Due to several developments such as an increased dynamic business environment and the need for lean processes, manufactu
Posted: Thu Apr 28, 2022 2:25 pm
Due to several developments such as an increased dynamic
business environment and the need for lean processes, manufacturing
companies are forced to intensively deal with risk issues in their
supply chains. Accordingly, supply chain risk management has become
an important field of operations management. Catastrophes such as
9/11 in 2001 (USA), the tsunami in 2004 (Japan) and hurricane
Katrina in 2005 (USA) have all raised awareness about supply chain
risks. Furthermore, common occurrences such as quality problems
with suppliers highlight the relevance of supply chain risk
management, since one part with a quality defect can stop an entire
assembly line. In particular, the automotive industry is well known
for improving underlying processes by lean principles and for
complex supply networks according to their demanding business
environment.
In order to remain competitive, many companies in the automotive
industry foster the streamlining of their supply chains by
implementing concepts such as Just-in-Time and Just-in-Sequence.
The automotive industry supply base is characterised by many small
and medium-sized suppliers, which represent one of the main drivers
of the economy. The development of a lean supply chain leads to low
inventories but results in a high vulnerability due to the fact
that problems can hardly be compensated for. Another trend
bolstering the importance of supply chain risk management is
dealing with complex supplier networks.
Especially in the automotive industry, concepts such as
outsourcing or offshoring result in more business relationships
conducted in international contexts. Therefore, additional
dependencies are created raising the complexity of the underlying
network. The complexity of a network typically leads to higher
vulnerability. International business relationships due to
globalization imply transportation, cultural or exchange rate risks
that require companies to deal with supply chain risk management.
Even small and medium-sized enterprises (SMEs) are confronted with
these developments and their respective consequences, and should
therefore be aware of supply chain risks and instruments to cope
with these risks.
Supply chain experts at UPS Capital, who specialize in risk
mitigation, divide supply chain vulnerabilities into two categories
of risk. There are day-to-day risks provoked by the normal
challenges of doing business:
As stated earlier, there are the disruptions when “all hell
breaks loose.” These usually cannot be predicted including
pandemics such as Covid-19, tsunamis and terrorism. However, it is
expected that companies prepare with risk management
strategies to mitigate and minimize the impact of such
risks.
QUESTIONS
(b) Describe the commitments you will
need from your company’s top management in order to support your
strategies (10 marks)
business environment and the need for lean processes, manufacturing
companies are forced to intensively deal with risk issues in their
supply chains. Accordingly, supply chain risk management has become
an important field of operations management. Catastrophes such as
9/11 in 2001 (USA), the tsunami in 2004 (Japan) and hurricane
Katrina in 2005 (USA) have all raised awareness about supply chain
risks. Furthermore, common occurrences such as quality problems
with suppliers highlight the relevance of supply chain risk
management, since one part with a quality defect can stop an entire
assembly line. In particular, the automotive industry is well known
for improving underlying processes by lean principles and for
complex supply networks according to their demanding business
environment.
In order to remain competitive, many companies in the automotive
industry foster the streamlining of their supply chains by
implementing concepts such as Just-in-Time and Just-in-Sequence.
The automotive industry supply base is characterised by many small
and medium-sized suppliers, which represent one of the main drivers
of the economy. The development of a lean supply chain leads to low
inventories but results in a high vulnerability due to the fact
that problems can hardly be compensated for. Another trend
bolstering the importance of supply chain risk management is
dealing with complex supplier networks.
Especially in the automotive industry, concepts such as
outsourcing or offshoring result in more business relationships
conducted in international contexts. Therefore, additional
dependencies are created raising the complexity of the underlying
network. The complexity of a network typically leads to higher
vulnerability. International business relationships due to
globalization imply transportation, cultural or exchange rate risks
that require companies to deal with supply chain risk management.
Even small and medium-sized enterprises (SMEs) are confronted with
these developments and their respective consequences, and should
therefore be aware of supply chain risks and instruments to cope
with these risks.
Supply chain experts at UPS Capital, who specialize in risk
mitigation, divide supply chain vulnerabilities into two categories
of risk. There are day-to-day risks provoked by the normal
challenges of doing business:
As stated earlier, there are the disruptions when “all hell
breaks loose.” These usually cannot be predicted including
pandemics such as Covid-19, tsunamis and terrorism. However, it is
expected that companies prepare with risk management
strategies to mitigate and minimize the impact of such
risks.
QUESTIONS
(b) Describe the commitments you will
need from your company’s top management in order to support your
strategies (10 marks)