Impact of Uncertainty on Organization Supply Chain - Assignment Example

Running Head: Supply Chain Management Name Course Course instructor Date submitted Table of Contents Table of Contents 2 1.0 Introduction 3 2.0 Question 1 5 2.1 Impact of uncertainty on organization supply chain 5 2.2 Effect of external and internal factors across a business organizational supply chain 7 2.3 How organization can be agile and use this aspect in enhancing effectiveness in supply chain 8 3.0 Question 2 9 3.1 Strategies for making supply chains more responsive to local conditions 9 3.2 How can a company entice local producers to produce during natural calamities such as floods? 10 3.3 Action taken to minimize possibility of losses during summer period 12 4.0 Conclusion 13 5.0 References 14 1.0 Introduction Supply chain is defined as the process which involves the flow of goods and services from their source which is the manufacturers to immediate manufacturers later to end products manufacturers and lastly to wholesalers, retailers and distributors. This process is usually connected through various transportation and storage activities which are normally integrated by way of communication, planning and integration of specified activities (Cavinato, 2004). Supply chain management is consider as a set of approaches that effectively comprises of manufacturers, suppliers, warehouse and stores so as to ensure that good are produced and distributed in right quality and quantities to their specified locations within set time. This is very essential since it reduces high costs thus satisfying all the intended requirements. There are two types of supply chains namely external and internal supply chain (Cavinato, 2004). An internal supply chain An external supply chain 2.0 Question 1 2.1 Impact of uncertainty on organization supply chain It is evident that uncertainty is considered to be a fundamental driving force behind any effective development of various supply relationships. Uncertainties, frequency at which uncertainty reoccurs and magnitude to which long lasting transaction are incurred are the three main dimensions which usually characterizes organizational supply management. Uncertainty with an organizational supply chain can be brought about by lack of enough information of the supply chain, inaccurate predictions related to impact of control actions found in supply chain, transport delays and lack of adequate information about the environment of supply chain (Devadasan, 2009). In order to understand more about the impact of uncertainty to supply chain it is essential to first understand the relationship which exists between supply chain, firms’ performance and nature of supply chain. These three factors go hand in hand in determining the overall performance of an organization (John, 2004). According to John (2004), uncertainty on supply chains have various significant impacts with a higher possibility of resulting to a “bullwhip effect”, which usually occurs when demand is variable on supply chain, are increased causing huge inefficiencies. This effect is considered to be risks as potential players are expected to hold excessive inventory levels so as to meet intend bust and boom situation. Clearly excessive inventory strains financial performance hinging itself on product value. Within a supply chain, bull whip effect is treated as an intrinsic risk. When we consider impact on organization performance, research indicates that performance within a business are better when supply chain uncertainty in their areas of delivery, consumer focus and flexibility (John, 2004). Based on supplier partnerships and consumer relationships on the performance of business, closers relationship between both suppliers and customers resulted to high levels of performance whereas uncertainty causes a wider gap to exist in these relationships thus negative impact to supply chain. Research indicates that both demand and supply uncertainties on the supply chain are negatively correlated. This clearly explains why uncertainty in supply is a stronger determinant of organizational performance as compared to that of demand. Uncertainty that surround supply chain can be minimized by a business being more aligned with both customers and suppliers. Increased globalization, competition, geographical scope and complexity within the business sector had lead to the importance of understanding uncertainty and their impacts towards a successful supply chain. Companies have been forced into adapting strategies that ensures sustainability thus increased profitability. Though the process of identifying the impact of uncertainty on supply chain is complex, it is evident that these risks cause a lot of changes within both the managing and manufacturing processes within an organization. Uncertainty within supply chains contributes widely to poor customer services accompanied along with excess inventory, bureaucracy in decision making and increased quality inspection at shipping or receiving stations. It is mainly defined using five major cumulative levels namely; ad hoc which is linked to unstructured supply chain which comprises of poorly defined processes, integrated supply chain processes that automatically start disappearing within management levels, extended unhealthy completion and poor performance coupled with poorly evaluated vendors and clients. 2.2 Effect of external and internal factors across a business organizational supply chain There are several internal and external factors which usually affects an organizational supply chain. Sherer (2005) asserts that, external factors are those beyond organizational control whereas internal can be controlled to a certain extent. Based on internal factors also known as micro environmental are namely suppliers, partners, shareholders, employees, distributors and wholesalers who are mainly involved in a supply chain. Internal factors mainly influence supply chain mainly through distance and time. They are considered to extend supply chains which are an added account which an organization must be ready to carry. Suppliers, wholesalers, distributors and retailers link the whole supply chain delivery system, therefore a mistake done by one of these may automatically result to lowering performance especially in the supply chain. It is therefore very essential to observe all the above mentioned putting in mind about supply availability and monitoring of price trends. Internal factors assist an organization in promoting, selling and distribution of goods enhancing an effective supply chain. Resellers who include suppliers, distributors, retailers and wholesalers are all distribution channel who form a strong basis within supply chains. Distributions channels perform fundamental functions within a supply chain which is considered cheap to a company performing these functions on its own (Sherer, 2005). Based on macro environmental also known as internal factors, they comprise of