The Impact of Uncertainty on Organizations in a Supply Chain - Assignment Example

Supply Chain Management Question 1 The Impact of Uncertainty on Organisations in a Supply Chain Supply chain could be defined as a system of suppliers, producers, distributors and consumers. These elements in the supply chain are engaged in a long term business relationship. For better management of the business, the relationship among these elements should be effective (Sharman et al, 2010, pg 97). In the course of businesses transactions, the business must deal with many different types of uncertainty. These may include competitors’ actions, share prices, petrol prices, floods, droughts, workers strikes, bomb threats, shortage of raw materials and labor, or sudden increases or decreases in demand for products or services. Research has indicated that the impact of uncertainty on organizations in a Supply Chain is always enormous and requires good approach in order for the company to gain resilience. These uncertainties can be grouped into either being physical mobility and flows, financial, informational rational or resource segments. This section of the paper will look at the impacts of these uncertainties to the success of any organization. Considering demand and supply, it has been suggested that uncertainty in either of them will impact on the performance of an organization. This is observed in both the product as well as the service based business entities. Taking a comparison of organizational performance at different levels of demand and supply uncertainty, it is apparent that in both the service sector as well as the product based firms, performance will be affected. Business performance is way better when businesses operate in conditions with reduced supply and demand uncertainty. This is because; reduced demand uncertainty will enhance better delivery. On the other hand, heightened demand uncertainty leads to likely or actual interruption to the flow of the product or service; the information, as well as money (Xu et al, 2007, pg 50). This will ultimately affect the organization’s operations. In as much as these risks cannot be controlled by the business particularly those that are external, the only way forward is to minimize them (Xu et al, 2007, pg 51). Taking an example of terrorist attack, its effect on the supply chain is adverse. In incidences of terrorism, major transport modes like airports are closed down and this directly affects the supply chain for those transactions that are internationally based. In addition, borders are usually closed down in fear of bomb blasts which hinders free movement of products within and between countries. It is therefore imperative that such uncertainties are checked within a supply chain to minimize loses for most organizations. Effects of Internal and External Factors across Businesses in a Supply Chain Within the supply chain, uncertainties usually occur as a result of both internal and external environmental factors. The combination of these two areas makes the movement of goods and services along a supply chain to slow down hence the ultimate impact on the organization’s profitability. External factors in the supply chain uncertainties include the macro environmental factors that the business may not have control over but can only work to minimize the impacts. This has a collection of political legal factors within a specific region, economic factors of the market, and socio-cultural beliefs of the consumers, technological advancement, populations and finally competition between companies (Sharman et al, 2010, pg 67). On the other hand, the internal factor may include suppliers along the chain, distributors, employees, wholesaler and other shareholders. These external and internal factors affect the supply chain in a number of ways. As realized earlier, external factors cannot be controlled by the business except attempts to minimize them. Externally, when there is a problem with competition in the market, clientele behavior of cultural orientation, as well as technological advancements, the structure and characteristics of the supply chain if affected. This in essence compels the supply chain to become more flexible and agile (Sharman et al, 2010, pg 82). Internally, the preferences of key players mentioned above may vary (Gattorna, 2003, pg 162). Its effect is on the information dissemination as it may be distorted during creation or there may be incidences of overstatements in the information released along the supply chain. In addition, there might be lags and tricks within the business as a result of the key players misunderstanding each other. This in most cases affects the market demand and prices particularly for the suppliers, retailer and intermediaries within the supply chain. The integration of both internal and external forces in the environment of the supply chain is what creates the complexity within the supply chain which should be checked for the success of business transactions. Agility and Flexibility of Organizations in a Supply Chain To attain clientele satisfaction through reduction of the existing gap between satisfaction and perception, organizations need to exhibit agility and flexibility within their supply chain (Evans, 2002, pg 28). It should be noted that a supply chain involves a process of moving goods and services from the client’s request through raw materials, supply, manufacturing and finally the distribution of the same product to the consumer. To attain agility and flexibility, there are a number of things that an organization should