As we have established, Supply chain management is largely about working together. When planning for and managing the sourcing, procurement, conversion and logistics, related to a product, companies need to create the right relationships with the right companies. This will help to improve the movement and storage of materials and inventory while at the same time preparing for disruptions. Therefore getting the right balance is not easy. If a supply chain is stretched too thin, this affects the vulnerability of the supply chain and can create disruption to operations.
Globalisation and new market realities that allow just-in-time manufacturing, outsourcing and lean manufacturing have further complicated supply chains and their management. While it brings great opportunity to companies, it also brings considerable risk. If done correctly, a flexible and optimised supply chain can not only free up resources within the organisation, but it can also decrease the cost of goods and increase the number of markets that can be occupied. However, mismanage the supply chain, and disruption can decrease revenue and market share, and can increase costs considerably.
With this movement towards global sourcing, companies are now recognising the increased level of supply chain risk. While global sourcing offers a range of benefits related to lower prices and increased access to markets, together with a marked move towards customer service there is, as a result, an increased potential for the disruption of product and information flow within supply chains. As a result, managers must accomplish the control of supply chain risks in the same vein as they manage other risks that impact on business performance.
The challenge to managing supply chain risks is that supply chain disruptions can occur for a wide variety of reasons, such as fires, delays in transportation, stoppages, or natural disasters.
Companies running lean operations no longer have inventory or excess capacity to make up for production losses, so that material flow problems rapidly increase to wide-scale network disruptions. From the customer point of view, the customer does not care which disruption occurred; they still expect the final product or service delivered at the right time and price. Consequently, it falls on operations to handle these disruptions in real-time. Therefore supply chains must be resilient.