Discuss about the Risk Feasibility Analysis on Performance of Supply Chain.
At the time of planning for a potential project, it is required to base the decisions on accurate information. The feasibility analysis helps to determine the viability on the performance of the supply chain. In order to analysis the performance of the supply chain, it requires gaining accurate information based on a review of specifications, location as well as site visits, qualification of the supplier, licenses, and permits as well as economic analysis. The thesis statement is that more sophisticated is the feasibility analysis the companies used in the supply chain, the higher performance they achieve. Seuring and Gold (2012) stated that the risk of a supply chain is a probable happening of the incident as well as failure to seize opportunities to supply the customers in which the outcome effect into the financial loss for the whole supply chain. Risk within the supply chain may be poor perceived quality of their product as well as services and price volatility.
The report is based on risk feasibility analysis on the performance of supply chain. Sometimes, the researcher faces challenges while doing a feasibility analysis of the risk to identify the level of performance within the supply chain. Recommendations are given in order to overcome the issues while doing feasibility analysis within a supply chain.
In the existing world, the supply chain focuses on the changing markets with necessities such as competitive while carrying the goods on time, short cycle times, best quality as well as low costs (Chow et al. 2015). Managing the supply chain is the vital source of the competitive advantage. The field of the supply chain should be thoroughly researched, as it is a complex element, which requires feasibility analysis to be successful globally. The risk within the supply chain is understood as undependable resources as well as vague interruptions that create it, as well as the indecision, are explained by an interface between risk within suppliers as well as demand within the processes. The performance is the capability of the supply chain to present the products as well as services with good quality and in an instant while minimizing the cost (Chen and Wu 2013). While doing a feasibility analysis of the supply chain, it is required to consider the emerging element such as globalization to improve particular performance indicator. For each of the supply chain company, it is required to know the performance measures so that the company compares their standards with their competing chains.
Within the supply chain, direct suppliers or consumers measure the performance of the entity individually. The overall performance of the supply chain is considered by the value represented by the product as well as service manufactured for the customer. Brandenburg et al. (2014) opined that the value of the customers consists of perceived benefits that the consumers experiences during consumption as well as from the quality of a product. The distinguish sacrifice consumer makes to capture the product, therefore, cost as well as life cycle cost emerges during the life cycle of the product. The feasibility analysis is done on the concept of customer value to interpret the performance of supply chain using some metrics (Frankel 2013). Firstly, a share of supply chain related cost. Secondly, a level of customer satisfaction. Thirdly, it is based on the customer service level such as on-time delivery, a frequency of quality problems as well as changes in consumer requirements.
Within the supply chain, the risk is captured in various contexts such as a flow of materials, flow of information, assessment processes of cost as well as the performance of different independent organizations and therefore it affects the entire performance of supply chain. The supply chain project’s cycle consists of three phrases such as feasibility, planning and design and supply chain management. Feasibility includes the outline of the project, feasibility study (Fernie 2014). Planning and design consists of bottom design, time, cost planning and work planning. Lastly, supply chain includes procurement, distribution, installation as well as testing. Investment within the supply chain requires a high sum of price with a high stage of uncertainty. High profits are achieved in order to reduce the uncertainty, which makes a good forecast as well as the feasibility study. The efforts to decrease uncertainty as well as the rise in project successfulness are needy on the proposed plan (Wisner et al. 2015). The planning phase consists of the feasibility study that is the study to identify if the process of a supply chain is feasible or not the project is built with succeeds. The plan requires not only labors, but it also requires the cost to improve the identified risks within the supply chain. A decision that is taken based on the planning reduces the risk.
The risks can make failure within the supply chain, operation as well as marketing of the product. Within the project cycle, the largest opportunity in order to lessen the total cost of the project is setting up as well as a feasibility study. Some the aspects that are inspected in the feasibility study are as follows:
Market Aspect: The risks are difficult to reach the target market, unsatisfied customers for products or services and bad supply chain management. The feasibility analysis is done to perceive as well as satisfy the customer’s needs throughout products and services of selected target market that should be better than the competitors (Sodhi et al. 2012). The organization should build strong customer relationship to gain loyalty. The researcher should identify the specific customers those are willing to buy propose products. It is done through market segmentation.
Management Aspect: The employees those are involved in the field of the supply chain have the lack of knowledge about the use of supply chain management system. The organizational feasibility analysis includes information about the professional background of the founders; employees involved in the supply chain, as well as the type of skills, contribute to the business (Colicchia and Strozzi 2012). This feasibility study is conducted to involve the infrastructure capability in order to achieve as well as sustain process improvement.
Technological Aspect: The technical risks are imprecise technology in operation and supply chain phase. There are a limited number of human resources in order to support investment in a supply chain. There are also unsupported facilities, location as well as a lack of IT infrastructure in the supply chain. A feasibility study is done on the location to show the distance of the proposed project from their competitors with a supply of raw materials and communication facilities (Chen and Wu 2013). The researcher should examine if the organization should follow the proper IT infrastructure for their supply chain management. Then, it is possible to assess whether its supply chain performance is technically feasible or not.
Financial Aspect: The financial risks are that there is a fluctuation in the foreign currency, high overhead cost, and excess investment in a supply chain. Feasibility analysis is done to determine the cost that is involved in the supply chain management of the organization. The market survey should be done to supply information about the sale price that could be attained for a new product (Fernie 2014). Therefore, feasibility analysis assists the entrepreneur to compute the predictable income, spending as well as gross profit. If the gross profit indicates that the proposed supply chain processing business is successful, then the financial manager should calculate the monthly gross margin for one to three years.