political, economical, social, technological, legal and environmental factors. According to Devadasan (2009), political factors are mainly due to policies implemented by various governments which may either favor or do not favor a supply chain. Political decisions impact on various business aspects especially while focusing on their intervention within the economy. Economical factors comprises of taxation changes, inflation, exchanges rates and interest rates. These factors are considered to have a greater impact on organizational supply chain behaviour. Higher interest rates may deter supply chain operation due it costs a lot while borrowing. Strong currencies usually make exporting of products difficult thus affecting supply chain operations. Social factors are known to impact on demand for various products and availability of work (Devadasan, 2009). New technology creates new processes and products thus it may slow or increase operation in a supply chain based on its effectiveness and costs. Technology can lead to innovation, improved quality and reduce costs within a supply chain thus improving business operations. Environmental factors comprises of both climate and weather changes, changes in climate impact industries either due to global warming thus reducing business performance which is connected to supply chain (Samaranayake, 2005). Finally legal factors are those associated in the establishment of a legal business environment in which it performs its operations. These are requirements and rules that must be followed thus affecting organizational behaviors especially those related to supply chain. They impact on product prices, demand and supply based on how the legal aspects affect business operation. 2.3 How organization can be agile and use this aspect in enhancing effectiveness in supply chain There is to respond to the above mentioned uncertainties as way of ensuring that supply chain remains effective and efficient at all times. Research indicates that response to these uncertainties highly depends on agility or flexibility of the supply chain and the greater parts of its network. Even with the continuous search of efficiency, the most challenging part is that involving finding vulnerable ways to manage supply chain. It is evident that since supply chains link different network entities, it is essential to widely focus on ways these uncertainties can be managed. Organizations are focusing on incorporating a robust and resilient supply chain as part of managing uncertainty which is occurring here and there. A robust supply chain is widely effective while dealing in reasonable variability thus maintenance of output versus variability. Based on resilient supply chain, it offers more as compared to robust since it able to predict on uncertainty variability thus creation of a shift in the level and variability in supply chain input. 3.0 Question 2 3.1 Strategies for making supply chains more responsive to local conditions It is evident that management of supply chain is very essential in improving local conditions which affect it such as immense flooding. For instance, as a CEO and you receive news that a cyclone is likely to affect Queensland which is your main supply chain operation it is very important to come up with effective strategies which will ensure normal operation are been carried out locally. Fresh fruits are perishable and during floods their supply chain may be negatively impacted especially as a result of lack of proper communication and transport systems. It is evident that to ensure there is efficiency within supply system it is essential to enhance both communications, technology entities during such uncertainties (Pearson, 1999). Organization should ensure that communication is adhered to as way of developing long term relationships with all members found within a supply chain. Research indicate when best communication practices are put into action, the company are able to come up with objectives which are usually effective in supply chain minimizing level of exposed uncertainties affecting local markets (Sánchez, 2005). Key supplier, wholesalers, retailers and distributors who are major players in a supply chain need to have new technology so as to meet quality, costs and effective delivery services as required in this era of competitive markets advances. Communication and improved technologies assists organizational supply chain into responding quickly to achieve customer satisfaction (Sánchez, 2005). A local supply chain that has incorporated effective communication and improved technological systems assist in development of new products thus a competitive advantage in both local and international markets. Proper communication is known to widely encompass all functions defined in an organizational supply chain. In addition to this, distribution channels are considered to widely interface directly with technological applications. Communication work hand in hand with technology as these two focus on meeting the need and expectations of customer as described in a supply chain. 3.2 How can a company entice local producers to produce during natural calamities such as floods? It is obvious that companies need to be entice local producers to widely produce goods at certain periods so as to be able to cope up with conditions across state. By so doing it is evident that minimal cost will be mused thus extending a company profitability margin. It can be very expensive when producers are not able to meet up customers’ demand which therefore results into disrupting the whole supply chain process/management. If producers are able to produce a substantial amount of produce which sustains the same amount of people when on both normal and flood weather then consumer will always be satisfied (Sánchez, 2005). Further, not only does this satisfy consumer but rather it highly assist in the minimization of supply chain interruptions enabling the company earn a substantial amount of its investment time after time. When producers are able to maintain its produce even in times of natural calamities such as floods, it is able to ensure that it is able to minimize on micro environmental factors which are defined to lack immediate control of a particular firm. This can be in the form of minimal insurance premiums whenever there are such interruptions. For producers to be able to produce a considerable amount of supply that is sufficient enough to last even in flooding situation there are certain arrangement need to be carried out. Firstly, it is important for an industry such like that which produces fruits to control and mitigate such flood uncertainties within their supply chain through the establishment of resilient supply chains which are able to adapt to abrupt changes or can respond instant when there are disruptions. Quick adaptation to uncertainties within supply chains is the function defined by supply chain management. Secondly, there is entire need to effectively indulge in planning for disaster even before they occur. This enables producers to remember that future expectations of supply are normally coupled in past and present experiences that are essential while planning for unforeseen risks (Model and Empirical Study in the Automotive Industry, 2005). Another arrangement that producers can embark on an insurer premium whereby they will be able to insure their produce against natural calamities. It is evident that working with insurance firms, companies are able that risks are everywhere and as a way of preventing them it is essential to first control and mitigate them (Model and Empirical Study in the Automotive Industry, 2005).. Most companies fail in times of flood especially those that produce perishables since they look this kind of risk too narrowly without coming up with strategies on how to minimize these uncertainties. Coming up with a supply chain risk management program minimizes chances that a particular company will suffer of disruption of its normal operation. 