carry out so that they satisfy their clientele needs. For the organizations to be agile in the supply chain; there is need to reduce the gap between the different processes that goods go through to reach consumers. Organizations therefore have to embrace velocity within the work functions of the supply chain. Any sections of delay must be minimized or made simple so those requests reach clients as fast as possible. There is also need to integrate information technology within the supply chain so that communication overlaps are cut down. This involves connecting information at every chain electronically so that communication is direct and to the right person. This may involve giving feedbacks to the clients in good time so that they monitor the movement of their requests (Evans, 2002, pg 42). Agility and flexibility as well requires that the organization becomes quick in the reaction to the changing needs of the market economy. The period taken to the market should be made short, services to clients improved and at the same time being keen on new challenges that may arise in the market, and finally providing quality services to the consumers. In the cases of uncertainty in the supply chain like terrorism attacks, the organization should reconsider using international suppliers who even though may appear less expensive; they are more vulnerable to disruptions in the transportation system (Ponis, 2010, pg 121). This will require that the organization develops alternative local suppliers who even though may be expensive, they are safer. This can however be made strong through sharing of information and having a closer integration of main shareholders of the supply chain. At an elevated level, the organization can adopt a more visible supply chain in which there is integration of the insights of suppliers, constant supervision of suppliers and development of infrastructural empowerment. Question 2 Responding to Local Conditions in the Supply Chain The effects of weather conditions are pertinent issues that should be addressed within the supply chain of any organization (Sharman et al, 2010, pg 87). Looking at the case study in the question, floods form part of the macro environmental factors which the company has no much control over. However, strategies can be put in place to reduce the impacts caused by floods to the supply chain. Based on the Brisbane Fresh Fruit and Vegetable case study, floods that are common in the area during summer disrupt the supply chain particularly on the distributors and wholesalers responsibility. Since floods in the region affect more directly the transportation system of the supply chain between the suppliers, wholesalers and the consumers, this has a long time effect on the inventories escalation in the supply chain. It is imperative that the organization becomes responsive to the weather conditions uncertainty so that the adverse effects are reduced within the supply chain (Gattorna, 2003, pg 179). Considering the kind of goods that should be supplied, delayed response to the supply chain may ultimately cause the destruction of the perishable fruits and vegetables. Owing to the fact that vegetables and fruits are highly perishable goods, storms that result into floods which have been prevalent in the region becomes of high significance to the performance of the organization in the supply chain management. Therefore, there is need to establish, forecast and control the risks linked to the flooding phenomenon. In the first place, before responding to the weather conditions of the region, the strategy laid down should involve plans to establish the risks and strategies for latent weather threats like the cyclones associated with floods. This action will involve a constant monitoring of the weather forecast particularly during the summer season that is linked to continuous floods in the region (Zeng, 2010, pg 19). As a result of these uncertainties, the inventory management system should incorporate a close monitoring of the weather forecast (Ponis, 2010, pg 132). This ensures that perishable products like the fruits and vegetables are pushed down the supply chain before the patent weather changes so that the risk of stock-outs is avoided. Given that at time weather forecasts can be unreliable, preparations to respond to floods should involve a general increase in record levels to adapt to the summer weather and its prevalent floods so that this acts as a precaution to the supply chain management team. It is though imperative that the cost of inventories is assessed to avoid working beyond the budget of the company. As noted from the case, demand transforms following weather uncertainty. This may have both a positive and negative impact on the performance of the organisation. Following this, it is significant that the sales of specific fruits and vegetables are closely monitored by the wholesaler and taken to the next level so that the supply chain can attain its agility and flexibility. This will help avoid overstocking or under-stocking by the time floods occur (Zeng, 2010, pg 15). It is predominant from the regional effects of the Queensland Coastal region that whenever there are anticipations of cyclones, consumers panic and buy in bulk which may impact on the organisation’s stock-out. To prepare for such uncertainties, clients should be incorporated in the information flow as well as the supply chain to ensure that they offer their contribution towards reducing flood and disease disruption as they strive to retain their loyalty to the organisation. Following the floods in the region, it