decreased customer service (Sarathy, 2006). Supply cha<strong>in</strong> disruptions can<br />

erode manufactur<strong>in</strong>g firms’ shareholder value and pr<strong>of</strong>itability. Disruptions to manufactur<strong>in</strong>g and <strong>in</strong> turn<br />

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