The heightened intensity of global competition has increased the necessity of manufacturing and distribution organizations to continuously improve production, product quality, cost, and delivery. Supply Chain professionals must be knowledgeable about the relevance of supply chain concepts—adapt supply chain to customer needs, customize logistics networks, align demand planning across the entire supply chain, and differentiate products close to customers.
The goal of The Global Supply Chain and Risk Management is to assist in meeting these challenges as to the education of many supply chain practitioners, the implementation of formal supply chain contingency and control systems, and the continued edification in recent global developments for all those working in the field.
The Global Supply Chain and Risk Management is written for two groups, those who are preparing for a career in supply chain and for those professionals seeking to improve their proficiency. The book will teach the best practices, common-sense, high-tech and analytical solutions for the entire global supply chain—customer service to inventory planning to transportation to warehousing. The four major parts address the financial implications.
acquisition costs, best practice, bilateral investment treaty, brand, carrying costs, cost curves, cycle time, demand patterns, economic order quantity, European recovery program, just-in-time, near shoring, Pareto’s law, volatility
Part I The Supply Chain and Financial Implications 1
Part II Global Disruption 17
Part III Inventory Management 37
Part IV Supply Chain and Continuous Improvement 51
Epilogue: Supply Chain Risk Management—The Future Scope 63
About the Author ……………………………………………………………………….83
This is a simple book. The book is based on the 20+ years spent gaining knowledge and experience of supply chain. It is uncomplicated as I have learned that most of the workings of an effective supply chain are not Albert Einstein’s Theory of Relativity, but rather logic and common sense with some intuition thrown in. It took more for me all these years to learn the complex answers and finally realize all that is required are the simple remedies.
My academic training is in accounting. Accounting taught me about the profit influence of supply chain management decisions. I have endured the experience of budgets burdened by effects of an ill-conceived supply chain and listened to customer service complaints caused by ill-advised supply chain decisions in which customer service levels cutback to generate cash.
This book is about a ground-breaking idea called Supply Chain Risk Management. It’s ground breaking due to the fact that the subject matter has largely been ignored. With drastic change in weather, unstable governments, and unstable currencies it is helping a multitude of businesses— tools, food, apparel, soft drinks, automotive, telephone parts, chemicals fuels, medicines, electronics, and computer companies—to enhance their supply chains.
It is no secret that globalization has increased the tentative nature of supply chains and the inherent risks involved. Along with those risks comes the opportunity and responsibility to manage it. The opportunities are: site facilities in safer locations or environments, tap into educated overseas personnel, allow for the set-up of production centers closer to the sources of vital raw materials and expanding the suppliers and vendor gaps in the supply chain.
The secret is to ensure that the supplier and the alternative supplier’s facilities are detached from your primary supplier’s facility. What would happen if a company procures semiconductor chips for use in their product and both the primary and secondary supplier were located in the exact same area—the same earthquake, power outages, or failures and political unrest—would put both suppliers out of operation at the same time.
A prime example of this was in 2005 with Hurricane Katrina. Prior to this, companies who were dependent upon the Mississippi River and the port of New Orleans for ocean shipments with multiple shippers thought they were safe. Katrina exposed the fallacy of that thought process—nothing moved through the port of New Orleans.
So while choosing alternative suppliers is important it must be accomplished prudently. Questions like these must be asked and hopefully answered in the affirmative. Do these suppliers receive their electrical power from a different source than the primary supplier? Do they rely on different transportation systems? Do they purchase raw materials from different places or sources?
The more questions like these asked and answered the more encouraging will be the business with a secondary supplier. When calamitous supply chain disruptions do occur a quick response will mitigate the consequences. In order to accomplish this a company must have these two programs in place: business continuity plan and an insurance program.
A business continuity plan covers a range of contingencies such as disaster recovery program, employee safety program, technology retrieval program, emergency communications capabilities, a relocation plan to sustain the company’s operations, and maintain a flow of raw materials. The other plan is Insurance program. Over the past two decades, starting with the Kobe, Japan earthquake on through Hurricane Katrina we continuously underestimate the effects disasters can have on a business’s supply chain. After the Kobe earthquake one of the companies was forced to move quickly for alternative production location and transportation.
This is not to suggest that putting these plans into action is easy. We have a tendency to downplay the magnitude of these disasters due to the fact that many people have not experienced these events. Few have the know-how to manage overseas supply chain. According to a study by Deloitte many companies who did not provide either or both a continuity program and insurance program lost more than 20 percent of market value immediately after the event. Furthermore, it took more than a year to recapture that portion of the market.
Consulting with experts in these fields will prepare them to prevent, control, and lessen the consequences. However, many companies fail in these tasks by taking a narrow view of the issue. They simply put into place an IT business continuity plan and fail to immunize the balance of the company. While all this may appear logical, it is not always in common practice.