Strategic Supply Chain Management - Term Paper Example

Strategic Supply Chain Management Student’s Name Institutional Affiliation Date EXECUTIVE SUMMARY Choosing the most appropriate supply chain model for an organization is important for effective management of procurement processes and other materials required for operation and selling of products. An effective supply chain management is increasingly becoming potentially valuable for organizations to attain a competitive advantage and organization’s excellent performance. This is evident from the fact that competition is no longer between organizations but among various supply chains in the market. Modern supply chains are a very complex process with various physical and information flows that ensure delivery of products in the right quantities, place and in a most cost effective manner. However, the supply chain is subject to vulnerability in the course of its operations. Supply Chain Vulnerability (SCV) may be referred to a point of weakness or a possible threat to the supply chain network. This paper, therefore, seeks to examine the vulnerability of Etihad’s Airways supply chain, its effectiveness and impact to the organization’s performance. Table of Contents Table of Contents 3 PART ONE: INTRODUCTION 1.1 Introduction Etihad Airways is founded on supply chain management and a network of departments that coordinate for its success. In broader terms, Supply Chain Vulnerability is referred to the negative impact or unexpected effect within the supply chain that cause consequences to the unit which could occur from the internal or external environment disruptions (Awudu & Zhang, 2012). The complex processes that are involved in the supply chain can increase the number of potential weaknesses in the network for an organization. In this assessment, the process of Supply Chain Vulnerability will be important in determining whether the chosen organization is applying an effective strategic supply chain management. The strategy in use will then be used to determine the impact of the supply chain on the success of the organization. 1.2 Supply Chain Vulnerability for Etihad Airways Etihad Airline was set up as a national airline of the United Arab Emirates in 2003. The company has progressively succeeded in its airline operations across the globe due to various factors among them being a well managed supply chain. The supply chains for any organization are particularly vulnerable because of the managers failing to realize the threat that the system subjected to and the threats that the situations impose on the supply chains. It is important, therefore, for the managers to understand the types of risk factors that may threaten the supply chain and understand the factors behind such threats. The managers are also supposed to categorize the processes and mechanisms that may lead to the occurrences of the risks and vulnerabilities. Lastly, in the assessment, the managers need to understand how they can cost effectively reduce the risks to an acceptable vulnerable level (Awudu & Zhang, 2012). The supply chain vulnerability assessment and their impact for Etihad will be based on the above principles for determining their success for the organization. PART TWO: ASSESSING CAUSES OF SUPPLY CHAIN VULNERABILITY 2.1 Natural and Human Causes Supply Chain Vulnerability can arise from external disruptions such as terrorist attacks or natural disasters or internal disruptions such as delays of supplies or improper predictions. The disruptions can also arise from other companies that attempt to make the supply chain more efficient which apparently affect the supply chain of other companies. In the airline industry such as Etihad, the supply chain can be greatly affected by weather conditions and various technicalities that develop from within the company’s operations. These may be in the form of labour strikes and bankruptcy which can impact on all dependent associates for Etihad (Bode et al. 2011) The supply chain can be disrupted by natural calamities such as Hurricanes, Tsunamis and earthquakes. The activities taking place in the airline company are dependable on other services across the globe which when disrupted will also interfere with the supplies for the company. In accessing the vulnerability of Etihad Airways supply chain, it is essential to examine the major areas of operations and associates of the company that are mostly prone to these kind of natural calamities for proper mitigation processes whenever they occur. Weather conditions will affect any airline company. The company should be keen at the weather trends in the areas of its operation since bad weather makes the supply chain vulnerable. The natural calamities as factors that affect the supply chain are uncontrollable by the management since they are naturally occurring events but managers should be prepared for these occurrences and set up optional measure whenever they happen (Bode et al. 2011). Strikes can disrupt the supply chain for an organization and also the supply chain for its business associates. Strikes are, however, different from natural disasters since they are intentional human acts. This means that they can be predicted to an extent and even prevented before they disrupt the supply chain. Delays do greatly interfere with the supply chain especially in the case where an organization is dependent on a single supply. At the same time, the degree of responsiveness of various supplies can interfere with the supply chain of an organization rendering it vulnerable. Etihad’s Management needs to work hand in hand with its associates to ensure that they respond faster whenever unfortunate occurrences befall the supply channel or the other business operations (Colicchia & Strozzi, 2012). Initiatives that organizations undertake in the efforts to create efficiency within the supply chain can also complicate the supply chain posing risks to the process. For instance, if a company applies the just- in -time (JIT) manufacturing and supply techniques can result to becoming Just-too-late suppose something goes wrong. Activities such as trying to cut cost by creating a lean supply chain can increase the vulnerability of disrupting the supply chain. In assessing the vulnerability of a supply chain, it is important to consider forecast issues and determine whether they are accurate since the inaccuracy of the forecast system can lead to the disruption of the supply chain. Understanding the risks involved in the supply chain for a company enables effective emergency response strategies that can help an organization recover from what was initially seen as unavoidable. 