Ericsson's proactive supply chain risk management approach after a serious sub‐supplier accident

TLDR

Supply chain risk management is increasingly important as supply chain vulnerability rises. The article describes Ericsson’s response to a sub‑supplier fire by establishing a new SCRM organization, processes, and tools. The approach analyzes, assesses, and manages supply‑chain risk sources by collaborating closely with suppliers and imposing formal requirements on them. The study suggests insurance companies are driving improved SCRM by recognizing supply‑chain vulnerability, and argues that traditional logistics trade‑offs should incorporate risk to achieve an efficient risk‑prevention balance.

Abstract

Supply chain risk management (SCRM) is of growing importance, as the vulnerability of supply chains increases. The main thrust of this article is to describe how Ericsson, after a fire at a sub‐supplier, with a huge impact on Ericsson, has implemented a new organization, and new processes and tools for SCRM. The approach described tries to analyze, assess and manage risk sources along the supply chain, partly by working close with suppliers but also by placing formal requirements on them. This explorative study also indicates that insurance companies might be a driving force for improved SCRM, as they now start to understand the vulnerability of modern supply chains. The article concludes with a discussion of risk related to traditional logistics concepts (time, cost, quality, agility and leanness) by arguing that supply chain risks should also be put into the trade‐off analysis when evaluating new logistics solutions – not with the purpose to minimize risks, however, but to find the efficient level of risk and prevention.