Discuss about the Risk Management in Supply Chain for Unanticipated Risks.
This report was written so as to give insight and way forward to mitigate or help solve the problems encountered in business organizations more especially in the case of managing the risks that may arise as a result of supply disruption in the chain of supply. This report contains the steps that can be undertaken such as ensuring financial visibility of the suppliers and ensuring the supplier has required documents such license of insurance before entering in to contract with them. This report is intended to provide possible solutions to all business dealing with supply of goods and services to evade anticipated and unanticipated risks.
The report was carried out through the use of direct interviews and use of questionnaires to chosen enterprises and chosen suppliers so as to come up with all round study about supply chain management. It particularly involves finding out what is important for the firm to be in charge of and those that require little attention. Coming up with a list that identifies every individual staple, coming up with critical material and the know-how of rudimentary supplier firms is thus essential. It is closely linked to invention and efficient contract management. The way a procurement firm tackles contract management will build the platform for risk management in supply chain.
Supply Risk management in the supply chain process of any firm should be taken as one of the essential substages in the structure of any business organization (Haraburda 2017, p.657). This involves coming up with both abstract and tangible plans that will enable the company to continue with normal operation even in the case of the occurrence of supply breakdown. This will determine the speed of things going back to normal incase after the breakdown
The major cause of many businesses falling out of the market is due to poor strategies or completely no plan put in place to manage the risks that may arise in the course of contract given out to suppliers (Zhou et al 2018, p. 9). These may be caused by several business in the management plan of the company such for instance, failure to provide suppliers with performance report which may make the suppliers think, that he is on the right truck even if they are not this end s up making the suppliers reduce their dedication thus can cause artificial or lack of the materials being supplied.
Failure to evaluate potential liabilities exposure before using any external suppliers has also been one of the breaking point of many businesses either upstream or downstream supplemented with lack of proper diligence in the operational supplier assessment (Almaktoom et al 2016, p.861). According to Martian Christopher’s book (Managing Risks in the supply chain), there are both internal and external risks that may affect the supply chain in any organization. The macro threats are those which are mostly created by incidences either upstairs and downstairs include demand (unpredictable or misunderstood customers and customers terminating their demands), supply disturbance to the movement of products in the supplant chain) physical threats such as the conditions of supplier’s facilities (Synder eta al 2016, p.91). While internal threats are oriented by incidences within the companies restrain check. They include mass produce (risks instigated by disruption of reticent or processes and threats fostered by changes in central persons in leadership.
Several steps and technics can be undertaken to help mitigate both speculated and unspeculated risks in the logistics. According to Martin Christopher, several steps can be used in the process to help manage the supply chain effectively (Yu, Xiong & Cao 2015, p.98). This involves coming up with several steps in the supply risk management plan. These steps include:
It particularly involves finding out what is important for the firm to be in charge of and what should be given little focus. Coming up with a list that identifies each raw material, developing effective strategic material and understanding the strategic supplier organization is essential at this stage for every business. It is closely linked to innovation and efficiency in contracting management (Vujovic et al. 2017, p.9). The way procurement office will tackle the issue critically. The use of contract streaming that brings a clear knowledge of the important cost of building and leaving old styles which provide the ability to secure higher chances of success rates of executing well-drafted agreements for instance use of procurement contracting portfolios. Understanding the gaps present in the organization agreement terms and secure methods of fixing them
Secondly, coming up with strategic requirements for supplier insurance and limitations in liabilities.it encompasses evolving of potential liability exposure before using any external supplies of product services either upstream or downstream (Lee, Song & Cheong 2018, p.9). Addressing all areas of protections that is limitation of liabilities, indemnification and supplier insurance. The cost of suppliers to be insured so that they are protected against legal and finance exposure that could reduce the ability to carry out the contractual commitment and bridge of protection to the procurement firm from direct and indirect allegations from Stuckists or other parties that may be affected by the contract (Fang et al2018, p.22). This is by ensuring that every organization has a proactive management of risk protection by having all the resources in place to proactively collect and knowledgably renew the contract. In addition to this, the company or organization should be able to tackle vulnerability, for each of the risks present in the supply chain this include answering the questions such as scenarios that are expected to happen, reason for their occurrence and the way the company is able or unable to deal with them.
