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The supply chain is very crucial as it dictates the flow of commodities from their place of origin as raw materials to their consumption as the final product. Supply chain management (SCM) refers to the process of monitoring and controlling all the activities involved to eliminate any hindrances that may disrupt the flow and cause delays. The market is sensitive and considering that the various stages are interconnected the breakage of one may produce serious repercussions. Companies have embarked on efforts to assess the multiple risks and the impact they may have on the operations to avoid it. Stress testing is employed to produces scenario and identifies mitigation plans.
However, there are two hiccups associated with such a strategy the first being the assumption that disruptions occur under normal circumstances without considering the restoration period of buffers. Secondly, the impacts of operational hindrances are universal to all firms operating in the industry and may elicit strategic responses such as emergency sourcing by the competition. Once supply chain risks are identified the next step is managing them to ensure continuity of operations. The interaction of demand and supply forces produces complications following the assumption that the initiatives are unrelated. The final procedure of the SCM is the development of the risk strategy that will be implemented, and it revolves around the trade-off between reward and operational-risk. The competence of the management is put to the test as well as the cost arising from the long-term vulnerability.
The success of the company is heavily dependent on the decision made by the management. The article mentions this as one of the six pitfalls associated with Supply Chain Management. In the business world, there have been reports that managers have plunged corporations into debts and the eventual shutdown. Moreover, the assumption that operational buffers are robust mitigation plans is a common occurrence in the corporate world. In most instances, entrepreneurs are unable to consider the disruption, resumption and restoration factors.
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