Cumminss Case Study

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Cummins Inc. – Analysis of the strategic fit between competitive strategy and supply chain risk management

*Enterprises today are finding that they are relying more and more on supply chain partners for their success. Enterprises spend most of their budget on purchasing goods and services from its supply chain partners. While globalization, extended supply chains and supplier consolidation offer many benefits in efficiency and effectiveness, they can also make supply chains more brittle and can increase risks of supply-chain disruption. Effective supply-chain risk management (SCRM) is essential to any successful business. It is also a capability many enterprises are yet to develop. The supply chain triad shown in figure 1 conceptually represents the key elements that should be of key focus in a SCRM. Identifying, evaluating, treating and monitoring supply chain risk will differ across individual enterprises depending on their industry, the nature of their extended supply chains, and their tolerance for risk.

Figure 1: Risk Management Framework

Supply Chain Process Overview

At Cummins Inc. supply chain risk management (SCRM) is embedded in the DNA of
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A “Risk Map,” “Risk Dashboard,” and a list of the “Top 10 Risks” and their corresponding mitigation strategies are maintained to keep the company operational and be able to spring back from disruptions quickly. Various tools are used to assess the risk such as failure mode and effects analysis, fault tree analysis and probability models are also utilized. A Scatterplot tool is used to depict the probability of failure index vs profit at risk index identifies partners that have higher risk of failure and the corresponding financial impact on the profit as shown in figure 3. The company prioritizes the suppliers that have high risk of failure and a high impact on the profit and work their way

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