Social and Cultural Aspect: The investment plan within supply chain does not influence in increasing the surrounding citizen welfare and influence in exchanging people behavior. The intended target group does not knowledge about the supply chain. After the feasibility analysis, it is identified that an extensive supply chain management system is required. Even experience with supply chain training is suggested (Seuring and Gold 2012). The cultural feasibility contracts with the compatibility of the planned project with cultural set up of the supply chain environment. The social feasibility addresses the identified influences that the proposed system may have on the social system.
Figure 1: Feasibility Assessment Process in five areas
(Source: Seuring and Gold 2012, pp-547)
The reasons behind this risk feasibility analysis in order to measure the performance of supply chain are that it gives new opportunities through the investigation process. It enhances the probability of success in order to address as well as mitigate factors that could affect the supply chain management of the organization. However, sometimes, the feasibility analysis is critical when it invests into the new business, invests in new technology as well as operating approaches, entering into high competitive market segment as well as investing into new supply chain process (Colicchia and Strozzi 2012). Time is a factor while conducting the feasibility analysis, therefore, if the analysis is conducted too quickly, then there is a chance of errors that leads to failure of the project.
Another issue arises when the hire of the expertise for doing the market, financial as well as technical analysis has a lack of skills as well as knowledge in this field. Selection of the best expertise to conduct the feasibility study in only one area should be problematic if the project crosses the boundaries of specialization. Therefore, a hiring of individual expertise for each of the areas should be expensive. It increases the operational cost of the organization and results into increase in estimated financial amount (Avelar-Sosa, García-Alcaraz, and Castrellón-Torres 2014). It gives an impact on the performance of the supply chain.
Recruitment of best expertise: The best approach is to hire the expertise with a mix of required skills from financial to market analysis to sustainability. After the recruitment of the experts, training is given to them so that they can easily handle the supply chain management system efficiently.
Estimation of proper price to conduct feasibility analysis: The cost of the feasibility analysis depends on regulations, market trends, the scope of the project as well as competition. As the managing of supply chain within the organization varies with complexity as well as scope, therefore the management is suggested to estimate the cost. The management should balance between cost and quality of supply chain to get a competitive advantage.
Use of technology to raise the performance of supply chain: Technology is used to raise the performance of the supply chain within the organization. It is required to use a supply chain management system so that it overcomes with the error of entering the data into the system. All the details of the supply of raw materials are entered properly.
Conclusion
It is concluded that the risk feasibility analysis is required to identify the risks with the supply chain. It evaluates the potential for success of an organization. The five areas of the feasibility study are technical, market, management, social and cultural as well as financial aspects. The technical feasibility assesses the technical resources available to the supply chain. The financial helps the organization to assess the cost and benefits. The management requires assessing the requirement of employees and experts; market depends upon the target customers to use the supply chain of the organization. Social and cultural feasibility plans with cultural set up of the supply chain environment and addresses the recognized influences that the future system may have on the social system. The performance of the supply chain is measured so that the organization offers a good quality of products as well as services while minimizing the cost. Recommendations are suggested as to recruitment of best expertise, use of technology and estimation of accurate financial cost in order to conduct the feasibility analysis.
References
Avelar-Sosa, L., J. L. García-Alcaraz, and J. P. Castrellón-Torres. “The Effects of Some Risk Factors in the Supply Chains Performance: A Case of Study.” Journal of applied research and technology 12, no. 5 (2014): 958-968.
Brandenburg, Marcus, Kannan Govindan, Joseph Sarkis, and Stefan Seuring. “Quantitative models for sustainable supply chain management: Developments and directions.” European Journal of Operational Research233, no. 2 (2014): 299-312.
Chen, Ping-Shun, and Ming-Tsung Wu. “A modified failure mode and effects analysis method for supplier selection problems in the supply chain risk environment: A case study.” Computers & Industrial Engineering 66, no. 4 (2013): 634-642.
Chow, P.S., Wang, Y., Choi, T.M. and Shen, B., 2015. An experimental study on the effects of minimum profit share on supply chains with markdown contract: Risk and profit analysis. Omega, 57, pp.85-97.
Colicchia, Claudia, and Fernanda Strozzi. “Supply chain risk management: a new methodology for a systematic literature review.” Supply Chain Management: An International Journal 17, no. 4 (2012): 403-418.
Fernie, John. “02 Relationships in the supply chain.” Logistics and retail management: Emerging issues and new challenges in the retail supply chain(2014): 35.
Frankel, Ernst G. Systems reliability and risk analysis. Vol. 1. Springer Science & Business Media, 2013.
Seuring, Stefan, and Stefan Gold. “Conducting content-analysis based literature reviews in supply chain management.” Supply Chain Management: An International Journal 17, no. 5 (2012): 544-555.
Sodhi, ManMohan S., Byungâ€ÂGak Son, and Christopher S. Tang. “Researchers’ perspectives on supply chain risk management.” Production and Operations Management 21, no. 1 (2012): 1-13.
Wisner, Joel, Keah-Choon Tan, and G. Leong. Principles of supply chain management: a balanced approach. Cengage Learning, 2015.
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