Supply chain management Essay Example | Topics and Well Written Essays - 1500 words

Supply chain management - Essay Example Businesses make plans based on the time it takes to ship or airfreight goods from one place to the next. The time it takes from order to delivery is factored into the lead time and in arriving at a re-order level for inventory supplies. Some firms do not have enough warehouse space to store goods and so they depend on the goods to come when they are needed by the customer. Tang (2006) indicates that systems such as reducing the supply base, just-in-time (JIT) and vendor managed inventory, and outsourced manufacturing are some of the supply chain initiatives that have been used to increase revenue and reduce assets. However, Tang (2006) also indicates that although these are great initiatives in a stable environment they have created longer and more complex global supply chains which increase their vulnerability to disruptions. Although, the implementation of such systems are represents measures that firms employ in their attempt to become cost effective and therefore competitive. How ever, Lee (2004) indicates that there is generally a very large hidden cost which accompanies cost efficiency measures when disruptions occur. Therefore, cost efficiency needs to be balanced with agility, adaptability, and alignment. Lee (2004) also indicates that the objective of agility is to respond to changes in demand and supply that occur in the short term expeditiously; in the case of adaptability it is to make the necessary adjustment to the design of supply chains in order to accommodate changes in the market; and in terms of alignment, seek to improve the performance of supply chains by establishing incentives in order to motivate partners. Lee (2004) also suggests methods that can be used to achieve these objectives. When these disruptions take place there is loss of revenue as firms often run out of supplies. In the case where the supplies are finished goods it means that customers will be inconvenienced. This inconvenience is even greater when there is no other source o f supply. If the goods are raw materials it means that production may have to be halted until a new supplier is found or until the supplies of goods arrive. Therefore, customers will also have to wait longer before their demands can be satisfied. Firms also face increasing costs because of the fact that when supplies have to be sourced temporarily to fill demand it usually comes at a higher price than normal. While this is taking place permanent employees have to be paid even if they have nothing to work with. In most cases workers who are employed temporarily are laid off until things return to normal. Though the firm may be able to charge the customer based on the increased price, it is not normally possible especially when the price was already quoted. Additionally, increasing the price may result in the loss of customers. There may also be issues relating to reliability as customers do not expect firms to run out of stock without giving due notice. If the customer is dependent o n only one supplier then this will definitely have a negative impact resulting in a total loss of business from specific customers or a partial loss of business. This partial loss or reduction in demand from specific customers may result from their (the customers) application of various strategies to prevent any reoccurrence of this type of scenario. Therefore, instead of using one supplier the