Supply Chain Risk Management Issues - Assignment Example

Supply Chain Management Name Professor Institution Course Date Supply Chain Management Table of Contents Supply Chain Management 2 Table of Contents 2 1.0 Introduction 3 2.0 Supply chain risk management (SCRM) on how it can be employed to reduce vulnerability 4 2.1 Actions that can be taken to mitigate or eliminate and manage risk in the logistics and financial functions 5 3.0 The role and importance of SCRM in effective management of complex systems support 6 3.1 What, if any, risks are inherent in support of complex defence systems? 8 3.2 How resilience can be built into the supply chain for systems support 8 4.0 The relevance of current research in SCRM in relation to defence industry 8 4.1 A comparison of SCRM in the commercial environment 10 5.0 The extent to which SCRM is included and managed in current defence industry projects 10 6.0 Conclusion 11 7.0 References 12 1.0 Introduction In the 21st century, supply chains have been intensively been used as a source of the competitive edge (Manuj & Mentzer 2008, p.192). Implementation and proper management of global chains provide firms with access to cheap raw materials and labour, broad product markets and enhanced financial opportunities. Stemmler (2006, p.43) argued that company must show consistency in management of supply and take every part which can cause risk if they are to attain efficiency. However, Jüttner, Peck and Christopher (2003, p.200) claimed that the recent incidents have vibrantly shown that a disruption impacting an entity along supply chain might have an effect on the ability of a company to continue operations, get finished goods to market or provide critical services to customers. Firms which perceive that they have controlled or managed risk have often ignored the vital exposures within their supply chain (Jüttner, Peck & Christopher 2003, p.200). Therefore, the report will review such statement in context of supply chain systems support operations. To put this report into perspective, this report will define supply chain risk management (SCRM), focusing on how it can be employed to reduce vulnerability. In addition, the report will discuss the role and importance of SCRM in effective management of complex systems support and relevance of current research in SCRM in relation to defence industry. 2.0 Supply chain risk management (SCRM) on how it can be employed to reduce vulnerability According to Wieland and Wallenburg (2012, p. 887) supply chain risk management often abbreviated as SCRM is defined as the adoption of various approaches to manage the exceptional and everyday risks within the supply chain following on constant risk assessment in quest of minimizing vulnerability and maintaining continuity. Christopher et al (2011, p. 68) categorized supply chain risks into the five classes including process risk, control risk, demand risk, supply risk and environmental risk. To reduce or minimize such risks management experts recommend supply chain risk management approaches to companies which they need to adopt (Manuj and Mentzer, 2008, p. 193). Tang (2006, p.453) contended that the subject of Supply chain risk management has in the recent years received significant and intensifying attention in industry, as activities and processes in numerous firm operations become more and more complex. In fact, supply chain risk management often aspires to determine the areas within supply which have potential risk hence implementing proper actions to control such risks. Sheffi and Rice (2005, p.42) urged the expansion of a company into other global market normally extends the company supply chain networks hence increasing the number of players or actors within supply chain. As a result, the supply chain can experience several disruptions with the supply chain hence increasing vulnerability. Khan and Burnes (2007, p. 198) contended that the vulnerability can be on the supply side on the demand side. Since it is difficult to identify the problem within supply side (suppliers side), in their supply chain risk management practice, companies normally use brokers to identify the vulnerability to risk on that side (Waters 2007, p.56). The brokers will be able to tell the company whether the supply side is vulnerable to supply risk, environmental risk, process risk or control risk. Similarly, the company through its SCRM can rely on suppliers to get the information on supply vulnerability (Wieland & Wallenburg, 2013, p. 306). The company can enquire about environmental risk like political factors and depot blockades. The company should also confer with supply to identify supply risk actual or potential disturbances in flow of the information, processes or product emerging in the supply chain network of the firm. Mangan and Butcher (2008, p.17) stated that the company also can identify vulnerability by asking the suppliers whether they are able to deliver the required materials to effectively fulfill its production demand. Khan (2003, p. 78) opined that the vulnerability on the supply side can be caused by physical condition of the facility or government compliance. The process is important because several researches on supply chain risk management hold that problems breakdown of machine at just one supplier can negatively affect all the organizations within the supply network. 