Supply chain management and operations

Supply Chain

The importance of supply chain management is broadly acknowledged by many large companies for efficiency and cost-savings gains. However, particularly in today's economically challenged environment, few companies are focused on social responsibility areas they perceive as adding only to costs or at least not having as much of a positive return on investment as alternative opportunities related to direct bottom-line impacts. For example, frequent areas on hold include risk management to improve public safety and environmental sustainability. However, Dow Chemical is a notable exception and, for this reason, the company's supply chain management practice is frequently cited as an example of what other companies should strive to replicate.

On the risk management front, Dow Chemical has implemented a radio frequency identification (RFID)/sensor system with a global positioning system (GPS) and other technologies to improve the safety and security of its hazardous materials shipments worldwide, while also simultaneously boosting supply chain efficiencies (Reese, 2007). This article explains how the system will enable Dow managers to pinpoint the location of a shipment and its contents anywhere on the planet. The program also incorporates container-based sensors that can detect anything from hazardous leaks and dangerous temperature excursions to unauthorized tampering with shipment containers. Dow can program the system to automatically send alerts to its personnel - via cell phone or e-mail, for example, or through the Web-based system interface when the system detects shipment irregularities. The system can dispatch similar alerts when a shipment fails to reach its destination within a designated time.

Just like Dow, more companies can actually save money by investing in supply chain risk management.

"The first reaction that most people have when they think of more security is that this will increase cost….increased safety makes good business sense, too. When you get creative and find ways to change the design of your supply chain, you can find different routings or different suppliers in a way that reduces the total freight and therefore reduces costs." (Mathes, cited in Reese, 2007)

In its supply chain risk management efforts, Dow Chemical has found opportunities to cut inventory by $160,000 reduce the cost of transporting a particular material by millions a year, improve response time to identify and resolve in-transit problems by 50%, decrease safety stock inventory by 20%, reduce the company container fleet by 20% and improve delivery time windows by 90% (Reese, 2007).