3.3 Action taken to minimize possibility of losses during summer period It is evident that with increased globalization and global warming weather changes are taking place with such an alarming rate therefore, certain actions or measures need to be carried out in order to ensure that companies are able to be more responsive both in summer, winter or any other kind of climatically change (Hendricks, 2005). During times were there is economic boom, it is clear that innovation growth serves as the main agenda in most companies thus establishing actions which are very essential in supply chain management during summer periods. It is important that during summer fresh fruit producers should not underestimate supply chain as a major source of acquiring a competitive advantage. It is clear the establishment of a strong and effective supply chain in all climate changes especially during summer period for fresh fruits providers is becoming a more critical factor towards a substantial business performance (Hendricks, 2005). This action process involves three main steps namely; mapping of fresh fruit supply chain through mapping or pinning down uncertainty found in critical nodes within this network, identification on how risks can be reduced; this can be through identification of resources to counteract these uncertainties, maximum collaboration and planning, major redesigning of supply change and finally investing on risk visibility systems. To begin with, the most fundamental step towards ensuring that production of not only fresh fruits but also perishable foods during summer time is that of identifying all possible risks linked to its supply management especially at those nodes that are considered to be critical. By so doing, producers are always at the forefront in realizing when there is a possibility of an uncertainty to occur. It is observed that most fresh fruits supply chains are complex in nature since they require readjustments during climatic changes (Hendricks, 2003). An essential action involves identifying vulnerability linked to this particular supply chain. In a more deepening understanding risks or uncertainty are widely characterized by both the possibility of an event taking place and the severity obtain when such an event does occur. By knowing this definition, fresh fruit companies are able to come up with a more refurnished supply chain management. It is observed that, during summer risks or uncertainty are usually found in a supply chain are not only maximizing on their frequencies but rather, the severity displayed by its effect can be costly in the sense that a wider potion of its supply chain may come to a complete halt. It is essential that to avoid such circumstances companies, fruit vendors and distributors to clearly understand supply chain management and its flow in materials. Another major action that can be incorporated in minimizing supply chain risks is global sourcing (Hendricks, 2003). Although, this decision is one which is based on minimizing costs and coupling it with potential amplifications linked to this usually occurs when this same global outsourcing channels are established. Risks that arise during summer may be linked to those of inbound transportation, customs regulations and other handoffs which act as catalysts within supply chain of fruits. As this number uncertainty level increases the probability of the event being disrupted during the summer period. 4.0 Conclusion An efficient and more responsive action towards a supply chain is one major way of creating a competitive advantage. Establishing of a strong information and communication entities is a major tool of shaping an organization supply chain. Today, most business has realized the need of connecting its stipulated strategies to its supply chain. Companies have developed the use of supply chain management techniques and efficient data systems which are known to be effective in harmonizing organizational goals thus achieving long term strategic innovations. As a result of this, most organizational supply chain has widely evolved from what was known as vertical integration to that of securing an efficient supply chain. Further, supply chain is defined as enterprises comprised of wider and broader decisions. Profitability within organizational depend widely on how it will configure its supply chain. Management should understand the consequences which may result when supply chain has been configured. Supply chain decisions is normally driven by corporate which aligned to it. 5.0 References Cavinato, J. (2004). An analysis of supply risk assessment technique. International Journal of Physical Distribution and Logistics Management, 34(5), 383–387. Devadasan, S. (2009). Total agile design system model via literature exploration. Industrial management and data system, 109: 4, pp. 570-588 Hendricks, K. (2003). The effect of supply chain glitches on shareholder wealth. Journal of Operations Management, 21, 501–522. Hendricks, K. (2005). An empirical analysis of the effect of supply chain disruptions on long run stock price performance and equity risk of the firm. Production and Operations Management, 14(1), 35–52. John T. (2004). Supply Chain Management. Thousand Oaks, CA: Sage. Model and Empirical Study in the Automotive Industry, (2005). International Journal of Operations & Production Management, 25:7, pp. 681-700. Pearson, N. (1999).Strategically managed buyer–supplier relationships and performance outcomes. Journal of Operations Management, 17(5): p. 497-519. Samaranayake, P. (2005). A conceptual framework for supply chain management: a structural integration. Supply chain management: An international journal, 10:1, 47-59. Sánchez, A. (2005). Supply Chain Flexibility and Firm Performance: A Conceptual Sherer S, (2005). From supply-chain management to value network advocacy: implications for e-supply chains. Supply chain management: An international journal, l10:2 (2005), pp.77-83. Read More