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Keywords Supply chain management, Risk management
Abstract The notion of risk is receiving greater attention in research on supply chain management by academics and practitioners alike. As firms collaborate and combine forces to compete as extended enterprises against other integrated supply chains, risk is linked to the interdependence among supply chain partners. Academic interests appear to focus mostly on the risks associated with logistics and its impact on the timely delivery of goods. Beyond these concerns, the events of 9/11 have heightened consideration for supply chain risks related to possible security breaches and terrorism. This paper highlights six areas of supply chain-related risks. It discusses these risks at length, showing how they are endemic to the extended enterprise, and attempts to develop a typology for categorizing them. It also addresses the implications for supply chain managers as they balance a concern for risk with their efforts to search for, select, nurture, and manage their set of supply chain partners.
The case for the extended enterprise
The case for an integrated supply chain is becoming more easily made as firms acknowledge the cost benefits and the competitive gains that result from supply chain partners working collaboratively to accomplish mutual goals. The vocal skepticism that accompanied the decision to work with a small number of suppliers, to link workflows and information, and to jointly plan strategy in pursuit of end use customer satisfaction seems to have dulled to a whisper for a number of companies. These firms have witnessed the gains that result from outsourcing non-core activities, achieving high levels of transparency and visibility of inventory and information throughout the supply chain, and utilizing technology that enables the trading partners to "see" the relevant operational transactions of their other supply chain members. The successes documented at such companies as Dell, HP, and Harley Davidson point to leaner inventories, lower working capital, higher profits and productivity, and better customer service. Supply chain management systems and Internet-based solutions have become the focus of many reengineering projects aimed at solving supply chain problems. For instance, HP's Internet-based exchange has reportedly saved over $100 million in just 18 months (Teach, 2002).
However, supply chain-wide thinking is a fairly recent phenomenon, and procurement managers have not always viewed their world through...