Supply Chain Management

Supply Chain management

Introduction

Supply chain management involves an integrative idea of managing the total flow of a distribution channel, which is from a supplier to the end user. This involves coordination of various business processes and activities, for example, through inventory management. Supply chain lies between fully integrated systems and those where a member operates independently. The fully vertically integrates systems are within one company, for example, the tire company that grew its rubber, manufactured tires and sold the products to their retail shops. In this system, management decides on marketing and logistics. Supply chain management involves performing functions through two or more entities and this helps in making the relationship between the firms tenuous. The purpose of this paper is to identify various characteristics of supply chains and to examine how they affect the channel of management.

Supply chain management

Supply chain management involves an approach used in inventory management though it deals with the whole channel of distribution rather than the next level. Kouvelis et al. (2006, pp. 449-467) shows supply chains are formed for three main reasons. One is to reduce inventory in the chain. The other reason is to increase customer services and finally it is to assist in building a firm's competitive advantage for the channel of distribution. The reduction of inventory assists in significant cost savings, increase availability of stock and reduce the order cycle time due to wide inventory management. The customer service function is also beneficial as the redundant stock is released leaving the company with manageable stock that meet the needs of customers. Supply chain management allows for effective examination of firms with certain cost advantages in the channel. The competitive advantage is achieved through improved profitability, lower inventories and improved customer service.

Characteristics of supply chain management

The features of a supply chain management include inventory management, total cost, amount of mutual sharing, and coordination of level in channels, channel leadership, sharing of risks and rewards and time horizons.

Supply chain risks

To manage supply chain risks, it is necessary to adapt a general framework that will ignore disruption risks. Managers should introduce a culture where every individual in the organisation is aware of the risk and should be ready to face it. The strategic issue in such a firm involves determining the actions to be taken since risks mostly affect the supply process thus resulting to market failure. Kouvelis et al. (2006, pp. 449-467) argue that once companies are prepared for the supply chain risks they are in a better position of gaining the market share from other competing firms. In the process of implementation, it is necessary to utilize the adaptive method of planning rather than one that involves long-term benefits. This is necessary, as solutions that are more adaptive would work best in an environment faced with supply chain risks.

Decisions made are based on real time data in such a way that risks are avoided at that particular moment. Executives should experiment options, learning about the outcomes and revisiting the assumptions involved. In firms that use dual sourcing, managers should monitor the outcomes and alter the parts that do not work well for the firm. The firm should be flexible and move according to the environmental pressures. This is achieved by adapting the sourcing strategies over time. In the process of preparing for the unexpected, different risks should be assessed. This makes it easier in responding to the threats and there are two methods applicable. One is that firms should take preventive actions by developing security strategies in their supply chain. The other action taken involves remedial actions. Lavassani et al. (2009, pp. 85-98) describes that these actions mitigate the costs of risks. Such costs caused by supply chain risks can be harmful to a business, for example, Ford Company had to shut down five of its plants since it could no longer get products from its suppliers based in Canada. Global supply chain is termed as vulnerable due to various external risks such as natural calamities and terrorism (Kouvelis et al. 2006, pp. 449-467).

Other factors include internal factors within the organisation, for example, having differences with the suppliers. Companies should also take various measures of dealing with supply chain risks. This is by carrying out research on the best methods that would provide valuable insights. Risks that affect the supply chain include political instability, terrorism, strikes or fire. Modern practices in the global market have also facilitated the increase of these risks for instance due to weak management and the use of just in time inventory management. Companies should avoid the use of third parties in their supply chain as this increases risks (Lavassani et al. 2009, pp. 85-98).

Supply chain risks increases in cases where firms involve themselves into complex supply networks. Organisations should be proactive in order to encounter fewer risks and be in a position of recovering from hardships. This is achieved effectively once firms identify their weak points and being able to get out of situations they have never experienced. Coleman (2000, pp. 19-23) describes that risks are avoided where firms practice bench marking in such a way that they are able to study their competitor's weaknesses as this enables a firm to identify new threats in the market. A method for dealing with uncertainties involves inviting external parties who are capable of examining the position of the firm thus noting the level of crisis preparedness. External parties are useful as firms get to know the best plans and strategies to set up incase of a crisis. Smaller risks should not be neglected as they build up to become a bigger calamity that will be difficult to handle. These risks may lead to loss of stock or even loss of market share thus lower productivity.

Managing supply chain risks is by concentrating on the source of the risk and paying less attention to the type of risk as compared to others. This is because a risk can be stopped completely once the source is identified, for example, in strikes, managers should identify why the strike came up and what had not been provided to the suppliers. Lavassani et al. (2009, pp. 85-98) describes that the causes of suppliers strike could involve disruption in transportation, the supply, facilities, freight breaches, lack of effective communication or the