2.2 Global and Industrial Causes The world has advanced from just the local to local manufacturing and marketing strategies to offshore manufacturing, marketing and supply chains stretching from one corner of the world to another. For instance, components may be assembled in U.A.E, sub assembled in Germany and finally assembled in the U.S.A for sale in the world market. The world travel industries like the airlines have also expanded their operation with customers and products to be delivered all over the world. Etihad in particular has operations in the whole of Middle East, Europe, some parts of Asia and America. These widespread operations increase the vulnerability of the supply chain for the company since the global economic effects strike the company’s operations from whatever place they occur (Barney, 2012). These companies should, therefore, the supply chain issues linked to the operations and be ready to set up mitigation measures. The world is also experiencing focuses factories and centralized distribution of products. The benefit of this trend is reduction of the production costs. However, the product has to travel greater distance across the world to reach their intended market. The supply chain for that particular company becomes more vulnerable that for the case of a company that is not centralized. The airline company has established many routes and bases in Middle East and other regions to ensure that its activities will not greatly be affected suppose one region of its operations is affected. This is due to the many operational zones that are available for the company. Operating from one corner of the world can make the supply chain of the company of vulnerable in the cause an unfortunate event bringing the entire operations of the company to a temporary halt (Green, 2013). The reduction of the supplier base, that is, the number of suppliers from whom organizations obtain material from. The current global trend in the supply chains for businesses has seen some businesses opting to rely on one supplier or others opting for many suppliers. Even though some organizations will view the reduction of supplies as an advantage to their operations, to others it can be a risk. Single supplies can greatly increase the vulnerability of a business’ supply chain in case of certain failures (Ghadge, Dani & Kalawsky, 2012). PART THREE: SUPPLY CHAIN VULNERABILITY 3.1 Definition of Scope of Work After identifying the causes of risks in the supply chain, the next step is coming up with an objective for the analysis, the extent of the analysis and then establishing the acceptance criteria. In determining the scope of work, time and resources need to be allocated so as the scope of work and the resourced are committed to the assessment. A multidisciplinary group should be established to take the role of currying out the scope of work in the company. The group should be in a position to cover all the relevant aspects of the supply chain in close coordination with other relevant departments (Carvalho et al. 2012). The group should be in a position to identify proper communication channels with the company’s stakeholders within the inter-company supply chain. Acceptance criteria should be given much attention at this stage since it will find its use later in the determination of whether a vulnerability scenario is acceptable or not. The acceptance criteria also form a part of starting and evaluating consequential measures and mitigations relevant to the focus. The differences between the acceptance criteria and the mitigated or the Unmitigated consequences should as well be considered (Barney, 2012). 3.2 Context Description It is important to understand the specific contexts and the logistics in the supply chain. The specific supply chain ought to be well defined while emphasizing much on the areas that one wants to concentrate on as defined in the above step. The concept can be described in any ways but the most important this is to focus on the important areas and the way they are related. One may separately consider the issues of infrastructure, management, processes, relationships and interfaces. To be specific, this process should cover all activities related to the demand side and all activities related to the supply side. Further, the process should focus on all logistical activities of flow of information, goods, services and financial funds. The relationships of these processes should well be documented through the use of stakeholder mapping (Hitt, 2011). 