Evaluating the Supply Chain Implication - Essay Example

? Table of Contents Introduction 2 The Beer Game 2 Supply Chain Behavior Theory 3 Devised Strategies 3 Companies with Successful Strategies 4 2)Green Supply Chain 5 Adoption of Green Philosophy 6 Challenges for the Supply Chain Manager 7 3)Supply Chain Risks 7 Boeing 9 Supplier Selection 9 Risk Management 10 Business Process 10 Risk Evaluation and Supply Chain Implementation 10 4)Constraints 11 Conclusion 12 References 13 Evaluating the Supply Chain Implication Introduction The supply chain management is one of the most important areas in business management upon which the whole business cycle is dependent. The results of the supply chain management activity are determined in accordance with different factors that were implicated regarding the steps involved and the effects that different factors had upon the supply chain of a company. The management of inventory and its importance is elaborated when there is a strategy to maintain enough stock in the inventory to fulfill the required demand and does not get stock out. Along with fulfilling the demand there must be the management of inventory where the inventory level is not that much as compare to the cost of holding the inventory rises. The business cycles are determined where there are booms and slumps and the ways that are integrated strategically to smoothen the business cycle. The implications of getting green chain and the strategies how the green chain can be followed are kept in mind. The benefits and the disadvantages of having a green chain along with the challenges faced in getting a green supply chain are discussed. The risks associated with the supply chain are elaborated and the sufficient measures along with strategies that can be followed to minimize the risks. The time associated with some of the factors that are applied in the supply chain in order to get benefit from it and how the benefit can be utilized is discussed. 1) The Beer Game For the better understanding of the supply chain where the phenomenon of buying and selling is elaborated, a game is observed. A beer company is made and the supply chain is created. The different factors of the supply chain are understood better when they were applied and the inventory level changed accordingly. It is basically about elaboration of demand and supply for the product creating the cause for change in the inventory level in the company. The inventory level was managed by the management of the company in such a way that they do not run out of stock. The proper management of the inventory and handling of the demand and supply shall impact the management of the inventory. The risks of not been able to fulfill the demand are associated with the inventory level where the company runs out of stock and the customers’ orders cannot be satisfied (Simon, et al., 2000). On the other hand where the demand of the product is not appropriately ascertained and the company holds much more inventories then needed and incurs a holding cost. The difficulties faced included the poor management of the inventory as a result of late orders and delays along with the poor estimate of the demand of the product. Supply Chain Behavior Theory The theory of supply management consists of three elements which are description, prescription and the identification of alleged trends which were completely ignored in the beer game hence causing issues to rise (John, et al., 2006). Supply chain management and purchasing are often termed as similar which is ambiguous. Supply chain management is a much wider term including the operation management and logistics that the company uses in order to rotate a complete business cycle from purchasing to selling. When the company shifts from descriptive to prescriptive, problems rise. The prescriptive is more like a prescription which involves the working characteristics of the supply chain management. The trends analyst considers co operations rather than competitions. The trend identification is better observed in measuring the performance of the various factors of the supply chain. Supplier evaluation in regards of managing the supply chain and the role that procurement and suppliers play is the critical factor in order to determine the trend of the supply chain. The behavior that the supply chain predicts is dependent upon the managers who are not always the rational decision maker (Sarah, 2004). The behavior that supply chain depicts is according to the decisions of the management and how they are able to drive the chain for the best interest of the company. The supply chain is complex and includes many of the moving parts mainly classified as strategic and operational activities. The strategic decisions depict that how the supply chain will be managed and involves many decisions which are made by the management. The operational activities are the implications of the strategic decisions of the management. It is the combination of the strategic and operation decisions which elaborates the behavior of the supply chain. Devised Strategies In observation of the beer game the negativities of the supply chain which consisted mainly by poor management can be altered in order to benefit the company. Management of the companies is devising strategies in order to get better outcome for the better supply chain management and thus results in a success for the company. Strategic decisions regarding the management of the supply chain can only be devised when the whole supply chain is observed in detail and analyzed in various scenarios. The strategic decisions are the core of the management that involves planning and depicts the long term impacts upon the company. The analysis of the supply chain helps the management to get a better understanding of the supply chain and thus decisions can be made to overcome the negativities in it. Managers around the world are considering enhancing the value of the value chain (Kelly, 2013). Each and every sector of the supply chain is considered and analyzed. The activities that add values to the supply chain are emphasized and the non-value addition activities are considered to reduce to minimum. The