The Current State, Objective and Future Trends of Risk and disruption management in supply chains
States and Trends of Risk and Disruption Management in Supply Chains
After suffering for years, managers' gain ground in supporting supply and demand market of today, yet the effective assessment of managing risk as well as disruption is still an active conversation amongst project managers. Management takes a new position and arranges new strategies to support potential critical paths in product development and distribution. The supply chain is now global, thanks to the help of the internet, and thus needs active plans to support the future growth of distribution of products to a diverse and otherwise complex sociological environment. By evaluating the current state, revealing potential trends and discussing the support of potential disruptions, a better understanding for problem solving and preventative measures will ensue.
The current state of affairs for the supply chain of today starts with the consumers. Consumers demand much more today than they once did. The instant gratification of products has led to a challenging process of distribution. Global and uncontrollable event impact businesses on a much broader scale and suppliers "are capacity constrained, but the reliable supplier may possess volume flexibility" (Tomlin, 2006). Organizations require dependency on effective and tactical rerouting of product volume, as rerouting is the ideal disruption management strategy, yet places taxation on a process already at capacity (Tomlin, 2006). Rerouting allows firms to reduce costs and decreases unforeseen disruptions (Tomlin, 2006).
Managers must take into consideration a volume of potential risks producing disruptions'. Mitigating the risk involved for distribution, require a buffer so that potential rerouting of a supply chain is essentially a positive plan B. Management will need to follow through with a variety of different considerations, which include the specification of the risk source and all vulnerabilities involved; human and machine centric operational contingencies; nature; terrorism and political instability (Kleindorfer & Saad, 2005). Understanding the risk and various sources will allow managers to focus on the bigger picture, as well as have a broader sense of potential impact. While nature is at many times unforeseeable, paying attention to the weather is one way to manage and reroute a supply of product, ensuring that the product can reach the final destination. Assessing risk depends on understanding the vulnerabilities and hazards, and recognizing the strategic importance in effective communication under times of duress (Kleindorfer & Saad, 2005). Both mitigation and contingency tactics are required for a manager in the effective approach of problem solving.
Mitigation and contingency actions are not free, and therefore passive acceptance of the disruption risk may be appropriate in certain circumstances. Passive acceptance is often the default strategy even when it is not appropriate. (Tomlin, 2006)
Disruption to a supply chain is not only inconvenient but also costly. Firms can lose millions because of strikes, equipment failure and much more. Managers must plan for continuity in the event of a potential impact, thus allowing the impact to show readily in times of crisis (Craighead, Blackhurst, Rungtusanatham, & Handfield, 2007). Management that takes time to plan for continuity allows for budgeting to remain at a consistent pace therefore enables the bottom-line in critical events to remain relatively even (Craighead, et al., 2007). Without careful planning a more severe crisis could result in catastrophe for any organization (Craighead, et al., 2007).
Theoretically, a well-designed supply chain increases an organizations chance for positive response to potential hazardous events. Nodes and arcs are legitimate elements in a supply chain design and a design can be usefully in the comparison and contrast of observing the supplies basic characteristics and trends (Craighead, et al., 2007). "Such a contrast and comparison could facilitate the identification and definition of structural and infrastructural differences across supply chains that, in turn, shed insights into why certain supply chain disruptions would be more damaging than others." (Craighead, et al., 2007)
Business continuity planning (BCP) is a current trend and one that supports the minimization of the effects of unanticipated events for an organization to meet the customers' needs (Zsidisin, Melnyk, & Ragatz, 2005). While BCP is a solid foundation in planning, management must consider two risks carefully. First, managers must be aware of all events that might create disruption, and the second is the likelihood of the events occurring (Zsidisin, Melnyk, & Ragatz, 2005). Without preparation and awareness, an organization threatens their own profit margin and success (Craighead, et al., 2007).
Organizations face new trends in supply chain management, trends are more complex as the global economy expands. Managers will continue to grow knowledge management skills, so that should a supply chain disruption occur, post-incident review can provide important lessons learned, thus eliminating or decreasing future occurrences (Zsidisin, et al. 2005). Painting a proper portrait of future trends is dependent upon an organizations ability to analyze the market historically, and with zest. Suppliers will require increased focus on meeting the needs of consumers at peak times, collaboration amongst management and their value chain will increase a profitable conclusion in a potential risky scenario, and role-based vision partnered with key software packages will assess better delivery of supplies (Blanchard, 2009).
Complacency for an organization requires elimination, as an organization that becomes complacent with valuable information creates risk and closes the doors to potential growth (Juttner, Peck, & Christopher, 2003). Data collection for an organization assists in creating mental maps and physical data for potential new hazards or trends. The collection of a wide range of data opens the doors for organizations to create new strategies and create accountability for management (Juttner, Peck, & Christopher, 2003). Lack of ownership and accountability creates patterns of chaos, and can foster an environment for lack of responsiveness (Juttner, Peck, & Christopher, 2003). According to Neureuther (2009), the devices for qualifying risks and inquiry, that inspects relationships, effect relationships of risk and cost continues to remain essential as supply chains develop globally and competitively.
Computer software helps to manage and provide insight to potential risks and provides key assessment tools. For instance, United Technologies uses supplier-tracking services developed by Open Rating Inc., to keep an eye on an extensive supplier network, especially in waiting key component parts to their organization (Bartholomew, 2006). When faced with an aerospace unit supplied by a failing supplier, the Open Ratings system helped United Technologies organize a better solution between the organization and the material suppliers, thus avoiding potential hazards of not receiving critical equipment (Bartholomew, 2006).
Too often as well, organizations focus on one supplier for all their needs. Creating a well distributed supply resource chain, enables an organization to decrease the risks potentially involved in the collection of raw materials for their products (Bartholomew, 2006). Further, organizations continue to go local for their supplies thus improving turnaround time for much needed supplies (Bartholomew, 2006). "Effective business continuity management must look beyond an organization's own risks and consider the exposures of its third-party suppliers as well." (Veysey, 2003) To avoid delays to potential risks, organizations can prepare by economically retaining and maintaining to capacity inventory reserve (Chopra, & Sodhi, 2004). By maintaining a level of inventory to support, the organization ensures a strategy of meeting daily production goals and balancing assembly-line problems (Chopra, & Sodhi, 2004). Organizations can also focus forward on transportation methods. If a company holds very little inventory of otherwise high-value parts, the company is able to afford to use high-cost transportation methods to drop ship parts, minimizing delay-related risk as well as inventory-related costs (Chopra, & Sodhi, 2004).
Going beyond is organizing the data, as well as understanding the data. The best methods to prevent system failures on key software solutions of a supply chains, is to have a backup systems and "well-designed, well-communicated recovery processes that duplicate all data and transactions" (Chopra,…
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