3.3 Taxonomy Development This step is aimed at establishing a set factors leading to vulnerability which should be used as a basis for developing vulnerability scenarios. These factors can be used as a checklist for developing and conducting a vulnerability analysis and structured consciousness of factors that affect the vulnerability of a supply chain. This process may be helpful in coming up with approaches of structuring different concepts. The taxonomies may be grouped as either internal or external factors which represent accidental events or disruptions in the supply chain. Internal factors may include staff factors, human factors, maintenance factors, management factors, organizational factors, technical failures and system attribute factors. External factors may incorporate financial factors, market factors, societal factors, infrastructural factors, legal factors and environmental factors (Pfohl, Gallus & Thomas, 2011). 3.4 Scenario Development A scenario in this case can be defined as development of subsequent event caused by an accidental event which can be separate in time and space. In simple terms, a scenario is a chain of events that needs to be assessed while the accidental event is the cause of the scenario. A scenario ends after the system is temporarily stabilized by mitigation measures. The scenario is by documenting the events occurrences on a worksheet and can be presented in a table. Factors that contribute to vulnerability are listed in the first column in the documentation. The set of factors developed in the taxonomy can be used as a basis in the checklist for areas and factors to remember when preparing the analysis (Stadtler, 2015). The accidental events can then be identified in the next column can then be identified and described. This can held see the aspects that may be improved by small means leading to organizational learning. It is important to note whether the identified scenario can threaten the supply chain or not. Other elements that affect the supply chain can also be included in the table and summarized to help in the next step of assessing the vulnerability of the supply chain (Seuring, 2013). 3.5 Quantitative Ranking and scenario Importance This step can finalize the assessment of vulnerability for an organization with an aim of drawing conclusion from the identified problems. This involves ranking of scenarios according to their criticality or the degree of attention required. The consequences that emerge can be of different kinds, hence, one can establish a rating through them to find out which the most pressing emerging consequences. Establishment of how these consequences affect the mission of the supply chain is also very important at this level. This will help very much in the establishment of mitigation processes in the supply chain assessment in preparation for a stable supply chain management process (Walker & Jones, 2012). PART FOUR: DEVELOPING A SUPPLY CHAIN STRATEGY After accessing the vulnerability of the supply chain, managers proceed to come up with a supply chain strategy that suits their organization. Depending on the nature of the business, a number of supply chain strategies can be employed to ensure the sooth and successful logistic operation in an organization. Basin on Etihad Airways, the following supply chain strategy will be relevant for the more effectiveness of its operations. 4.1 Understanding the Business Strategy The first step in developing a supply chain strategy is for the supply chain managers to understand how the company chose to compete amongst other companies in the industry. Understanding the competitive goal of the company enables the supply chain department to view itself as a customer linked department that performs a competitive goal in the organization. For instance, if the business strategy is aiming for a low cost production, then the supply chain should aim for the same and vice versa (Waters, 2011). 4.2 Customer Segmentation The customer should be segmented based on the service needs of various groups and then come up with effective supply chain means to profitably serve the segments. Segmenting customers on the basis of various needs enables a company to develop a portfolio of services that it tailors to various segments. A company can identify customer segment through surveys, industry research and interviews (Wagner & Neshat, 2012). All in all, the most important thing for the companies is to identify the profitability of the various segments so that they can balance the supply chain of activities depending on their profitability. 4.3 Customization of Logistic Networks A company can customize its logistic requirements to the service requirements and the profit from the customers. Etihad Airways should adopt this logistic requirement designing its network to meet the average service needs of all its customers. This can also be done so as to satisfy the requirements of a particular customer segment which may be considered as tough. It is, is therefore, important for managers to design a multilevel logistic network plan with a full package of distributions to satisfy the customer needs. 4.4 Market Signal Monitoring and Consistent Forecast Listening to the market signals and aligning demand planning in accordance with the supply chain can ensure consistent forecast and optimum resource allocation. The company can employ and implement a cross-functional planning process that is backed up by forces of demand and supply. The demand and supply forced can assist a company to forecast the change in the supply chains over which the company can use to balance its commodities and services in relation to the changes. This element is very important in developing a supply chain strategy that can not only be applies instantly but also in the future of a company’s supply chain activities (Zhu, Sarkis & Lai, 2012). 