Risk Mitigation Indicators in Supply Chain: Lesson from Indonesia

Abstract :

This study aims to explore the leading indicators of the non-optimal risk management system and how to plan risk mitigation in the Indonesian manufacturing’s supply chain division. This study used employees from the middle-level management and upper-level management, from the Supervisor to the General Manager, whose departments were related to the supply chain process, as the unit of analysis and unit of observation. It employed a mixed-method and exploratory research in nature. By conducting factor analysis, it identified 19 supply chain risk indicators and extracted into six factors of 17 valid-indicators to analyze risk mitigation in the supply chain. These factors included: 1) supplier risk (delivery delay, rejected product, transportation problems, supplier stop line), 2) nature risk (flood, tsunami or storm, accident), 3) custom risk (import regulations, late shipment of imported goods, through truck prohibition, custom problems), 4) operation risk (problematic purchase orders, production errors), 5) capacity risk (overcapacity, parts supply shortage), and 6) sourcing risk (mistake in supplier selection, supplier bankruptcy). It implies that these six factors need to be considered by the company to predict events that may occur in operational processes in the supply chain so that there are no problems in the production process. Consequently, to analyze risk mitigation indicators in the supply chain division, a company must have an excellent ability to monitor and evaluate all operational activities in its supply chain in order to be able to control the supply-chain risk management system optimally.