2.1 Actions that can be taken to mitigate or eliminate and manage risk in the logistics and financial functions Christopher et al., (2011, p.69) pointed out that the company can mitigate such vulnerability through dual sourcing where it has another supplier who can be contacted whenever there is a delay in one. Therefore, from this perspective it is evident that in using both suppliers and brokers, SCRM are able to reduce vulnerability within the supply chain. Similarly, supply chain risk management can minimize vulnerability by identifying internal risk within the supply chain (Finch 2004, p. 184). Tang and Musa (2011, p.29) claimed that the process entails having a team of experts who can internal employees to look into information flow, financial flow of the company and process design. The question the team of experts should be asking themselves about information flow is whether there is demand for materials, the capacity status, and inventory status. In addition, to mitigate vulnerability, the team should be asking whether the company have the ability to adequately pay supplier and on time and whether the company if the business in proper investment (Tang & Musa 2011, p. 30). If the company is vulnerable to poor and late payments, suppliers might discontinue the relations or bring low quality materials hence affecting the business. Khan (2003, p.78) posited that to mitigate such vulnerability of supply chain, the company can look for inexpensive suppliers, or have back up (where to borrow money to pay suppliers). SCRM can also be employed to reduce vulnerability especially information system which is part of the supply chain. In most companies, information system is used to process information and track product orders (Khan 2006, p.320). However, such information systems are sometimes vulnerable to security attacks majorly by hackers. The company needs to engage its information system experts to secure its information to manage risk in the logistics. 3.0 The role and importance of SCRM in effective management of complex systems support Therefore, SCRM has two major roles and importance in effective management of complex systems support is they include risk assessment and identification and risk mitigation (Finch 2004, p.185). Jüttner, Peck & Christopher (2003, p. 200) With several players now enjoined in supply chain market complex, companies which perceive that they have controlled risks will always ignore crucial vulnerability within the supply chains. The exposures might emerge just after disruptions. The vulnerability is exposed by presence of various risks comprising process risk, control risk, demand risk, supply risk and environmental risk. Swanson, Bartol & Moorthy (2010, p. 12) asserted that for a defence industry, the disruptions can lead to delay lead time hence exposing customers (countries) to security risk. For instance, if a company was rely on a company from Japan to supply it with T tank vehicles for security purposes but Tsunami attacks the country just during production. If the T tanks needed some agencies, it will expose the country procuring the products to security risks. Therefore, supply chain risk management becomes important strategy and plays the role of assessing and identifying various risks (Wieland & Wallenburg 2012, p.890). The supply chain risk management need to carry out environment scanning to identify external risks which are associated with complex systems support. Supply chain risk management will enable the defence ministry or company to know the source of risk in its supply chain. For instance, in the example of Japan, the risk here is environmental based. Christopher et al. (2011, p. 70) stated that other risk which may be identified could be political turmoil which could disrupt operations or transport of defense products. The government could also set new rules on trade of defence products or devices affecting already ordered products. Apart from identifying the risk that makes supply chain vulnerable, it also assesses how often the risk is likely to take place. Giuniperoand Eltantawy (2004, p.699) postulated that the outcome of risk assessment can be used by the company of government to make decision on whether to engage a particular supplier within its chain. On the other hand, supply chain risk management also plays a big role and important in risk mitigation. Since the current supply chain is complex the company can face a lot of disruption within leading to losses and damage to the company’s image. Christopher et al (2011, p.70) argued that companies which have adopted supply chain risk management have discovered several strategies for the supply risk mitigation. Supply chain risk management practices will enable the company to either use dual as opposed to single sourcing, build trust in its relationships, how to manage inventory or whether to use logistics alternatives (Christopher et al. 2011, p.69). 3.1 What, if any, risks are inherent in support of complex defence systems? Mitigation practices also provide a solution when the risks are inherent in support of complex defence systems. Stohl and Grillot (2013, p. 34) stated that inherent risk can be the government or company policy or rules on production and distribution on defence weapons. The ministry can overhaul its supply chain system. In this situation, the company can develop a new supply chain which complements the government and company policies. Waters (2007, p.192) argued that defense ministry can also develop SCRM culture where it continuously carry out risk assessment and adjust to match with the industry policies. 3.2 How resilience can be built into the supply chain for systems support The research has found out that most significant methods to build the resilient supply chain for systems support is through collaboration with players and the actors within the system coming together to resolve the risks which exists. Similarly, by members of the system working together, it can be easy to get or share information concerning risks or disruption to plan for mitigation. The ministry of defence can also increase build resilience into the supply chain for systems support by strong and secured information systems of which they store important information. This can be done through adopt of virtual private networks, having strong firewalls, and intrusion detection systems to support online security. 