Operations and Supply Chain Management - Research Paper Example

Operations and Supply Chain Management A succinct definition of supply chain management would be managing activities that encompass procuring a product/service from the manufacturer/service provider and getting it to the end consumer. Management of the activities that facilitate reaching of the product to the end consumer should match with the demand and supply of the market. In general, supply chain management entails availing the right product, when needed, at the right price and to the correct location (“Supply Chain Management”). Therefore, because of globalization of companies and the markets they serve, supply chain managers are being forced to redefine their strategies. As pertains to this assignment, focus shall be on an article published by The Wall Street Journal. The article highlights how companies are cushioning themselves against paralyzing incidences such as natural disasters to ensure continuity of business while keeping the bottom line ‘protected’. The writer has included viewpoints from CEOs/CFOs of a few global companies and their take on the importance of reinforcing the supply chain. The article stems from the fact that multinational companies have had to incur enormous expenses because of natural disasters. This has been after a long history of establishing cost-moderated links. The awareness on a need to strengthen the supply chain arises from the earthquake that hit Japan in 2011. This is because the earthquake led to a shortage of electronic and car parts; forcing companies to think up other sources. This led to exposing the vulnerability of the supply chain but the next action is still a matter of great deliberation as establishing dual sources is seen to affect the bottom line of companies largely (Murphy). Moreover, because the supply chain of most multinational companies is disciplined, some CEOs find it hard to establish new links. This implies that the next logical thing would be to push the suppliers to ensure their own supply chains are sustainable in the event of natural disasters and other paralyzing risks. For example, Jabali Circuit a manufacturer of electronic parts, advised its suppliers in Japan to consider de-clustering their factories that is, not having them close to the factories. This guarantees that companies can still rely on their regular supply links when a natural disaster occurs (Murphy). However, de-clustering would force the suppliers to incur huge costs in terms of setting up and streamlining new networks of operation. Nevertheless, this increment in expenditure is minimal considering the safety net it provides multiple facilities in the event a natural disaster strikes. The learning point here is that supply chain managers need to rethink their strategic plans in terms of insuring risks to include unforeseeable circumstances such as natural disasters. The strategic plans should entail establishing supply chain links that are reliable even in the event of natural disasters. There needs to be a shift in thinking about how to deal with risks that could paralyze businesses for lengthened periods. In the article, the writer states an example of IT providers that now have to consider backup systems for servers that may go down for a week due to power failures caused by natural disasters (Murphy). Supply chain managers should now come up with contingency plans that focus on making certain that companies are able to continue operations in case a natural disaster strikes; therein referred to as continuity planning. The article cites another example of global companies that have had to reinforce their supply chain links- FedEx Express. This came about after the Iceland volcanic eruption in 2010 that disrupted flights for a while. Regardless of the fact that contingency planning is time-consuming, such an incident forced the CEO to arrange a meeting with employees to identify ways of minimizing the impact of such incidents (Murphy). This may include identifying alternative means of transportation. The economic crisis in Europe is another vulnerability that has forced global companies to reinforce their supply chain. This is particularly so for companies that relies on them for supply of car parts. Europe’s production of car parts has gone down due to the economic crisis; however, China has taken advantage of that opportunity and increased its production for this year. Companies that relied on them have had to adjust their operations to include China in their supply chain (Eshkenazi). This scenario implies that companies have to remain wary of the fact that there will be instances where suppliers are unable to reinforce their own suppliers. In such instances, the companies have to consider setting up new links with other suppliers. This could indicate an increase in expenditure that consequently has to be shifted to the consumer unless; the companies can negotiate accommodating terms with the new suppliers. Notably also, is the volatile situation of countries such as Iran that have U.S sanctions imposed on them. The uprising in certain countries in the Middle East implies that global companies with interests there should remain abreast of any resultant compliance. This has necessitated companies to remain aware of such occurrences to avoid controversial situations that may otherwise arise and possibly lead to disruption of overall supply chain links (Murphy). In this case, supply chain managers’ focus is to avoid disruption of business caused by violation of new compliances. Conforming to any new requirements implies that the previously rigid supply chain link would have to be ‘loosened up’. In addition, another scenario resulting from the uprising in certain countries in the Middle East is when government collapse, the case of Egypt is referred to in the article. In such a situation global companies that have markets there had to think up alternative sources. This entails stockpiling which could easily affect the bottom line negatively (Murphy). This brings forth the importance of having a plan that guarantees steadiness of business. It is clear that focus will now be on streamlining supply chain networks to become more flexible as opposed to less costly as has been the case in the past. CEOs of global companies have the uphill task of ensuring their businesses are not disrupted by natural disasters and/or other paralyzing risks such as the economic crisis in Europe. Staying abreast of current issues such as the uprising in the Arab world has also become a requirement for CEOs. Supply chain managers have to commit to instituting new ways of operating that accommodate these occurrences. Global companies have to undertake a ‘new’ kind of risk profiling depending on the vulnerabilities they are likely to face; therefore, the concept of reinforcing supply chain networks will vary between companies. Works Cited “Supply Chain Management - Definition and importance of its strategies”. Management Study Guide. n.d. Web. 17 January 2013 Murphy, Maxwell. “Reinforcing the Supply Chain”. The Wall Street Journal. 2012. Web. 17 January 2013 < http://online.wsj.com/article/SB10001424052970203436904577150803868408054.html > Eshkenazi, Abe. “Risk-proofing the Supply Chain”. The Association for Operations Management. 20 January 2012. Web. 17 January 2013 Read More