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supply chain risk management empirical
relationship between operations and supply and chain
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The larger a company’s supply chain, the more vulnerable the company becomes. When the company’s suppliers spread further and further away from the company, the company becomes even more vulnerable to political and currency risk, cyber attacks, missed inventory goals, and failed communication with the supply chain. For a company to overcome those potential vulnerabilities, a company must build safeguards into their operations. Those safeguards include a strong corporate backing in supply chain management, solid relationships with suppliers, more attention to forecasting, and a holistic approach to sustainability.
The corporate culture of a company is a critical component to supply chain management (Lee, B.C., et al., 2010). Top level management needs to lend support to operations managers and their efforts to not only build the supply chain but manage the relationships. A part of top level management support is the understanding of the risks associated with entering into a relationship with a supplier. According to Schoenherr, those risks are “the loss of control over the task … a potential degradation of critical capabilities, increased dependency, and financial vulnerability. Additional risks emerge out of market volatility, incomplete specifications, and the inability to measure performance. Risk is usually heightened with a more involved outsourcing arrangement, as more control is transferred to the supplier,” (p. 347). If top level management is not accepting or understanding of those risks, the operations manager’s job becomes strained in building and managing the supply chain. As with any professional relationship, strain can have severe financial consequences. However, the risks stated above can be significantly lessened...
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...and medium-sized enterprises in food products and beverages. International Journal of Production Research, 48(2), 425-451.
Heizer, J. & Render, B. (2011). Operations Management (Tenth ed.). Upper Saddle River, NJ:
Pearson Prentice Hall.
Klatch, W. (Spring, 2007). How to use supply chain design to reduce forecast friction. Journal of
Business Forecasting, 26(1), 23-31.
Lee, B.C., et al. (February, 2010). Evaluating antecedents and consequences of supply chain
activities: an integrative perspective. International Journal of Production Research, 48(3), 657-682.
Lee, H.L. (October, 2010). Don't Tweak your Supply Chain--Rethink It End to End. Harvard
Business Review, 88(10), 62-69.
Schoenherr, T. (January, 2010). Outsourcing decisions in global supply chains: an exploratory
multi-country survey. International Journal of Production Research, 48(2), 343-378.
In the 1960s through the 1970s, companies realized strong engineering, design, and manufacturing functions were strong market strategy keys to create and capture customer loyalty. As the demand for new products rose in the 1980s, these market requirements were to increase their flexibility and responsiveness to adapt existing products and processes or to develop new ones in order to meet customer needs. As manufacturing improved in the 1990s, managers began noticing material and service inputs involving suppliers and their major impact on an organization’s ability to meet customer needs. As a result of these changes, organizations now find that it difficult to manage their own organizations. First, they must be involved in the management of their network of all upstream firms that provide directly or indirectly, as well as the network of downstream firms, which are responsible for delivery and market service of the product to the end customer. In order to succeed, managers have to realize that they cannot do it alone and they must work together on a daily basis with the whole organizations in their supply chains. Because supply chain management involves all functions within an organization, managers need to know what a supply chain is, why it is important, and the impact of supply chain management on the success and profitability of their organization. Today, Wal-Mart topped the list of the America’s biggest companies on the Fortune 500 list, “with sales of almost $345 billion — more than a quarter of a trillion dollars” (Forbs). Wal-Mart’s supply chain management is becoming recognized as a core competitive strategy.
Christopher (2011) pointed out that resilient supply chains are not the most affordable however they are more competent when dealing with uncertain organisational environments; this creates a conflict of interests.
In today’s business world, organizations frequently face difficult operating challenges. In order to meet customer demand, businesses need to develop an implementable strategy that directs the company during a crisis. Disruptions in the supply chain are one of the primary reasons these types of business strategies are needed. The number of natural or manmade disasters has risen considerably over the past ten years. According to an article in Armageddon Online, “during the 2000 to 2009 period, there were 385 disasters, an increase of 233 percent since 1980 to 1989, and 67 percent since 1990 to 1999” (2010). Some other common supply chain disruptors are transportation delays, port stoppages, and poor communication between the company and supplier. More times than not, these types of events cause a bottleneck effect in the company’s supply chain.
Optimal supply chain performance requires the execution of a precise set of actions that are not always in the interest of the individual supply chain members, who are most often interested in only optimizing their own objectives (Cachon et al. (2003)). Optimal supply chain performance can be achieved if firms coordinate by contracting on a set of transfer payments that are design to align each firm's objective to the supply chain objective. This mechanism is termed decentralized supply chain co-ordination using contracts.
*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.
