Insight from industry Supply chain risk management (SCRM): a case study on the automotive and electronic industries in Brazil Mauricio F. Blos Department of Management and Information Systems Science, Nagaoka University of Technology, Nagaoka, Japan Mohammed Quaddus and H.M. Wee Graduate School of Business, Curtin University of Technology, Perth, Australia, and Kenji Watanabe Department of Management and Information Systems Science, Nagaoka University of Technology, Nagaoka, Japan Abstract Purpose ��� The purpose of this paper is twofold: to identify the supply chain risks in the automotive and electronic industries in Brazil, and to highlight the urgency of supply chain risk management (SCRM) implementation. Design/methodology/approach ��� It uses exploratory study methodology in the automotive and electronic industries, taking in consideration of the (SCRM) phase of initiation. Findings ��� There are significant practices to implement SCRM: better supply chain communication, SCRM and business continuity planning training program, and the creation of a chief risk officer position to manage the supply chain risks. Research limitations/implications ��� The limitation of this study comes from its small sample size. There are two simple reasons: many companies did not know SCRM and thus misinterpreted the information about SCRM. Practical implications ��� This case study promotes more preparedness for the two industries to manage the risks of supply chain. Originality/value ��� This study shows the risks that surround the supply chain in the automotive and electronic industries in Brazil and how these industries can implement SCRM in a successful way. Keywords Supply chain management, Risk management, Business continuity, Automotive industry, Electronics industry, Brazil Paper type Case study Introduction Supply chain risk management (SCRM) is a new and novel methodology that captures both the operations as well as the financial aspects of decision-making. Supply chain management, in general, is still a relatively new concept in most developing countries and many companies have not even begun to consider the formal management of their supply chain. Some consider the cause as the organizational behavior: departmental structure and bad communications. However, supply chain management grows rapidly each day, and many senior supply chain professionals from the investigated industries have expressed its broader future role. Supply chain management is ���the management of material, information and finance through a network of organizations (i.e. suppliers, manufacturers, logistics providers, wholesales/ distributors and retailers) that aims to produce and deliver products or services for the consumers. It includes the coordination and collaboration of processes and activities across different functions such as marketing, sales, production, product design, procurement, logistics, finance, and information technology within the network of organizations.��� Supply chain risk management (SCRM) is ���the management of supply chain risks through coordination or collaboration among the supply chain partners so as to ensure profitability and continuity��� (Brindley, 2004) (Figure 1). The risk in supply chain management originates from two key areas: supply and demand. The next level of equal importance is environmental, political, process and security risks. Political and environmental risks may always remain amorphous and refractory to adequate quantification. Security risks are even more volatile but on a far higher priority level. Based on the definitions of supply chain The current issue and full text archive of this journal is available at www.emeraldinsight.com/1359-8546.htm Supply Chain Management: An International Journal 14/4 (2009) 247���252 q Emerald Group Publishing Limited [ISSN 1359-8546] [DOI 10.1108/13598540910970072] 247

management and SCRM, it appears that one can address the issue of SCRM along two dimensions: 1 Supply chain risk. Operational risks or disruption risks. 2 Mitigation approach. Supply management, demand management, product management, or information management. Many supply chain scholars believed that companies could only mitigate supply chain risk but loss and damage could not be avoided when accident happens. However, supply chain risk management (SCRM) has become effectively to reduce loss and damage. This paper presents an empirical study of SCRM in automotive and electronic industries in Brazil. The scope is formed by research methodology and results. A supply chain vulnerability map with conclusions and future directions are given in the final section. Research methodology Since only limited empirical research on how companies deal with SCRM has been found, an explorative investigation based on a supply chain vulnerability map (SCVM) is conducted in this study. The main objective is to define the necessity of applying SCRM. This SCVM based on Sheffi (2005) is divided in four quadrants as discussed in the next section. The focus of this study is manufacturer and dyadic supplier-manufacturer (automotive and electronic industry) relationship for big and medium-size enterprises. Therefore, the units of analysis in this research are purchasing, production, and supply chain managers. A total of 72 questionnaires were developed, tested and distributed to the automotive related industries in Sao Paulo, Rio de Janeiro and Rio Grande do Sul, Brazil. A total of 30 questionnaires were distributed to the electronic related industries in Manaus Free Trade Zone. Positive and negative statement is used to simplify the validation of questionnaire to build the supply chain vulnerability map. The survey sent the questionnaires via e-mail to the targeted respondents and some of them included face-to-face interview. The returned/ replied questionnaires, 32 from the automotive industry and 14 from the electronic industry, represent a total response rate of approximately 45 percent. The following four questions are very important in building the SCVM. They are: ���What are the types of events that can disrupt the supply chain?���, ���What are the characteristics of supply chain disruptions?���, ���What is the likelihood it will take place?���and ���How severe will it be?���. We then identify potential risks and their possible ramifications. Descriptive analysis is used to analyze the profile of the companies and respondents. The responses were mainly from the purchasing managers (44 percent), supply chain managers (20 percent) and production managers (36 percent). The 46 returned/replied questionnaires helped to identify the supply chain risks through a developed supply chain vulnerability map and the investigated managers (purchasing managers, supply chain managers and production managers) believed that their respective company would fulfill the demand although a disruption of supply chain risk occurs. Most of the investigated industries believe that SCRM is important to fulfill demand, reduce high cost and reduce loss profit if the companies suffer supply chain disruptions. In the following section, survey results are presented. In this section we investigate the specific supply chain vulnerabilities by considering the automotive and the electronic industries in Brazil. Then we quantify them in Figure 2. Financial vulnerability With the complexity of the global market, there are some disruptions that complicate financial flows and cash management in Brazil. Of the finished goods cost, 4 percent or more is spent on supply chain. That is a significant drag on cash flow and effective management of working capital. Strategic vulnerability According to the investigated companies, most of the time this kind of vulnerability appears when there is a ���new model introduction��� (during program launch) and some failures happen with the project management plan. Poor-quality goods supplied were identified as one major problem for the electronic industry. Most of the electronic companies that have quality assurance from its Asian���s suppliers do not need to inspect the goods 100 percent and as a result, the defective parts are detected during production time. As a countermeasure, the quality control department is called and the production line is stopped until some corrective action (re-work) is taken. Sometimes, re-work is needed to solve the problem. Of course there is also the problem of production delay, but it can be settled later, as one manager from one investigated company suggested. When the problems are not simple, the parts are scraped and the production is postponed until the arrival of a new shipment. Hazard vulnerability Hazard vulnerability includes internal risk drivers: malicious disruptions such as international terrorism to external risk drivers: natural hazards such as flooding, hot weather and heavy rain/thunderstorm. One foreign electronic company investigated said that to protect the organization from hazards that might result in future disasters, general hazard information and warnings are two separable types of risk communication. Natural processes are an enduring condition around the human environment. Natural hazards become disasters when they intersect with the human environment (Natural Hazards Review, 2005). With global warming, the number of natural disasters, such as floods and droughts has increased year by year. In 2004, a cyclone destroyed 21 municipal districts in the south part of Brazil. Inundations in the metropolitan areas seem to be the big negative effect for the road shipments. It promotes interruption and/or delay for delivers. Figure 1 Supply chain risk management Supply chain risk management (SCRM) Mauricio F. Blos, Mohammed Quaddus, H.M. Wee and Kenji Watanabe Supply Chain Management: An International Journal Volume 14 �� Number 4 �� 2009 �� 247���252 248