sectors of the supply chain which influences the consumer taste and preference are of value adding and these components of the supply chain should be improved in order to get return on the value. The activities for which the customer is willing to pay are value adding. The activities which do not excite the customer such as waiting are non-value adding and these should be reduced to the minimum. The strategy to make the supply chain into a value chain should be the main course of decision making for the management. The supply chain is converted into value chain where every activity done adds value in the product and the consumer is willing to get benefit from the product and is able to pay. Risks involved in the supply chain cannot be ignored and devising the strategy that accounts for the management of the risks is a step that will enhance the supply chain. The prediction of the trouble spots in the supply chain highlighted and focused in such a way that their impact is minimized and the result is a strategy that is beneficial for the company (Marisa & Erwin, 2010). Highlighting the spots as the supplier defaults and delay due to natural disaster are the negative spots which harms the smooth running of the supply chain. The value addition in the supply chain and minimizing the risks in the supply chain are the key characteristics of the strategic decision making. Analyzing the demand of the product and maintain appropriate inventory that shall be able to meet the demand of the product and not much that the holding cost of the inventory becomes more than the return it provides. Companies with Successful Strategies Nike applied the strategy in which it derived the demand of its product by a software i2. The software was implemented in the system that determines the demand of the particular product and thus determines the supply chain (Christopher, 2004). Although the implication of the software was not much of a success in the beginning but they had alternatives. The implication of the system enabled the demand of the product to be more reliably measured based on different algorithms. Depicting the demand of their products Nike altered the value chain in the sense of when and what to buy and how the production should be done in order to satisfy the demand. The strategy can be the best fit for the organization when the supply chain of the organization gets the value chain. The addition of each factor in the supply chain should be value adding in the product. The demand of every product is different as per the market conditions and analysis. The demand should be accurately and reliably measured so as to account for the changes in the supply chain that is different for every organization. 2) Green Supply Chain The concept of sustainability has grown in the business world. Corporatists have become more concerned about their sustainability and this concept focuses mostly on the environment. Besides being just an idea the responsibility towards the environment and management of sustainability issues have become very much important and crucial for the operation of the organizations. Corporatist show concerns about their environmental footprint and even issue environmental reports (Ana Beatriz, et al., 2013). The responsibility towards the environment and its protection are an important part of CSR (Corporate Social Responsibility) of the organization as it signifies that corporate has responsibility towards the environment as a whole. This idea is spreading at a very great pace that for the long-term presence, growth, sustainability and stability it is important to have sustainable environment and that is only possible if it is protected today and natural resources at disposal are not exploited. Supply chain is a significant part of the operations of the organization and supply chain sustainability assures that organization and its operations are environment friendly. Supply sustainability evaluates supply chain or logistics of the organization in terms of environment the risks it has for the environment along with the wastages. Thus it is not just a statement that management in the corporate make to influence the perception of their stakeholders it has become a fact and executives today understand that for long-term profits it is necessary to have sustainable supply chain (Sara, et al., 2012). The focus has increased over the past few years as previously corporate had trouble in defining their priorities they have been finding it difficult to choose between profits or to allocate costs or make efforts for environmental purposes. The modern corporate world has realized the importance and emergence of the environmental issues. Management has developed consciousness towards the importance of the legal regulations regarding green environment. The better understanding of the regulations of green environment enabled the management executives to realize the mechanics and the consequences of green supply chain. Green supply chain is the improvement of brand image along with the sustainability of the company (Marisa & Erwin, 2010). Adoption of Green Philosophy B&Q is a multinational company with diversified operations. It has taken years of struggle and strategies to establish and strengthen the value chain that the company currently has. The strength of value chain and supply chain depends upon the relations that the company maintains that assure the success of the company. B&Q has maintained a system in place that differentiates it from its competitors like security of supply chain, better trading conditions, and improved sourcing are all of the things that their competitors struggle for (newsroom, 2013). Thus the pressure increases as the focus has turned towards the environmental protection and green supplies. Suppliers being an integral part of the supply play an important role to ensure its sustainability and it is difficult for the companies like B&Q to end the year’s long relations on the basis of green supplies. Executives in the larger companies like B&Q are usually of the perspective that time is of the essence and supply chain’s sustainability depends upon the relations that the company