In today's highly competitive world, a company or organization's success solely depends on how well it can control its supply chain by surmounting the resultant bottlenecks of its decisions. With global sourcing becoming a reality in the marketing field, companies and organizations have been forced to reduce inventory levels and foster faster order fulfillment cycles. With an increased supply chain disruption frequencies on the rise organizations need to adopt a set of processes and enabling technologies, for example, through the sharing of relevant information across the links.
Supply chain management revolves around the introduction of either a new or already existing product into the market with regard to a given company. The organization in focus will be the university's supply chain and procurement. Before any transaction, the university procurement committee always must have in mind the link that exists in the supply or delivery of the goods in transit as well as the risks involved. Moreover, supply chain as a whole has been recognized as the management of key business processes across the network of organizations that deal with supplies since it makes the difference between a market leader and an also-ran, as highlighted by Jacorby, D (2009). The Global supply chain forum identified eight key processes: customer relationship management, customer service management, demand management, order fulfillment, manufacturing flow management, procurement, product development and commercialization and returns. With supply chain management program involves all the major sectors of purchasing, physical distribution, transportation, collection and manufacturing operations putting them into one unified program. In order for the supply chain management to be a success it needs to coordinate and integrate these activities into one main process that embraces and links with all the partners. With all this taken into consideration, the university is deemed to be headed in the right direction in avoiding risks that come with supplies and procurement.
Like any other company or organization the supply chain includes a wide range of functional areas which may include, inventory control, sourcing, procurement and supply management, inbound and outbound transportation and warehousing as well, which makes the whole ideas of a well-coordinated supply chain important as it must encompass also the external partners involved. This argument leads to increased market share (Benson M. 2007). Singh says:
"If you can start measuring customer satisfaction associated with what a supply chain can do for a customer, and also link customer satisfaction in terms of profit or revenue growth, then you can attach customer values to profit and loss and to the balance sheet." Therefore, supply chain is of great essence for the university's growth.
As much as the universities can have the trust of their suppliers, it cannot rule out the idea of planning for future risks or eventualities, and as a result, there is need to draft a good risk management plan that could be best suited for their organization. In this regard, the university supply chain management-contracting department has to maximize various market analysis tools, in which according to the Porter's five forces analysis, it takes into account the five forces that determine the competitive intensity and attractiveness of a market. According to Porter, the forces are close to a company that affects its ability to serve the customers and generate profit out of the services rendered. In order for these forces to be fully enacted, the university will require a re-assessment of the market place.
The forces guiding supply chains can be classified into; “horizontal" competition referring to a threat in the substitute product or a new product entrant, or some established rivals. Another threat is the "vertical" competition, which arises from bargaining power of the suppliers or distributors and the bargaining power of the customers. Each of this force has a significant impact on a market product or service as. Therefore, it implies that the model of pure competition should be in constant across the firm or organization to enable a firm deal with its rivals, be it new entrants or existing ones.
PESTEL and SWOT analysis tools were employed, taking into account the importance of SWOT analysis with its aid in understanding and reviewing any company's positions or standing before any minor or major decisions are made about the future direction of the company or the introduction of a new business idea. Combining SWOT analysis and brainstorming, especially in workshop sessions, can prove very useful for business planning, strategic planning, marketing, business and product development, as well as competitor evaluation. SWOT analysis, which is an acronym referring to Strengths, Weaknesses, Opportunities and Threats, is widely used as a 2*2-matrix method for gathering, presenting, structuring, and reviewing extensive planning data within a larger business planning process or project. It was among the analysis tools used by the university in coming up with decisions and carrying out its market analysis in a wave to counter its competitors.
The PESTEL analysis on the other hand measures a market's potential according to external factors that are in place, for example; economic, political, technological or even social. It is advisable to complete a PEST analysis prior to a SWOT analysis. According to a company's preference, it is worth noting that a SWOT analysis is used to measure a business unit, an idea, or a proposition. A PEST analysis on the other hand measures a market. Whereby a SWOT analysis takes the form a template presented as a grid comprising of four sections, with each section having the heading of each letter; Strengths, Weaknesses, Opportunities, and Threats allowing answers to be filled in the relevant sections. It allows the analysts to work out the findings much more easily with a practical way of assimilating both the internal and external information about the business unit delineating short and long-term priorities. It also helps to provide an easier way of building the management team responsible for meeting the company objectives bad profit growth.
