Supply chain is a network of people, departments, organizations, activities and skills working together to facilitate the production and the sale of a good or a service. The main progression on the supply chain is from the delivery of raw materials from the suppliers to the ultimate delivery of finished goods to the clients. Like many other departments in an organization, the supply chain is also exposed to various risks that disrupt the maximisation of an organizations’ output. Some risks include, cybercrime, economic fluctuations, inadequate supply of laborers, laborers’ strikes, natural disasters and political instability (Lopez, 2017). These organizations therefore have to be alert and device strategies that may help the organization to predict potential risks and devise ways to adapt to the risks efficiently. Different organizations have their distinct ways of managing internal and external supply chain risks depending on the adversity and the frequency of occurrence. This essay particularly examines the supply chain of cisco systems, pointing out the various risks and identifying the ways the supply chain management adopted to mitigate the risks.
Cisco company is one of the leading networking company in the world that started in 1984. Its unique growth model that involved research and design, partnerships and joint development projects gave it a worldwide leadership status. Cisco’s supply chain has undergone tremendous transformation since its inception. Currently the company is globalized and does a lot of outsourcing. Cisco also contracts other manufacturing companies for most of its products to guarantee quality and low cost. However, its contracts are always short-term with the option of renewable arrangements. In 2006, Cisco aligned itself to a just-in-time production system model known as Cisco lean where the company organized itself only to order a product after the customer has placed an order. This model significantly caused the reduction of suppliers. Despite its success, Cisco company’s supply chain also faces both internal and external risks in the supply chain including political instability, economic variation, regulatory restrictions, changing customer demands, natural calamity and technological dynamics.
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The constant exposure to a variety of risks sharpened the organization’s risk management initiatives. They officially employed the business continuity planning model in the year 2004 to enforce risk mitigation practices. However, at the beginning the program was proactive because they only responded after a risky situation. Their assessment was mainly on the extent of the risk and the financial impacts. This approach proved ineffective with time and they had to change to an advanced approach of risk extenuation after the Hurricane Katrina in 2005. The company also selects alternatives to mitigate product related risks. Currently, the company’s supply chain management is on another level because it not only involves risk awareness but also emphasizes in evolution by taking part in supply chain incident management. This approach has therefore shifted the approach to business growth through 24-hour word-wide surveillance (Saenz & Revilla, 2014).
Cisco’s supply chain risk management strategies have impacted the company in several ways both negatively and positively. To begin with, the supply chain risk management initiative implemented after the Tsunami in Japan resulted in positive outcomes because it attained a record time in the entire Japan network. The management was able to identify the impact of the event in all their suppliers within 12 hours. The company also gathered enough details about the sequence of the incident. The initiative also enabled the company to have a clear view of the sub-tier risk which was essential in deploying the right measures to mitigate them. Customer service teams were well positioned to connect with customers. The result was that around 118 customers managed to make inquiries which were effectively handled within 24 hours. Above all, the incident protected the revenue of the company and avoided the cost of losses which is the most honorable measure of the success of the risk management strategy.
The supply chain can effectively align with the supply chain management by putting in place a reporting, visualization and an analytical function together. This will ensure that the supply risk management system gets data from a single source (O'Connor, Steele, & Scott, 2012). According to Saenz & Revilla (2014), the supply chain resiliency is the ability of the process of production to recover from a major disruption. Some of the resiliency metrics used by Cisco to assess the supply chain resiliency include component resiliency, supplies resiliency, manufacturing resiliency and test resiliency. Each metric has a score that measures which assesses the time-to–recover for all capabilities. Component has 30 percent, supplier has 20 percent, manufacturing has 30 percent and test equipment 20 percent. These scores were reported twice a year to the senior management. The close supervision of these metrics enabled the supplying companies to see resiliency as a characteristic of a product as well as recognition of the resiliency gaps and finding effective ways to address them. The resiliency assessment approach for managing supply chain risks can be generalized for any supply chain because it is a proactive way of identifying areas in the supply chain that recover from disruption fast ( Santanu Mandal Affiliation, 2016).
Putting in place a supply chain risk management department is important in any organization despite the costs involved. Although the benefits cannot be necessarily measured in monetary terms, the truth it is advantageous to an organization. The department takes care of the supply chain which is usually a significant area of used and untapped financial savings in any organizations. Proper risk management can save up to 80 percent of a company’s controllable cost. Therefore, the existence of a supply chain risk management in any firm is justified and should not be overlooked (Curkovic, Scannell, & Wagner, 2016). The Cisco’s globalization strategy and outsourcing in the supply chain has created a lot of complexities for the organizations. The company can learn to first identify the strategic areas of the supply chain, to integrate risk management practices into the value chain, to be alert and watch for risky events and learning to recover quickly from risks. Therefore, Cisco must continuously learn by developing a growth mindset, developing a risk management culture and cooperation with experts. These ways will be vital in making the supply chain risk management develop a better sense to respond to its roles, increase the level of focus on customer-supplier collaboration, identifying weak points and focusing on innovation.
Conclusion
From this study, it is evident that the smartest risk management approach is not taking time to think about a particular risk but acting in time to prevent the occurrence of the risk. Risks are part of any operational business due to the environment of operation. Cisco company has been experiencing external risks that have been a roadblock to their performance. Although it faced challenges in the beginning, It’s strategy of risk mitigation got a major transformation in 2012. It became more customized, flexible and standardized. which was the main opportunity or the company to scale and explore more business models. This approach showed that the company is focused on the customer service and reducing the cost of operation. The company’s risk management approaches involve supply chain resilience, product resiliency, business continuity planning and crisis management.
References
Affiliation, S. M. (2016). Value nets: breaking the supply chain to unlock hidden profits. international Joural of Information Systems , 36-57.
Curkovic, S., Scannell, T., & Wagner, B. (2016). Managing supply chain risk: intergrating with risk management. Boca Raton: CRC Press.
Lopez, E. (2017, August 7). the 5 types of supply chain risk. Supply Chain Dive .
O'Connor, J., Steele, J. B., & Scott, K. (2012). Supply Chain Risk Management at Cisco.
Saenz, M. J., & Revilla, E. (2014, june 17). Creating more resilient supply Chains. Mitsloan Magazine .
