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Supply Risk Management Assessment

Control and mitigate your supply chain related risks

Effective supply risk management is essential to ensure that, in the event of a disruption at any point in the supply chain, the company can react quickly and effectively to minimise any disruption to the business. Key areas of focus when assessing the effectiveness of the risk management procedures in place within an organisation include internal policies and awareness, structure, organisation, process (identification, evaluation, treatment and control), and results.

The Supply Risk Management Assessment tool has been developed by AGCS (Allianz Global Corporate & Specialty Switzerland and the University of applied Sciences of Northwestern Switzerland.

The aim of the tool is to assist clients by providing an assessment of the management systems that support their supply chain, it is not designed to provide an in depth review of the supply chain.

The assessment tool has a number of stages:

Stage 1: Preparation / Desk research – this is done prior to meeting the client and ensures that the reviewers have a thorough understanding of the clients industry, company, products, production and events.

Stage 2: Corporate interview / Assessment – a formal discussion with the client to dis-cuss awareness, policy, strategy, responsibility and leadership in the area of supply management.

Stage 3: Site visit – performed by ARC, this will follow up on the results from the corporate interview and assess whether the information and structure is understood and followed at a site level.

The Supply Risk Management Assessment Tool

The construct of the entire supply risk management assessment model is based on three sub-models. In order to establish an effective instrument for evaluating the firm’s capability for man-aging supply disruption caused by insured perils, the three sub-models have been integrated into one single assessment model. This model considers the approaches of procurement, risk management and of a learning organization, and is often described as an excellence model.

The 3 sub models are described below:

The Procurement Model

The term “supply management” describes the methods and processes of modern corporate or institutional buying. This may be for the purchase of supplies for internal use (referred to as indi-rect goods and services), for purchasing raw materials for consumption during the manufactur-ing process, or for the purchase of goods for inventory to be resold as products in the distribution and retail process.

The supply management function of an organization is responsible for various aspects of these acquisitions. This includes management of demand and requirement, sourcing location, supplier selection, supplier relationship management, as well as supplier development, in order to serve the customer demand on time with the right quality and with best available price. Supplier management deals primarily with the oversight and management of materials and ser-vices inputs, management of the suppliers who provide those inputs, and support of the process of acquiring those inputs. The performance of supply management departments and supply management professionals is commonly measured in terms of amount of money saved for the organization. However, managing risk is one of the other critical aspects of supply management; especially the risk of non-availability at the required time and insufficient quality of goods and services are critical for an organization's survival and growth.

The Risk Management Model

Supply risk can be defined as “an unintended, anomalous event with low probability that materializes somewhere in the upstream supply chain, which significantly threatens the normal business operation of the firm” (Wagner & Bode, 2008).

Risk Management is the way companies deal with these risks. Supply Risk Management follows ISO 31000 (based on ONR 49000) by describing in a systematic way the risk management process: identification, analysis and assessment, treatment and control. According to the ISO Standards the Risk Management system, and consequently the supply risk management system, should be embedded within the management system of the company (Quality, Environment, Health and Safety (EHS), etc.). As a minimum it should ensure business continuity under severe conditions with appropriate event and crisis management.

The Excellence Model

Over the years a number of research studies have investigated the correlation between the adoption of holistic Models, such as OIQ (Organizational Integrated Quality), the EFQM Excellence Model, and improved organizational results. The majority of such studies show a positive linkage. The EFQM Excellence Model provides a framework allowing organizations to determine their current “level of excellence” and where they need to focus their improvement efforts.

Moreover, the model helps to ensure that business decisions incorporate the needs of all stake-holders and are aligned with the organization’s objectives.

The EFQM Excellence Model is probably the most widely used organisational framework in Europe, with about 30,000 organisations using it. The EFQM Model acts as a common reference tool helping organisations move towards excellence. Thus, the model provides its users with a set of performance improvement tools in order for them to achieve and sustain results and excellence. The model is regularly reviewed to incorporate new ideas, concepts and learning.