Another tool worth using is brainstorming. This process requires a group of people thinking along the same line of business but each with his/her own ideas. As a process, it can help to come up with new ideas, motivate a team, solve problems, as well as develop a team. Brainstorming allows people to suggest ideas randomly but at one person acting as the facilitator who should organize the ideas for a latter reviewing when either the ideas have run out or time allowed has lapsed. The facilitator needs to condense and refine the ideas by allocating or making new headings or group the ideas as a list or even use a color marker pen to highlight the different ideas or solutions.
The Kraljic matrix model can best be used to describe or better analyze the purchasing portfolio of a firm helping the company maximize the supply security and reduce costs, by maximizing their purchase, power, hence, such activities as procurement becomes a strategic activity rather than a transactional one since purchasing must become a supply management according to Kraljic. It is the best tool to use in a university scenario, as its major operations deal with purchases and expenditures, for example, purchases of office stationery, student chairs, and food. Thus, each section is accountable for its own expenditures. Generally, the tool has four main steps to follow, which include purchase involving the classification of all the commodities, products and services as well as components being bought as per the risk of supply and the profit impact. Another step is the market analysis that investigates how much power you and your suppliers have. The third step is strategic positioning, where you are required to classify the identified materials or products while doing your market analysis of items that are entered in a purchasing portfolio matrix. Lastly, develop an action plan for each product and materials selected in your matrix. It will suite well any university since it can form part of the corporate strategy that should help them to evaluate the risk and maximize their profits by use of the right approach.
Cause and effect analysis concerns various aspects of tackling the issue at hand considering what might have caused the problem in the first place which is identifying the problem, followed by working out the major factors involved. It should be done using either the Mckinsey 7’s framework or the 4p’s of marketing. It will enable one to solve the problem completely once the root cause has been identified, rather than starting to solve part of the problem. Once the issues have been identified, the supply chain manager starts to brainstorm possible causes of the problem. Using the cause and effect analysis tool devised by Professor Kaoru Ishikawa, one can create diagrams with cause and effect analysis as a quality control tool to either discover the root cause of the problem, identify reasoned for failure of a particular process, or uncover bottlenecks in a given process. Once all the causes have been identified, the diagram is analyzed to investigate the most likely cause further either by using investigations or even conducting surveys as these will be used to determine the most probable strategy to be used in solving the problem.
After coming up with possible factors brainstorm the possible causes of the problem and add those into the diagram, thereafter, analyze the diagram classifying them in the order of their complexity. It will be much easier to come up with a better idea.
Whilst undertaking a risk management and supply chain within the university, it requires a keen consideration of the minor and major decisions to be undertaken in the organization to help solve the issue that might be arising. With risk management practices and techniques being employed in order to help increase supply chain efficiencies they illuminate a delicate balance between the financial considerations of the organizations as well as those of the customers. Supply issues often lead to a larger and visible conflict due to their upstream position in the supply chain order.
Risks that can be identified in market include; the external risks which mostly are considered out of organization’s control, as well as internal risks, which are within the control of the organization. Most of the external risks in any organization can be controlled by events existing in the upstream or downstream scenarios of the supply chain. The external risks consist of demand risks, influenced by a misunderstanding or an unpredictable customer demands, there also exists supply risks that are brought about due interruptions in the flow of products within the supply chain, business risks is another type which is stimulated by factors such as a supplier’s financial ability as well as his/her management stability, environmental risks from outside the supply chain that are related to economic, social, climate factors and governmental are also another set. Those that are considered to be internal risks more than often provide greater opportunities to the organization to control them internally because they are within an organization’s management. They include; business risks influenced by changes in the key personnel leading an organization together with the management, business processes or reporting structures, manufacturing risks that are brought about by disruptions of the internal processes or operations of the company, cultural risks caused by the nature in which a business’s cultural tendency to hide or delay negative information and mitigation and contingency risks is caused by not putting in place contingencies.
Supply chain risks comprise of three types including; operational risks, macroeconomic risks that’s regarded as the most volatile of the three which in most cases is out of the control of the corporate supply chain system and lastly, event risks. With a volatile commodity price control, political uncertainties and labour disruptions are the core factors in the supply chain that should be addressed quickly (Nigel Issa, explains;
“A perfect example is the volcanic ash cloud that highlighted risks in the structural design, due to companies placing an overreliance on freights in delivery of their components and products. It further compounded into operational risks which are caused by daily late deliveries, the impacts of these risks, he says, could manifest into regular substantial disruptions.
