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Abstract
Supplier risk management has emerged as a critical component for assessing the health and viability of suppliers in the midst of the current conditions of economic volatility. In manufacturing, the risk of supplier failure is always a concern but in today's environment, not only are markets for many products weaker, but disruptions in the supply upstream have caused process reconfiguration, directly resulting in an increase in short term costs . This impact is amplified due to globalization, outsourcing, and lean supply chain initiatives. Any disruption on the supply side immediately creates a domino effect on the demand planning side. Consequently, in many situations, there is little buffer of inventory and little time to recover, resulting in missed customer deadlines and low customer satisfaction. Operating in this unfamiliar environment, managers are not adequately prepared nor have the necessary tools to effectively manage the supply chain risks. This research seeks to investigate tools that not only utilize traditional supplier risk factors but also considers a crucial variable of uncertainty in the form of financial market inconsistencies. These tools provide a more in-depth and comprehensive look at a supplier's risk profile thereby a better measure of supplier viability.
Keywords
Supplier Risk Management, Supplier viability, Supply Chain, Supply Risk
1. Introduction
The existence of varying levels of risks in the supply chain is definitely not a new phenomenon but as the design of supply chains have become more complex, the occurrences of those risks have increased. Anyone reading the headlines in the past couple of years knows that globalization and outsourcing have led to greater supply chain risk, particularly in the areas of product quality and brand reputation [1]. Those concerns remain, but they currently are taking a back seat to worries brought on by the recession about supplier financial health and viability. "Supplier volatility driven by the recession certainly has introduced more risk and we are seeing that manifested in supply disruptions and more suppliers disappearing through bankruptcies," says JeffMiller, industry group executive at CSC, a consulting, systems integration and outsourcing firm in Falls Church, Va. "In many cases it has been a double whammy for manufacturers. Not only are markets for their products weaker, but disruptions in the supply lines upstream have caused them to...