is clear that supply quantity has directly affected on the inventory levels in the operation of logistics. As a result, it is imperative for the organisation to have an integrated perspective about the conflict so that losses are minimised as much as possible (Ponis, 2010, pg 141). Alternatively, the organisation can introduce refrigeration facilities so that the perishable fruits and vegetable are kept in stock for a longer time to be supplied to consumers during the flood seasons. The handle the situation of floods during summer, the transport system is most imperative to be checked. The company could take over the task as the main wholesaler and supplier of goods relying more on the local supplier (Zeng, 2010, pg 15). This follows the fact that complaints have come up in the lieu of the organisation over-relying on the overseas suppliers for cheaper distribution and at the same time ignoring the local supplier who are more reliable in such uncertain weather conditions. The company therefore has to learn from past experiences and establish a better rapport with local supplier to integrate their prices to the companies limits so that supply come from local communities (Gattorna, 2003, pg 185). This will reduce on the transport costs and also use the more experienced groups of distributors within the supply chain for the local conditions. On the other hand, adoption of more than one mode of transport would serve to reduce cases of losses incurred during the flooding seasons. Considering the fact that goods which are perishable have to reach consumers as fast as possible, air transport would serve to save the goods from getting damaged. In the same way, air transport is not affected by floods and therefore would serve a better side of the problem as compared to the currently used road and railway transport. The technology of Brisbane should be improved particularly in terms of communication. It was noted in the case study that as a result of the flood affecting the headquarters, activities came to a stand still since everything was controlled at Brisbane main office. It is important in preparation of avoiding future losses from floods that communication if beefed up. Decentralisation of communication links should involve networking of the computer systems so that the effects of one region should not stop activities everywhere within the organisation. Communication could as well involve the people responsible of gritting the roads to give room for monitoring and scheduling of delivery routes (Xu et al, 2007, pg 211). Conducting of recreations of weather incidences can help the supply chain management team to find out other alternatives in the delivery modes of transport and particular eventuality plans. It is as well important that in the event of responding to local conditions, managers are trained in the ways forward in dealing with the issues at hand during floods. To respond to the flood and diseases that might disrupt the movement of products to the clients, the company should decentralise its activities from Brisbane to have more distribution centre near consumers which have the mandate to carry out activities independently so that work does not affect the entire state when cyclones hit one region of the country. This would cut down on the risks linked to distribution and other logistic operations (Gattorna, 2003, pg 183). Arrangements Needed for the Company to Entice Local Producers to Supply More amid Uncertainties As part of preparing to deal with the local environmental conditions, the company is required to entice the local producers to provide goods in the supply chain. This is through involvement of the local producers in the supply chain so that goods are available at all time. Following the recent complaints received at the Head Office of the company, local suppliers have a feeling that the company does not appreciate what is produced locally and therefore go for the overseas goods at a lower price (Ivanov & Sokolov, 2009, pg 130). Very little is bought by the company at local level and therefore this has killed the morale of local producers from producing more. It would not make sense if more produce is available locally and yet is lacks consumer as a result of the distributors at the wholesaler level going for other cheaper goods. It is only after the disaster hit the region that the local distributors themselves took over the task of distributing products to the consumers. This requires that the company changes its trend in the way local distributors are considered. In the first place, enticing the local producer to produce more as the company prepares for the floods would involve a shift from the offshore distribution to the local distributors so that they are allowed to source the products by themselves (Ackerman, 2007, pg 21). More should be bought from the local producers so that they develop a positive feeling towards producing more for the community. This would cut down on the losses caused by floods which mostly hit the offshore distribution centres so that products like fruits and vegetable are available at a local market. On the other hand, the company can entice local producers to produce more as they prepare to handle floods and other environmental uncertainties through paying attention to the downstream inventories. The company should develop a produced-to-stock strategy so that dissatisfaction from clientele during the uncertain seasons of summer can be avoided (Xu et al, 2007, pg 210). It is important that the company buys more from the local producers and store under good