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Abstract
Effective risk management in the supply chain of a company is a core business competency. In this case study, a major company in the Kaesong Industrial Complex in North Korea is used to evaluate strategic planning in supply chain risk management. In this company, four supply chain risks (financial, operational, human resources, and information) are identified and prioritized in terms of four strategies (cost, quality, delivery, and flexibility) using the analytic hierarchy process. The results are analyzed to provide supply chain risk mitigation strategies and their implications for the company. This study reinforces the importance of strategic planning for supply chain risk management in providing competitive advantage and future survival.
Keywords: supply chain, supply chain mitigation strategy, supply chain risk management
Introduction
Global supply chain management is exposed to a variety of risks such as demand fluctuations, exchange-rate fluctuations, price fluctuations, supply disruption, and supply delays.2 In addition, because of business activities and growth, management often has created conflicts among risks. Thus, business firms must develop mitigation strategies that effectively manage these risks in the supply chain.3 Supply chain risk management (SCRM) takes a proactive approach to the development of mitigation strategies for supply chain risks, giving important strategic alternatives and insights while overcoming challenges presented by the information and knowledge age.4
The purpose of this paper is threefold: 1) to identify, assess, and prioritize supply chain risks; 2) to use the analytic hierarchy process (AHP) technique to support the strategic planning in supply chain management (SCM) decision-making; and 3) to provide business decision makers with a model to identify risk mitigation strategies. Using a business firm (BF) in the Kaesong Industrial Complex (KIC), the study focuses on exploring supply chain risks' characteristics in order to implement risk mitigation strategies that will improve the BF's and the KIC's decision-making planning process and managerial policy.5 The study will suggest risk mitigation strategies that will enable the BF to respond to innovation and new growth, while reinforcing overall ongoing business planning strategies to meet defined requirements in the KIC business setting.
Supply Chain Risk Management
Supply chain management (SCM) is defined as an integrated business philosophy for managing information, materials, and monetary flows among different facilities, suppliers, customers, and logistic levels. SCM includes both internal...