Risk Assessment and Operational Approaches to Manage Risk in Global Supply Chains

Global supply chains encounter low‐occurrence/high‐disruption risks that are not addressed adequately by adding inventory. Although many operational risk‐management tools exist, these tools and methods have not been synthesized into a comprehensive management system. This article evaluates risk‐assessment methodologies and operational approaches to manage risk in global supply chains, and proposes a closed‐loop risk‐management system with inputs, outputs, and feedback. A focal OEM company's global supply chain is used to analyze the feasibility of proposed risk assessment and an operational business model. A tool for determining supply chain root causes (supply chain failure modes and effects analysis—FMEA), and a tool for supply chain risk assessment (global supply chain risk‐management scorecard) are presented. Results of completed supply chain FMEAs and global supply chain risk‐management scorecards are reported. Supply chains need scalable risk‐management tools to ensure supply continuity during major disruptions while balancing efficiency considerations during normal operations. The proposed management system includes scalable strategic and tactical tools to identify risks, determine root causes, assess change‐management capabilities, monitor performance, and evaluate execution of the system.