Scenario Planning in Supply Chain Risk Management

This paper studies the risks and uncertainties surrounding global food supply chains and finds that “scenario planning” which is a popular tool used in other sectors for risk identification, is less widely used to indentify risks within global food supply chains. Presented in this paper is a review of available literature and a discussion with regards to the feasibility of using scenario planning to address food supply chain risks. The feasibility of using scenario planning at the strategic, tactical and operational level is also discussed. SUPPLY CHAIN RISK MANAGEMENT Risk management has become an integral part of a holistic SCM ideology (Christopher and Lee, 2004). Local political turmoil, the ever increasing complexity and uncertainty of weather conditions, terrorism, counterfeiting, and a plethora of other such issues create external risks in the supply chain. The supply chain is also subjected to risks internally. Supplier issues, strikes, quality problems, and logistics issues are more internal operational risks, which need a different level of mitigation. Tang (2006) argues that with so many (e.g. terrorist attacks, hurricanes, earthquakes) disruptions that have happened in recent times, supply chain risk will become an important criterion for cost reduction in SCM. Chopra and Sodhi (2004) classify the supply chain risks in the form of delays of materials from suppliers, large forecast errors, system breakdowns, capacity issues, inventory problems, and disruptions. Whereas, Tang (2006) classifies risks as supply chain risks into operations and disruptions risks. According to Ritchie and Marshall (1993) risks emerge from one of the following sources: (1) Environmental factors (2) Industry factors (3) Organizational factors (4) problem-specific factors and (5) Decision-maker related factors. Tang and Tomlin (2008) recently classified supply chain risks as strategic (long term) or tactical (medium term). SCENARIO PLANNING Scenario planning was described by Ringland as a set of processes for improving the quality of educated guesses and also for deciding what their implications are (Ringland, Schwartz 2006). Scenarios were defined by Kahn and Weiner (1967) as “hypothetical sequences of events constructed for the purpose of focussing attention on the causal processes and decision points”. Another more recent definition follows (Ringland, Schwartz 2006) “builds plausible views of different possible futures for an organisation based on groups of key environmental influences and drivers of change about which there is a high level of uncertainty” Gerry Johnson and Kevan Scholes (1999). A crucial point noted by many academics is that scenarios are not predictions for the future but rather plausible futures none of which may actually materialise (Wack 1985, Wright 2000). Its purpose is more to make managers more aware of how prepared they are about plausible futures and how these scenarios can assist in making sound management decisions resulting in better and more effective choices (Ringland, Schwartz 2006, Wack 1985). Scenario planning has now being adopted as a planning tool across many organisations but there remains ambiguity regarding the exact procedure and other variables like number of scenarios needed ,number and type of people involved etc. as there is no standard approach towards implementing it. RESEARCH METHODOLOGY A survey was conducted in an effort to explore further the understanding and perceptions that entities within the UK food supply chains have regarding supply chain risks and the techniques deployed to mitigate and manage risks and disruptions (Dani and Deep, 2009).