4.5 Developing a Supply Chain Technology Companies can chose to develop a supply chain technology that welcomes various levels of decision making an outline a clear view of the flow of services and information. Managers are encouraged to come up with an information technology system that integrates. Technology and information technology are tools that managers should, not only invest them in other departments of their organizations but also in the supply chain department where it can greatly assist in the competitive advantage of their organization. Airline companies such as Etihad ought to strongly embrace the use of technology and information technology in its operations. PART FIVE: THE IMPACT OF SUPPLY CHAIN ON THE SUCCESS OF BUSINESS UNITS The success of a supply chain can be defined as the ability to create and sustain a corporate advantage fostering conducive and collaborative environment for procurement as well as purchasing functions. After reviewing the vulnerability causes for the supply chain in an organization, it is now important to look at the benefits of ensuring a stable supply chain in an organization. Etihad Airways is built on a stable supply chain management which definitely makes it benefit from the following factors: 5.1 The Supply Chain Model and the Corporate Strategy The organization model should fit the corporate strategy. Supply chain organizations that are universally successful are those which adopt a design method that specifically addresses where strategic decisions are and the source of knowledge for the decisions. The degree of centralization of the supply chain is a deliberate financial decision in which it assumes the most cost effective form of transaction verses strategic business. Organizations that are successful in supply chain management meet the corporate finance and corporate strategies through empowerment of groups with concepts required in making strategic procurement decisions. By use of the strategies to manage the above functions is accompanied by the use of appropriate level of resources and attention (Wagner & Neshat, 2012). 5.2 Organization Model and the Corporate Culture Supply chain management organizations are successful in fitting into the exact corporate culture. Corporate culture integrates elements such as the degree of autonomy of business organizations and the level of influence that the business units possess in comparison with corporate leadership. Culture empowers the management with the willingness to execute various polices. Without the power of culture centralized supply chain policy enforcement can be a hectic and ineffective process (Wagner & Neshat, 2012). Etihad Airways has been very successful in the use of culture in its supply chain for gaining competitive advantage over other airline companies in the industry. 5.3 Staff Skills and Expertise A well staffed supply chain ensures that the right people are in the right positions and numbers. In an organization that invests largely in the supply chains, the staff skills and backgrounds are systematically accessed. This is done through workshops that focus on what scopes of responsibilities are supposed to be taken and the place among other things. With the required number of resources, the delivery of the required services and internal customer support is ensured. Experts from supply chain organizations can form teams that require deep technical or operational expertise or the teams can as well be formed from effective cooperation through across cultural teams (Stadtler, 2015). 5.4 Long term Time for Program Change Companies that have embraced a successful supply chain benefit from long term view of a new program implementation. The organization make use of a multi-year program in ensuring that all the intended changes of the organization take due effect. The programs are monitored and reported through a multi-year process in programs such as savings or efficiencies standpoints (Bode et al. 2011). 5.5 Collaboration and Communication Leading companies in the supply chain have prioritized collaboration and communications because of the effective supply chain activities. Supply chain has enabled regular communications through established channels, for instance; the cross-functional teams. The supply chain workers find themselves in proximity positions in the various business activities (Awudu & Zhang, 2012). The rotation of business operations brings into place a collaborative environment motivated by operational staff in supply chain functions that relate to procurement processes and policies that satisfy the customers. PART SIX: CONCLUSION Conclusion The choice of an appropriate organizational model for a supply chain is vital for effectiveness in procurement management in various products and services needed for operation, product and service delivery for an organization. This assessment finds it important to conclude that supply chain vulnerability is an important business issue to be looked upon and evaluated. Supply chain vulnerability should be termed important as all other important business needs. The supply chain has been changing over time, moving from cost focus to customer focus and currently emphasizing on strategic focus. The assessment is useful in identifying the risks that an organization exposes itself to in the pursuit of either increasing or decreasing its supply chain networks. The development of supply chain management processes and strategies have impacts on the competitive advantage of an organization, performance and position of the organization. Business organizations should, therefore, take great interest managing their supply chain activities for success and growth. References Awudu, I., & Zhang, J. (2012). Uncertainties and sustainability concepts in biofuel supply chain management: A review. Renewable and Sustainable Energy Reviews, 16(2), 1359-1368. Bode, C., Wagner, S. M., Petersen, K. J., & Ellram, L. M. (2011). Understanding responses to supply chain disruptions: Insights from information processing and resource dependence perspectives. Academy of Management Journal, 54(4), 833-856. Barney, J. B. (2012). 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