maintains. In the case of B&Q the industry they operate in lot of suppliers are moving towards the schemes like the Forest Stewardship Council’s in order to get sustainability sourced timber however it would require the changes in the whole process at a fundamental level, new systems have to be implemented and redesign the way supplies are accessed. Thus the large companies like B&Q have worldwide relations and have supplies from different parts of the world as one supplier cannot match the whole demand of raw material required by the company therefore it is the suppliers, terms of trade and the relation with them that can assist in adopting green philosophy and eventually maintaining sustainable supply chain (Tom, 2013). It is not only suppliers that would be required to mend their ways but also the company that would have to change its way of sourcing their products. It would not be just the supplies that they get from the supplier but also their production process that would integrated and has to be green in order to make the whole supply chain green and fundamentally adopt the green supply chain. Challenges for the Supply Chain Manager B&Q has been quite focused and integrated the sustainability approach into its system and it has even named its approach as “One Planet Home”. In Europe UK based companies have shown great commitment towards the environment and making this process sustainable, reducing wastages etc. Being a manager the difficult factor for establishing a green supply chain is the partnerships or the relations that company establishes (B&Q, 2012). Partnerships are the strength of the company however success of One Planet Home requires commitment from whole organization to ensure sustainable supplies, production, water usage, carbon emission, wastage and recycling process that is a huge structural change. In the case of B&Q embedding sustainability has never been an easy process as the organization had diverse activities and operations. Plenty of meetings and conferences has to be organized, workshops, training sessions scheduled along with the HR department so that sustainability can be realized and integrated in different operations of the company (Tom, 2013). The purpose of sustainability is to increase the focus on eco-products and services thus the partnership with organizations like Bio-Regional has to be maintained and it becomes necessary to abide by the standards. B&Q one planet home is the continuity of the sustainability approach which should be examined. The company has won the “Sustainability Championship Award” which shows consistent performance of the company. however despite the technicality of the measurement the decreased carbon emission, low wastages, sustainable water usage and evolved production process have shown the company’s sustainability of being eco-friendly. 3) Supply Chain Risks There are risks involved in the supply chain that can hurdle the business cycle. The supply chain risk is increasing in importance for the success of the business. The risks associated with the supply chain involved the management of the sales and the purchase along with inventory maintenance. The supply chain involves many of the parts and functions of the business which include purchasing, selecting supplier, medium of sale, identifying customers and after sale services. Sales and operations planning (S&OP) has the potential to promote visibility within the enterprise and foster collaboration among business functions (Becky, 2013). The better understanding of the sales and operating planning shall be able to provide and insight relating the supply chain of the company. For understanding the risks involved in the supply chain, the chain should be examined and analyzed in detail so as to point out the trouble spots in order to make the supply chain more valuable for the company. In the sales and operations planning of the company there are several factors involved which are shown in the following graph in accordance with their percentile. Due to globalization companies expanded and thus the supply chain of the companies got complex and disintegrated. In measuring the risks for supply chains the complexity and disintegration has become one of the major concerns (Jyri & Jukka, 2012). Outsourcing many of the functions as to get cost benefit has made the supply chain even more complex. The identification and the impact of the risk can be determined when the factors of the supply chain is considered in detail along with their specific importance and position in the supply chain. Boeing Boeing is one of the companies that have realized the real potential of globalization with integrating parts from around the world from different suppliers. The supply chain of Boeing is much more complex and extremely diverse. The following diagram shows an overview of Boing 787 parts and the suppliers locations from around the globe. Parts of Boeing 787 come from different parts of the world covering five continents. In the aerospace company like Boeing the supply chain is complex and the identification of each element is done but the collaboration of the chain is hard to determine. The risks associated with a company with such a huge operational network can be minimized by following the right strategy and control. Proper risk management can be done for the supply chain in order to minimize the risks associated with the supply chain. Supplier Selection The risks that are involved in the supply chain should be properly identified. Boeing needs to concentrate upon the risks that are there in the supply chain. The suppliers that are selected needed to be of the standard and should be able to provide the continuous stream of materials that are needed to continue with the company process (Scott, 2013). Proper screening of suppliers will enable the company to select the suppliers that will smoothen the supply chain. Risk Management Risk should be properly managed in order to account for the management and determine the impact of risk. Strategy should be implemented where the risk criteria is clearly defined. The roles and the responsibilities of each of the component of supply chain should be elaborated. The