Third stage in managing risks in the supply chain involve innuendo/inference the failure of many organizations to take into consideration or insufficiently mentioning the substantially useful information besides promoting the imitation techniques (Zou & Counni 2012, p.148). It can be dealt with through employing the principles of enterprise resource management to affirm that overflow consolidation of the stockiest group does not occur. Coming up with strategic sourcing work by having a balanced portfolio which gives room to perform services in multiple locations thus segmenting the relationship be among many velour’s in all levels of contract manner thus opening door to substantial supply chain operation (Hialiang & Jiambo 2017, p98). The process ensures financial solidity perceptibility thus stabilizing entire suppliers.
The strength of a business depends with the stability of supply chain it deals with, building strong payment protocols and managing vendor relationship pays also a key role in managing any risk in the supply chain. Effective resolution of disputes which are inevitable at each stage of the supply chain coming up with effective procurement procedures such as putting complicated requirements for supplier cover for compensation and reduction of liabilities (Yucenur, Vayvay & Demirel 2011). Selection of established and investigated qualified best practice supplier firms that lead their sectors, critically making difficult decision and taking responsibility of every situation by discussing all conceivable chances of failure (Singh et al 2012, p.280). The company should be able to come up with ways that can go a long way to curb cases such as natural phenomena that cannot be anticipated for under normal circumstances such as tsunami. Empowering all sections of the organization with user reliable technics of placing order of goods and services and securing convenient prices as a result of the willingness to make long-term commitments.
Lastly checking the cost and benefits in allaying actions and measures comes with the benefits of threat reduction and if it is worth. The link between benefit of cost and susceptibility verses authenticity. Presence of disruption cost and thus increases of vulnerability.
From the research above, its quite clear that many organizations and firms have stumbled in the course of doing business due to poor risk management plans that range from failing to qualify their suppliers by giving report status of their progress to complex issues such as presence of gaps in their risk management plans. The risks range from macro (externa) to micro (internal) that are under the control of the firm management.
In assessing the market with several organizations, several steps were qualified to be more helpful in mitigating the risks including the” black swan”(Shenngham et al 2016, p.3369).The steps include coming up with innovative and efficient technics of risk management in supply chain, critical prerequisite for stockiest insurance, limiting liabilities, providing optimum and circumlocution(Edward & Chakraborty 2012, p. 1031) in addition to supplier financial visibility which concerns itself with ensuring that the supplier company is capable of honoring the contract without terminating it before its due date and has got the cover of insurance and has the financial ability to carry out the work
Conclusion
Risk management in the supply chain goes beyond the chain. It is organization itself as when disruption in supply is handled well it can change into business opportunity but when it is handled poorly it can turn into failure in business. Management of risks can only be effective if it is fully accepted into the organizational business process. The procedure of finding threats, scrutinizing them and forethought in imitation must be noted and feedback given through the firm.
Various road maps can be put in place such as giving reports to the suppliers and even going further to ensure that the suppliers provide their insurance licenses so as to help avoid the risks that may arise in the cause of any dispute which may arise in supply and any controversies. Risks to the supply chain consist of; value vulnerability, shortage of material. Automating steps involved in stockiest risk management collection, scrutinizing and managing supplier information.
List of References
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Edwards, B, & Chakraborty, S 2012, ‘Risk Communication and the Pharmaceutical Industry. What is the Reality?’, Drug Safety, 35, 11, pp. 1027-1040, Academic Search Premier, EBSCOhost, viewed 28 April 2018.
Fang, H, Jiang, D, Yang, T, Fang, L, Yang, J, Li, W, & Zhao, J 2018, ‘Network evolution model for supply chain with manufactures as the core’, Plos ONE, 13, 1, pp. 1-28, Academic Search Premier, EBSCOhost, viewed 28 April 2018.
Haraburda, SS 2017, ‘SUPPLY CHAIN MANAGEMENT Maturity Level Assessment’, Defense Acquisition Research Journal: A Publication Of The Defense Acquisition University, 24, 4, pp. 656-681, Academic Search Premier, EBSCOhost, viewed 28 April 2018.
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