Supply chain risk management

Abstract

The study is focused on Automobile Industry. Automobile part manufacturers like Robert Bosch have a high reliance on their suppliers for fulfilling the orders of their customers (automobile companies). Hence, the supplier selection process is quite complex and time-consuming as it involves approval of the manufactured parts requiring various quality and security checks. If there is a slight error somewhere in the manufacturing then it can lead to disastrous consequences for their customers e.g. Suzuki, Toyota, Honda. Also, from an operations point of view, the supplier selection process is tedious (requires lots of resources) and long (approx. 1 year). Thus, if there is any problem with the supplier or supplier shuts down his operations, then the whole production can come to halt and it is also not possible to switch the suppliers immediately given the tedious and lengthy process of supplier selection. The consequences of such events can result in a huge amount of financial losses, credibility and reputation loss for the manufacturer. Given all these difficulties, it is quite crucial to assess the supplier health and chances of default while choosing the supplier as well as during the course of time. If manufacturers are well aware of the risk and chances of default in advance then they can restart the process of awarding the contract to the new supplier given that they are having enough time in hand. In this way, the negotiation power of the suppliers is also reduced as the manufacturers are well aware of the suppliers’ conditions and had already planned the subsequent actions.