information system should be enhanced enough in order to communicate the risk timely. The identification of risk should be made easy by properly conveying the criteria for the identification of risk. Proactive approach should be adopted in order to account for the risks and measures should be taken so as to minimize the impact of the risks. Business Process The business process that is followed should be designed and implemented in accordance with the risks associated with the supply chain. The business process should be clearly explained to the management with the help of flow charts and other diagrams so that the management gets aware of the business process. The training of the supply chain partners should be done to ensure the supply chain is managed to run smoothly. Risk Evaluation and Supply Chain Implementation The risk associated with the supply chain should be identified before the implication of the supply chain. The evaluation of risk involves the following: Risk Ranking, the risks that are involved must be realized and identified. Once the identification of risk is done then the management can determine that how the risk associated with the supply chain is valued. All the risks that are involved in the supply chain should be determined and ranked upon the intensity and frequency basis. The ranking of risk will evaluate that how the risk should be accounted for regarding its consequences. The probability of the occurrence of risk should be determined and finally all the risks are ranked. Risk Acceptance Level, once the risks involved are identified and ranked then the risks should be brought to an acceptable level in order to avoid hurdle the operations of the organisation. The risks that are identified should be reduced to a minimum level, so that the performance of the company is not hampered. Risk Mitigation and Contingency Plans should be made in order to account for the risks that are associated with the supply chain. With the proper identification of the risks that are involved in the supply chain the supply chain can be implemented. Risks brought down to the acceptable levels along with the alternate strategies made in order to account for the risks in the supply chain the implication of supply chain is done. Risks are the major factor of concerns when the supply chain is to be implemented (Rosen, 2013). The conditions determined and the factors considered in realizing the risks associated with the supply chain elaborates the changes that are to be bought in the supply chain as the supply chain will be facing the risk when the conditions change. The implication of the supply chain is done when the risks are properly considered and are checked from time to time in order to account for the intensity, consequences and probability of the risk. 4) Constraints The determination of the constraints in manufacturing 100 units of K and 50 units of L the time required from each department is calculated as follows: Work center A = 15 x 100 + 10 x 50 = 2000 minutes Work Center B = 15 x 100 + 25 x 50 = 2750 minutes Work Center C = 15 x 100 + 5 x 50 = 1750 minutes Work Center D = 10 x 100 + 5 x 50 = 1250 minutes Where the available minutes for each department are 2400 per week thus there is a constraint upon the production of the required demand. Time required in work center B is 340 minutes more than the available time. The impact of this constraint upon the manufacturing unit will be that the manufacturing unit will not be able to produce the products (Goldratt et al, 2000). The other work centers will remain more idle relatively as still in this position the maximum potential of the work centers are not fully utilized (Ricketts, 2008). . The reduced production will further extend the idle time of the work centers A,C and D. The return per minute of department B is: For K = 1/15 = 0.067 per minute For K = 1/15 x 55 = $ 3.67 cost For L = 1/25 = 0.04 per minute For L = 1/25 x 55 = $ 2.2 cost More units of K can be made as compared with the units of L but the cost incurred will increase be more than that for K thus the allocation of the time should done for K as is requires less time and cost is less and will not impose the constraint on other work centers (Ayyagari, 2006). The expected margins that can be expected from the manufacturing unit is as follows: For K = 1/15 x 55 = $ 3.67 cost For L = 1/25 x 55 = $ 2.2 cost Conclusion In this era of globalization the supply chain of the companies is getting complex as when they go for more valuable resources. The risks associated with the supply chain cannot be ignored and is needed to be managed. More a supply chain gets complex the more challenges and risks it has to face. With the global environment under consideration the greener value chains are incorporated. Although the risk is involved in the complex and long value chains but there are strategies that can be implemented in order to account for the risk and minimize it to an acceptable level. There are many companies such as Rolls Royce, Boing, Walmart and Nike who have implemented such strategies which not only strengthen their supply chain but also add value to their supply change along with minimizing risks involved. The greener foot print is preferred in this modern world where people are more concerned about saving the planet and thus modifications to the supply chain is done which is relatively costly but satisfy the corporate social responsibility. The risks associated with the supply chain are of increasing importance for the businesses. The risk management is crucial as it determines the possibilities of breakdown of the operation which become intolerable in many cases. References Ana Beatriz, L. d. S. J. et al., 2013. Factors affecting the adoption of green supply chain management practices in Brazil: empirical evidence. International Journal of Environmental Studies, 70(2), pp. 302-315. AYYAGARI, M., DEMIRGU?C?-KUNT, A., & MAKSIMOVIC, V. (2006). How important are financing constraints?: the role of finance in the business environment. Washington, D.C., World Bank, Development Research Group, Finance Team. B&Q, 2012. Corporate. 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