ABSTRACT
If something can go wrong, it will go wrong at the worst possible time. Supply chain risk management ‘is the implementation of strategies to manage both every-
day and exceptional risks along the supply chain based on continuous risk assessment with the objective of reducing vulnerability and ensuring continuity’ (Wieland and Wollenburg, 2012). In the past, manufacturers such as Henry Ford attempted to own or control the supply chain. For example, Ford owned coal mines, steel mills, railways and river barges to supply his factory. Today, most manufacturers outsource as much as possible and buy built-up components. Volkswagen is an exception. They employ a largely vertically integrated strategy whereby they manufacture their own components. At the other end of the scale, General Motors (number three behind Toyota) outsources as much as possible, and their factories are little more than assembly lines of built-up components. By comparison, in 2015 Volkswagen (VW) became the largest auto manufacturer in the world, producing 10.5 million units and employing 590,000 people, whereas General Motors (GM), with a centralised strategy, produced 9.9 million units and employed 220,000. This means that for VW, the ratio of units per person was 18, and for GM, it was 45. At first look, this would seem that GM is 250% more efficient than VW. A look at the reported profit figures for 2015 tells a different story; VW profit was US$ 14 billion, and GM profit was US$ 9.7 billion. By making the most of the components in-house, VW has better control of the supply chain in terms of design, quality and delivery, and thus reduces risks associated with relying on outsourced supply. Toyota follows a blended model; in 2015, they employed 350,000 and produced 10.2 million units with a ratio of 29 units per person, but with a whopping profit of US$ 18.1 billion. Toyota is famous for their collaborative approach with suppliers. Toyota will, for example, provide technical expertise to help their suppliers become efficient, and suppliers are encouraged to make suggestions regarding design. GM is more at arms’ length; they tell suppliers what they want and do not get involved in the day-to-day operations of the supplier.
