The importance of supply chain management (SCM) has been increasing recently and the concept of supply chain risk management (SCRM) has been gradually expanded. Since the concept of risk and uncertainty permeates all organizational functions, risk management would seem to be a crucial step towards safeguarding a company's competitive advantage. In the case of modern supply chains, which are composed of complex relationships necessitated by competitive pressures such as outsourcing and globalization, understanding and implementing risk management processes and initiatives at various levels of the chain is essential (Peck, 2006). The purpose of this chapter is to conduct an extensive and structured review of the supply chain risk management (SCRM) literature in order to understand the importance of the risk management concept in the context of organizational supply chains, identify gaps, and suggest future research areas in this important and growing field.
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Earthquakes, hurricanes, floods, fires, strikes, terrorist attacks, political crackdowns, economic downturns, and epidemics are examples of events and incidents that may tremendously disrupt any supply chain. Obviously, these events coupled with supply chain’s inherent operational risks constitute the potential and current risks and uncertainties for Supply Chains (SCs). The impact of these disruptions in both the short and the long term will definitely threaten the continuity of businesses. The cases cited most often in regard to ineffective supply chain risk management (SCRM) are Ericsson’s huge 400 million Euro loss due to fire at its semiconductor sub-supplier plant, interruption of freight at US borders in the aftermath of the September 11 tragedy, and the Asian financial crisis and consequent crises and bankruptcy of many businesses in the 1990s. Boeing, Pfizer, and Cisco are other examples of businesses that have suffered unexpected losses of more than US$2 billion each as a result of ineffective SCRM decisions (Hult, Craighead, & Ketchen, 2010).
Given the ascending nature of disasters and increasingly complex network of relationships among buyers and suppliers, the main objective of this chapter is to help the reader to better understand the importance of managing risk in supply chains by exploring the concepts of risk and risk management in general, implications of risk in supply chains, and risk management steps and risk sources in network environments.