4.0 The relevance of current research in SCRM in relation to defence industry The current research on in SCRM in relation to defence industry entails global supply chain, technology, vulnerability and ownership. The current research leans towards global supply chain which is the present trend in procurement sector. such research hold that the business world has really changed and companies no longer trades locally if they want better materials and products. As a result companies including department of defence now implement global supply chain where they have several suppliers. Research in global supply chain is relevant to because it points out various risks that defence industry might face in global markets (Choi and Krause, 2006). The current research in SCRM in relation to defence also emphasizes the use of information technology. As opposed to past years when top officers in department of defence used to travel to another country to inquire about Products such guns, missiles, ammunition, military vehicles, military aircraft, ships and electronic system among others, information technology has enhanced this process making it easy and faster. The research of role of information technology is relevant in the sense that department of defense learn how to implement effective and efficient supply chain which makes it easy to track and coordinate product movements. Ownership risk is another current research in SCRM in relation to defence industry. This kind of risk arises from blurring links between the purchasing and the supplying firms within the chain. Ownership risk emerges to defense industry when there is confused link to responsibility; in others words, when there is no particular person who wants to take responsibility over poor quality products or delayed delivery. The whole process is triggered but the trend like outsourcing or having many logistics partners leading to having a complex supply network. As industry which deals with weapons, current research in current research on ownership risk enable the defence industry to avoid such risk by not engaging in complex supply chain because it can be difficult establish responsibility for each player within the chain. 4.1 A comparison of SCRM in the commercial environment A comparison of SCRM in the commercial environment shows that others sectors face less risk as compared to defense industry within a complex system. Security is an agent issue which does not need delay as slight delay could lead to deaths or destruction of property. This is so different with other sectors which can wait when there is disruption within a global supply chain. However, information technology research and development which current takes place in both defence industry and other sectors are beneficial in that they improve information flow and inventory management. In terms of cost, despite not having a complex supply chain as other industries, defence sector face high cost distribution based on packaging and urgency of products. 5.0 The extent to which SCRM is included and managed in current defence industry projects Some of the current defence industry projects include Combat Helicopter by Poland, High Tactical Vehicle by Spain, unmanned aircraft machine by Israel, unmanned aerial motor vehicle by the US and boxer armoured vehicle by Germany among others. SCRM is highly managed in defence industry projects based on the fact any faults could lead to more risks. The defense industry deals with lethal weapons which are used to protect countries hence the supply chain management must be of high standards and secretive from the enemies. Therefore, the defence industry faces several risks in its production and distribution. Some of the major risks faced by this industry include environmental risks, supply risks, control risks and process risk. The production and distribution are often watched by enemy such as countries and terrorist groups which not want the process to be successful. For instance, the US is against North Korea production of nuclear weapon hence would block anything to do with it as well as purchase of raw materials used to make it. The process is also political in nature as countries and political blocs have rules which importing and supplying companies have to adhere to. The political process is the control risks often disrupt the production and purchase of defence products hence management of SCRM currently look towards this direction. For instance, Geneva Protocol restricts by some extend the production, Arms control refers to international restrictions upon the development, production, conventional weapons proliferation of small arms and even the weapons of mass destruction. The SCRM is managed in the platform of information technology. Product and material ordering, payment and order tracking are now done within the information technology. It means important information is relayed between the ordering company and the supply. To secure the information from the enemy from disruption or compromise, the defense industry must strong secure its supply chain system by improving its database or supply chain software. Similarly, the industry players in defence industry can have alternative servers or backups. 6.0 Conclusion The research has broadly discussed some of the risks which company face today within their supply chain. Some of the risks discussed here included process risk, control risk, demand risk, supply risk and environmental risk. As the companies cross boarder to do business, their supply chain network enlarges and even become complex. In the process, companies can think they have sorted the risk yet there is still some vulnerability with the chain. However, the research has focused on defence industry and has found that sector can hugely be affected by the risks and vulnerability due to the nature of the industry. The defence industry needs great efficiency and effectiveness in production and delivery of products. In the regard, the report has established that supply chain risk management play an important in identifying and mitigation if risks and vulnerability which defense industry may face in their operations. 7.0 References Army Technology 2016, Defence Industry Projects, Retrieved 8th June 2016 from http://www.army-technology.com/projects/ Christopher, M, Mena, C, Khan, O & Yurt, O 2011, ‘Approaches to Managing Global Sourcing Risk’, Supply Chain Management: An International Journal, Vol. 16, No.2, pp. 67–81. Giunipero, L.C & Eltantawy, R.A 2004, ‘Securing the upstream supply chain: a risk management approach’, International Journal of Physical Distribution & Logistics Management’ Vol. 34 No. 9, pp. 698-713. Finch, P 2004, Supply chain risk management: Case Study, Supply chain risk management: an international Journal, Vol. 9, No. 2, pp. 183-196. 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