The Impacts of Economic Sanctions on Supply Chain Management

Over the last two decades, supply chains have shown a great tendency of expanding their networks beyond the national boundaries and using the global sourcing strategy. As a result, supply chains have become more complex and dynamic networks that extend over several countries, including multiple tiers of suppliers, each of which may have various entities with different operations, structures and goals. In this situation, any uncertainty in the political and economic relations between countries should be considered as a source of risks. After the rise of unforeseeable political issues, one conceivable response of nations is imposing sanctions which lead to significant problems in seller-buyer relationships. This study has focused on the Iranian supply chains -which have been suffering from harsh economic and financial sanctions in the recent years- in order to investigate the impact of such sanctions on supply chain risk management (SCRM). After identifying the most significant supply chain risks associated with different flows, namely material, information and financial flows, the identified risks are analyzed via a qualitative method with respect to means of probability, impact and effect of sanctions. The impact of sanctions on different risk drivers, industries and supply chain performance measures are investigated. The results show that sanctions have the greatest negative impact on financial risks compared to the other risk drivers and all companies regardless of their industries and scopes are found to be vulnerable to sanctions. As to performance criteria however, the analyses disclose that supply chain cost and cash to cash cycle should receive more attention whenever the supply chain are influenced by sanctions. The analyses reveal that supply chain risk factors are really triggered by sanctions specifically risks of exchange rate movements, material price fluctuations, supplier bankruptcy, inability to collect all receivables and buying from a single source which should be viewed as the leading risk factor in the presence of sanctions. In the final stage, the high ranked risks are discussed and appropriate risk management strategies are proposed to deal with them. Keywords: Supply chain management, Sanctions, Risk management.