Making identification, minimization, elimination of the cost of operations, associated with the supply chain risk management is a priority.
Generally, supply chain risk management allows for a broader view of the entire supply chain throughout the process, all the way from raw materials until they get out as finished products. When implemented in the right way, the university will always realize its ability to anticipate considerable growth or it will be a position to identify unexpected exposures. Though according to, (Tim Cracknell, 2012), a partner at Jardine Lloyd Thomson Limited, highlights three dangers associated with actions that can be implemented especially during recession periods “, “He adds that a revised mode of operation can take a default position if streamlining is used during recessionary times. Positive effects of the short-term savings can extend if complacency sets in. Single points of failure in the supply chain can be achieved thereafter, and if these were to be interrupted, it might prove to be difficult to recover.” It can cause serious reputational challenges.
There are various strategies that can be implemented to deal with supply chain risks either by the introduction of a strategic supplier management tool, which is a coordinated plan of actions that’s focused towards the main suppliers of the company, this enables the customers and the supplier’s businesses to integrate, thereby delivering some greater value for money for the customer and better profit margins for the university. In initiating the process the university needs to identify its main suppliers and assess their value as customers as this will help in the assessment for possibilities of partnership agreements. There also exists the need for an effective monitoring process tasked with maintaining a successful relationship from both a financial and operational perspective. In addition, the supply chain risk management should be driven by some company philosophy that should be improved from time to time by using joined targets which will help to make the arrangements in alignment.
Since several risks are attributed to customer responses and actions, a constant review and possible re-alignment of the customer’s portfolio should form the main concern for an organization as part of averting the anticipated risks. It can be achieved if companies can focus more on areas of supply chain that are regarded critical and quickly eliminating those links that are considered weak, which form sources of volatility for the supply chain, and when elimination proves a task not possible, a reasonable amount of effort need to be put into place to reduce or rationalize what the customer are offering thereby eliminating risks of future volatility, or implementing a form of price strategy that will allow for this volatility to be possible. This particular strategy roots from a company mostly ruthlessly focusing on the delivery of product to core customers, in order to generate returns and enhance profit margins, rather than serving every customer at hand.
Product complexity also poses a bigger challenge in the system, but will help to simplify flow in the supply chain since fewer suppliers and parts will be available for management making it easier to control risks in the organization. The university can also work to introduce lean products which uses a value stream approach in the minimization or rather elimination of those activities which are smaller or have zero value to the customers. Though this rationalization can be tackled best through the reduction of stock that’s holding a lot of exposure, risks associated with supply supplies, unit pricing management burdens, and required supply base. On the other hand, some focus should be dedicated and geared towards ensuring that a true reflection costs in the accounting systems is achieved as it will ensure internal pricing policies and measures of product profitability are achieved accurately.
As a way of avoiding many risks within the university supply chain a proper market analysis is of essence as it ensures the proper selection of appropriate procurement consultancy service providers, improved management of the procurement, improved risk identification and risk management and ensures better monetary value outcomes and an improved supplier relationship with the university. In addition, market research will enable the university establish whether it needs to deal with a panel of providers or individual suppliers who meet the ongoing requirements in its needs as well as how to manage supply chains in a global marketplace and how to choose third-party providers , Blanchard D. (2010). It should be done using, a particular given matrix highlighting four main quadrants; the first quadrant that has low value/low risk supplier who have a secure supply and a low relative expenditure, a second quadrant with low value/high risk suppliers who are considered difficult to secure supply with a low relative expenditure, the third quadrant is high value/high risk which has a difficult to secure supply and high relative expenditure and the fourth quadrant that’s high value/low risk that generally easy to secure supply and high relative expenditure. Therefore, in supply planning a cursory high-level assessment of which quadrant to implement is done with the purpose of deciding which can be the most appropriate risk/value quadrant to use.
Researchers have further shown that simple contracts such as buy-back contracts, revenue sharing contracts, and options contracts achieve the desired coordination when the partner firms wish to maximize product availability, individual profits and the total supply chain profits, essentially allowing the suppliers to effectively balance the overstocking and under-stocking risks. Building trust between firms, use of technology and third party coordinators are other ways to enforce better, and truthful information exchange, and as supply chains become global, sharing of information in truth and quickly will become even more necessary to maintain the required level of competition and the right level of supply chain coordination. It should also be embraced by the university in dealing with its contractors and suppliers.