Article Critique :Emerging markets to enhance supply chain to diversify risks BWFF 5063 FINANCIAL RISK MANAGEMENT PROF. RASID
EMERGING MARKETS TO ENHANCE SUPPLY CHAIN TO DIVERSIFY RISKSKUALA LUMPUR, Nov 22 (Bernama ) -- Emerging markets needto look at enhancing their supply chain network to diversifybusiness risks as part of efforts to sustain economic growth intheir countries, says an industry expert. GeoffreyRiddell, Chairman Asia Pacific and Middle East, Zurich FinancialServices, said supply chain was an important and criticalcomponent in business. "Suppliers are exposed to natural catastrophe and politicalrisk. Therefore, emerging markets should focus on diversifyingrisk," said Riddell, who is one of the panelists at the GlobalBusiness Leaders Forum 2010 here today. He was talking onpromoting new economic linkages between developed anddeveloping world. The forum was organised by the Commonwealth BusinessCouncil in Collaboration with the Asian Strategy and LeadershipInstitute (ASLI) and the Malaysia Investment DevelopmentAuthority (MIDA).
Risks in supply chain management issue in supply- Risk and uncertainty has always been an importantchain management.- The most issues being discussed regards to supply is the risks inrelation : * supply lead time reliability, * price uncertainty, * demand volatility which lead to the need for safety stock, * inventory pooling strategy, * order split to suppliers, and various contract and hedging strategies * delays of materials from suppliers, * large forecast errors, * system breakdowns, capacity issues, * inventory problems, and disruptions.
Risks in supply chain• management Risk management processes refer to the stages a supply chain or a company could follow to reduce the supply chain risks.• It normally involves such activities as identifying supply chain risks events, assessing the probabilities and the severity of impacts, prioritizing the risk event to be dealt with and developing actions for mitigating risks or planning for backups actions.• The risk management involves the course of actions to consider in order to reduce the risks. This can be done by reducing the probability of occurrence , the severity of impacts or both.• Generally speaking, the supply chain risks include: need risk, supply risk, management risk, information technology risk and system risk
Risks in supply chain management option as- risk management involves suchtransferring it to or sharing it with otherparties, accepting it as it is or avoiding therisks which is a common practices bysupply chain management nowadays.- Outsourcing/subcontracting practicesallows supply chain risks to betransferred to the parties providing theproduct or services.- Risk sharing maybe developed in termsof a joint collaboration for risksinvolving two or more parties in a supply
Risks in supply chain managementParties involved in supply chain
Risks in supply chain• management Need risk: it is includes the rate decline of satisfying important need because of inventory shortage, the unforeseen variation of seasonal need, the high rate of new products coming up, the low rate of customer loyalty, dependence to some crucial customers.• Supply risk referring to the accounting of some suppliers is incomplete, the quality problem of suppliers, inflexibility supplier, dependence to few key suppliers.• Management risk which explain that productivity doesn’t live up to the expectation, it is about the shortage or surplus of product ability, the break of producing because of inventory shortage, the quality standard of suppliers low to the acceptable level of market.• Environment risk also included natural disaster, industry policy risk, political conflicts leading to the break of supply chain, exchange rate risk and so on.• Information technology risk also give an impact to supply chain as the incomplete storage of historical data, the loss of important data in the process of transmitting, the failure of information infrastructure
Risks in supply chain management- Nestle defines supply chain management asthe two-way management of the flow ofgoods, services and information fromsuppliers tomanufacturers, wholesalers, distributors, stores to the end user.- Supply chain management is especiallycritical for the food industry because of theease of spoilage.- Even though Nestle feels responsible forevery link in the supply chain, it outsourcesmany of those activities as no company canclaim to do everything from A to Z in the
Risks in supply chain management• Current situation with Internet access, companies manage their supply chains through an efficient interface with an e-Marketplace. It is a tremendous opportunity for Nestle to work effectively to create new levels of performance.• Companies have to optimize internal processes to remain competitive in a
Cost savings arise from several sources. As Figure 1 displays, the cost savings possible witha SaaS WMS for a small- or medium-sized warehouse (or for one-fourth of a largewarehouse) with a $2-10 million inventory level is $330,000 savings the first year and$230,000 in subsequent years.
Risks in supply chain managementSony, Post-salesAn service Financial LogisticsOutsourcing functionsCompanyOutsourcers Parts Distributioncould manufacture Coreprovide Competency Best in the world at Marketing electromechanical Accounting miniaturization design Employee benefit Maintenance management Real estate management
Risks in supply chain- management Unipart Case study : relationship between Logistics and Jaguar which is been declared as example of Performance-Based Outsourcing.- In the course of their relationship, Jaguar defined a series of strategic goals, one of which was to earn a number one (1) ranking from J.D. Power and Associates.- One tactic for reaching that goal was to improve customer service in Jaguar’s aftermarket parts business. This resulting that logistics have to plays a key role in making sure that the right part is in the
Risks in supply chain management Outsourcing has become a major strategy as firms move toward specialization Increasing expertise Reduced cost of reliable transportation Rapid deployment of telecommunications and computers – the Internet
Risks in supply chain managementAdvantageous of outsourcing Cost savings Gaining outside experience Improving operations and service Focusing on core competencies Gaining outside technologies Other advantages
Risks in supply chain managementDisadvantagous of outsourcing Increased transportation costs Loss of control Creating future competition Negative impact on employees Longer-term impact
Risks in supply chainRisk rating management Definition or explanationCritical Once the risk occurs, the object of the whole module will be failSerious Once the risk occurs, the index level of object module will be reduced seriouslyModerate Once the risk occurs, the corresponding module object will be effected moderately, but the object can be realized partlyMinor Once the risk occurs, the corresponding module object will be effected slightly, but can be reachedNegligible Once the risk occurs, the corresponding module object will not be effected and can be reach completely
Risks in supply chain managementConclusion:It is important for the company toenhance the supply chain networkto sustain economic growthOne of the best ways to diversifybusiness risks as suppliers areexposed to natural catastropheand political risk is by outsourcingThe advantages of outsourcing as itwould provide cheaper and betterquality labour and also there’s