conditions for the purpose of selling during summer when the major distribution centres are hit by floods. This will definitely make the local producers to continue working hard to ensure that there is always enough in store for the company during the flooding seasons. Another enticing strategy that the company could use to encourage local producers for more production is through pricing. This strategy has to ensure that the stakeholders are satisfied by all means. In the past, the company had been avoiding to buy from local producers so that they distribute their products following the low prices in the offshore distribution centres. The company can transform the perception of local producers through setting of a standard and better price for their goods which would increase the movement of these products at the consumer level. Let the company buy more from the local producers at a better price and avoid setting high prices to the clients so that they can rely more on the locally distributed products (Ackerman, 2007, pg 39). This will put pressure on the producers to produce more for the readily available market. Similarly, the company could adopt better means of transport to reach the local producers and take their goods which will cut off the uncertainties of the summer seasons as the areas would always bet accessible (Ackerman, 2007, pg 42). This may involve the use of intermodal mean of collecting produce from the local distributors and availing the same to the clients for consumption in good time. Better service delivery to the customer would increase their reliance on the locally produced fruits and vegetable which eventually will reduce on the cases of destruction involved in the perishable gods. Actions to Be Taken to Reduce the Possibility of Major Losses as Had Occurred this summer To avoid the losses that had occurred to the company this summer, it is imperative that an action plan is put in place. As noticed, most of the losses incurred by the company involved products that were lost in the floods (Ivanov & Sokolov, 2009, pg 122). This implies that there is need to control the stock in the wholesalers’ stores particularly during summer to avoid the flood effects. This should include making sure that the movement of this stock is faster through the reduction of prices. This will entice consumers to buy more and help in the controlling of the company’s stock. On the other hand, because of the vegetables and fruits being highly perishable goods, storms that result into floods which have been prevalent in the region becomes of high significance to the performance of the organization in the supply chain management. Therefore, there is need to establish, forecast and control the risks linked to the flooding phenomenon. To do this, before responding to the weather conditions of the region, the strategy laid down should involve plans to establish the risks and strategies for latent weather threats like the cyclones associated with floods (Desouza, 2010, pg 122). This action should involve a constant monitoring of the weather forecast particularly during the summer season that is linked to continuous floods in the region. As a result of these uncertainties, the inventory management system should incorporate a close monitoring of the weather forecast (Desouza, 2010, pg 100). This ensures that perishable products like the fruits and vegetables are pushed down the supply chain before the patent weather changes so that the risk of stock-outs is avoided. Since at time weather forecasts can be unreliable, preparations to respond to floods should involve a general increase in record levels to adapt to the summer weather and its prevalent floods so that this acts as a precaution to the supply chain management team. It is though imperative that the cost of inventories is assessed to avoid working beyond the budget of the company. Another section of importance in the avoidance of future losses, the company should incorporate intermodal means of transport so that every season relies upon transportation systems that are more reliable. For instance in the summer season that is associated with floods, the company should depend upon air transport to distribute its products to the consumers and therefore reduce on the losses following excessive stocking (Ivanov & Sokolov, 2009, pg 132). References: Ivanov, D. & Sokolov, B. 2009. Adaptive Supply Chain Management. New York: Springer. Sharman, R., et al. 2010. Exploring the Grand Challenges for Next Generation E-business: 8th Workshop on E-business, Web 2009, Phoenix, Az, USA, December 15, 2009, Revised Selected Papers. New York: Springer. Desouza, K. 2010. Agile information systems: conceptualization, construction, and management. Heinemann: Butterworth-Heinemann. Ackerman, K. 2007. Fundamentals of Supply Chain Management: An Essential Guide for 21st Century Managers. Washington: DC Velocity Books. Xu, L., et al. 2007. Research and practical issues of enterprise information systems II. New York: Springer. Gattorna, J. 2003. Gower handbook of supply chain management. California: Gower Publishing, Ltd. Zeng, Z. 2010. Advances in Neural Network Research and Applications. New York: Springer. Ponis, S. 2010. Managing risk in virtual enterprise networks: implementing supply chain principles. London: IGI Global snippet. Evans, N. 2002. Business agility: strategies for gaining competitive advantage through mobile business solutions. Chicago: FT Press. Iyer, A. 2011. Orchestrating Supply Chain Opportunities: Achieving Stretch Goals, Efficiently. New York: Business Expert Press. Read More