In a traditional manufacturing company, the supply chain covers the following roles: suppliers, labour, engineering, production, product, quality assurance, inventory, competitors and customers. The last role, that of customers, is different from the rest of the roles within a classic supply chain, meaning that suppliers are oriented upstream, while customers downstream; the labour is situated internally, while customers are external; engineering is done only by qualified engineers; production is protected from customers; products represent the offering that the customers obtain; quality assurance prevents faulty products to get to the customers; inventory can be managed in order to saturate the demand in time; and finally competitors offer customers different choices to satisfy their needs. Taking separately, the customer role in the traditional supply chain often resumes at “selecting, paying for, and using the outputs” and sometimes proving feed-back and promoting a company’s offerings by recommending to others (Sampson and Spring,
It is suggested for any organization to review, reassess any existing supply chain management or any delivery techniques, before developing a new supply chain method so that any exposure to high risk of failure is reduced. Somerset as a company taken advantage of outsourcing and transferred it product manufacturing to China leveraging low cost labor and raw material. The labor cost and other cheap material reduce Somerset overhead cost, but there is always the risk of not delivering product on time due to the foreign country political climate, change in tax and tariff and local
Kersten, W., & Bemeleit, B. (2006). Managing risks in supply chains: How to build reliable collaboration in logistics. Berlin: Erich Schmidt.
As the future risks are unpredictable, researchers believe that by putting effort focusing on identifying and assessing risk with collaboration of stakeholders and being proactive into supply chain operations can drive to prevent supply chain disruptions and mitigate risks.
Today’s organizations are faced with increasing levels of global competition, customer’s demanding value for their money and high stakeholders expectations on investment returns. Gattorna (2003), notes that firms are now pursuing supply chain management as a strategy to competitive advantage. Firms in a supply chain relate, transact, and partner on different levels; from product design and development to product delivery. Through supply chain management a firm pursues value creation through timely product delivery, cost management, inventory control and customer service (Beamon, 1999).They do so individually or through synergies formed with other organizations to increase customer service
Understanding the changes in the market and the growth of e-commerce prompted the organization to invest heavily in its supply chain management forecasting and management system. The development of a network of distribution centers and Direct Fulfillment Centers to position the company to capitalize on the growing e-commerce market indicate a strong understanding of the need to adapt to changing market forces. The company spent over $300 million on new distribution center facilities in 2014 alone, and continues to expand to maintain efficiency in product movement (Cassidy,
According to (Ball, 2010) Linking technology and business strategy is extremely important now more than ever, and may lead to sustainability in the global marketplace, if well structure. The supply chain is important to business structure because it is a determining factor of a company’s success or failure in the global market, dealing with the production and distribution of goods. Managers must understand the risk, benefits, and strategic issues with supply chain when considering outsourcing. Continued improvements in telecommunications have improved how corporations conduct business both internally and externally. In the area of supply chain, technological improvements are changing the way customers and suppliers communicate and conduct business through computers, resulting in competitiveness both locally and globally, while accelerating returns.
There is predictive monitoring and predictive capabilities out there that businesses are taking advantage of to increase their competitive abilities. Case in point – recently a major commercial aircraft provider was unable to deliver an aircraft order to a customer timely because their ashtray company went out of business. A major bus company was also unable to deliver an order of buses because the company that manufactured and supplied their bumpers also went out of business. These two examples illustrate the power of information and the need to source strategically. It is not just the delivery of a component that is at stake, but the most capable allies that manage your supplies and impact your ability to deliver in the marketplace. Strategic sourcing is the springboard for supply management – there are a lot of processes: whether forecasting and planning on the front end or back end supplier management and score carding. Strategic sourcing is where it all starts and you select suppliers that enhance your firm’s capabilities which affect your bottom line and enter into long-term relationships. You manage the performance of that supply base and on an on-going bases there are negotiations to drive value into the supply management and supply chain strategy. It incumbent upon organizations to understand what they are buying, who they are buying from, who they are buying it for and how much the organization is spending to meet those objectives. Across the enterprise and on a global basis – have senior leadership realized that, rationalize that and determine who are the best suppliers. Fundamentally, organizations must ask themselves what are they are trying to achieve with strategic sourcing. If it were all about price and/or cost ...
19. Sodhi, Sunil Chopra and ManMohan S. Managing Risk to Avoid Supply Chain Breakdown. MITSloan Management Review. [Online] October 15, 2004. [Cited: February 25, 2010.] http://sloanreview.mit.edu/the-magazine/articles/2004/fall/46109/managing-risk-to-avoid-supplychain-breakdown/.
Supply chain management has been defined as that process that involves the management of information, materials, and all the finances that are handled within and across the entire supply chain process (Christopher, 2016). The management is usually done through out the entire supply chain management from that moment when the suppliers are involved through all the manufacturing activities, different distribution activities, and the way that the products are served to the final product consumer (Turban, et al., 2002). The process also includes all the activities that different organizations offers to their customers as after sale services for purposes perfecting their services and products towards their highly valued customers (Christopher,