Supply Chain Risk Management: Strategies for Value Creation

Financial risk

Financial risk: Financial risk in the value chain is more in adherent as the value chain is focused on adding on value to the functions of the company (Mattsson, and Simkó, 2017). As in the case of Walmart the company carries a broad financial risk while they complied to enhance their inventory and warehousing facility in all parts of the world.

Late scheduling: The value chain is widely concerned with addition of value to the company; a plan is to be executed for addition of value to the company functions (Holweg and Helo, 2014). In such a case the a strict schedule has to be followed in execution and behind the schedule can lead to a major disruption for Walmart.

Recovery plan: In order to avoid such circumstances a company must form strong system which implements the plan for value addition, along with that an observation team must be established upon that team to oversee the progress and when needed guide the implementing team towards the right path (Gereffi and Fernandez-Stark, 2011). In case of Tesco they decided to add value to their supply chain by making a plan and overseeing its execution which helped in finding out the problems in the task and recover from the diversions.

Figure 1 : RECOVERY PLAN

Risk Profile: The potential or ability of an organisation or individual to incur risk is called as risk profile (Micheli, Mogre and Perego, 2014). It can also be referred to as the risk to be faced by an organisation in the current market situation. A risk profile plays a significant role in determining the investment plan for the investor as well as gives the organisation an asset allocation idea for further investment in the business (Ghadge At el. 2013). In case of Samsung, the company made a precise risk profile before expanding  its supply chain in the new Android OS platform which helped the company gain confidence and budget their marketing scheme and supply chain accordingly leading to its success in the smart phone market.

Figure 2 : Risk Matrix

Risk mapping: In an investment decision one of the most integral part of risk evaluation is done by risk mapping (Melnyk At el. 2009). In the process of risk mapping the investor makes a systematic map of the risks that maybe faced by the organisation in the coming future. This technique helps the organisation to find out the potential risks in the future which helps it to operate in a way that they can be avoided (Lin and Zhou, 2011). In case of Ebay the company made a precise risk map which helped it take positive decision regarding the supply chain change which helped the company move its business to foreign markets.

Late scheduling

Figure 3: Risk Mapping

Resilience in supply chain: Supply chain resilience can be defined as the resistance the supply chain has towards the disruptions faced by in it in the prevailing market situation and also the tendency to recover from the following disruptions (Ambulkar, Blackhurst and Grawe, 2015). This can  also be called as the ability of the supply chain to maintain its operations standards even in case of issues faced by the system. Like in the supply chain of Alibaba, while going global the supply chain had to expand and the company faced a difficulty but with the resistance of the supply chain it was able to gain global success.

Figure 4: Resistace

Flexibility: Flexibility of the supply chain is referred to as the swiftness of supply chain in reaction to the change in demand of the supply (Liao, Hong and Rao, 2010). In the case of Subway the supply chain was not able to read the change in demand of customer regarding the toppings which lead to its decline in the American market. The flexibility of supply chain highly influences the business functions as it abeles the business in recognising demand and quick adhere to it safeguarding the competitive advantage (Gosling, Purvis and Naim, 2010).

Figure 5: Flexibility

Total Cost of ownership: Total cost of ownership refers to the concept of bearing the cost of all the streams of supply while making a delivery to the customer (Hartman At el. 2017). The total cost of ownership is incurred by the company delivering the item to the customer; it can also be called as the cost bourn by the company to supply the product to its consumer. In the field of E commerce companies like Amazon and Ebay provide their customers with full cost ownership delivery which increases the cost for the company but helps in gaining trust of its customer. They also bourn the risk of damage incurred in the delivery process (Afonso, 2018).

Figure 6: Total Cost of Ownership

Customer value: Customer value is referred to as the value of customer in the supply chain. In Customer oriented supply chain customer has the highest value to the process as their satisfaction is counted as the most important field for the company (Chun-ping and Xiu-qing, 2010). In Amazon inc. Customer is given the most value with a whole setup to deal as customer relation and they reply to problems or issues faced by customer providing assistance in a prima facia method. The company gives customers values which lead in sharing of value among the company and customers (Christopher, 2016).

Figure 7: Customer Value

References

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Ambulkar, S., Blackhurst, J. and Grawe, S., (2015). Firm's resilience to supply chain disruptions: Scale development and empirical examination. Journal of operations management, 33, pp.111-122.

Christopher, M., (2016). Logistics & supply chain management. Pearson UK.

Chun-ping, Z. and Xiu-qing, L., (2010). Research on customer value oriented supply chain management strategies. In 2010 International Conference on Logistics Systems and Intelligent Management (ICLSIM) (Vol. 1, pp. 173-177). IEEE.

Gereffi, G. and Fernandez-Stark, K., (2011). Global value chain analysis: a primer. Center on Globalization, Governance & Competitiveness (CGGC), Duke University, North Carolina, USA.

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Micheli, G.J., Mogre, R. and Perego, A., (2014). How to choose mitigation measures for supply chain risks. International Journal of Production Research, 52(1), pp.117-129.

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