The supply chain is the transfer of goods and services from the producers to consumers. Regardless of the process often being straightforward, it is prone to multiple risks that can have massive impacts on the suppliers and the consumers. Risks can occur within suppliers, clients, locations, and logistics. Therefore, suppliers often initiate supply chain risk management strategies to identify, assess, and counter risks to facilitate business continuity. The supply chain risk management cautions consumers from adverse operational factors that can alter production and supply, causing customer dissatisfaction. Therefore, risk assessment in the supply chain is critical for the success of a business as it reduces losses and maximizes productivity. This paper will assess how a business can build its risk management foundation using supply chain risk management enablers. In addition, the paper will discuss critical problems and issues in reverse logistics and the role of IT inventions and innovations in improving the efficiency of logistics and supply chain management.
Building a Risk Management Foundation Using Supply Chain Risk Management Enablers
Supply chain management enablers refer to factors and principles that facilitate risk management in supply chains. The enablers can be preventive or responsive. Preventive enablers address cause-related risks and reduce the likelihood of a risk occurring. On the other hand, responsive enablers include factors that minimize the extent of adverse impacts. Ideally, responsive enablers are effect-oriented since they target counter losses caused by the risks. According to Irene and Hans-Dietrich (2015), some common enablers include relationships, information sharing, coordination, flexibility, and multiple sourcing.
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Relationships refer to the associations between stakeholders in the supply chain. For the enabler to be effective in supply chain risk management, the stakeholders must have specific traits that prove their impact in the process. Irene and Hans-Dietrich (2015) note that the suppliers must be certified to ensure that a company entrusts a legit supplier. In addition, all partners must comply with quality management guidelines. Most importantly, the partners must show mutual trust and be committed to risk-sharing (Irene and Hans-Dietrich, 2015). Positive relationships in the supply chain are critical in risk management as they determine partners’ willingness to disclose potential risks to other partners in the process. Also, relationships determine the likelihood of other partners helping the affected partner recovery operations within the shortest time. The partners involved in the supply chain should have shared visions and be committed to continuous improvement to achieve optimum efficiency.
In addition, information sharing is a critical SCRM enabler that allows stakeholder coordination. Information sharing is a strategy where any information on a speculated or ongoing risk is shared among all stakeholders to facilitate the joint approach and multidimensional problem-solving. Risk mitigation is more effective when stakeholders collaborate as it enhances the development of cross-functional teams that provide holistic solutions to the current or anticipated risks. Besides, the risks are resolved effectively since they are shared or transferred among partners (Irene and Hans-Dietrich, 2015). Effective risk mitigation encourages business continuity as the supply chain recovers optimal operations within a shorter time. Therefore, the losses incurred by a company are minimal since the customers are cautioned from the adverse effects affecting the supply chain.
Moreover, flexibility is an SCRM strategy that businesses can utilize to evade risks or recover after risky experiences. A business's ability to evade risks is proportional to the losses incurred and the likelihood of growth and development. Businesses that address risks before they impact the supply chain suffer fewer inconveniences and thus are more reliable to the customers. Conversely, businesses that experience multiple risks suffer more losses and are unlikely to maintain customer loyalty as the supply chain is unreliable. Ideally, business flexibility is the technique to adapt in case of risks to maintain the stability of the supply chain. According to Irene & Hans-Dietrich (2015), a business can maintain SCRM flexibility through responsive production processes. It is fundamental for a business to regain optimal production within the shortest time after risk exposure to mitigate stiff competition and business collapse. Also, businesses can utilize outsourcing options, diversification, and centralized operations (Irene & Hans-Dietrich, 2015). Therefore, flexibility enablers are vital in building a risk management foundation.
Also, multiple sourcing is a strategy in the supply chain that serves as a preventive and responsive approach to risks. According to Irene & Hans-Dietrich (2015), multiple sourcing provides alternative suppliers that stabilize the supply chain in case of a risk. In some cases, supply chain risks can be severe such that they limit the distribution of goods and services to customers. Consequently, the consumers feel the impacts of the decreased supply through high prices since the demand is high. The incidents contribute significantly to a decline in market share. Therefore, alternative suppliers are critical as they provide goods and services to consumers before a company addresses operational risks.
Significant Problems and Issues with Reverse Logistics
Reverse logistics refers to all measures intended to collect reusable materials. It includes all processes targeting to lower the costs of production by remanufacturing and refurbishing products. However, in the supply chain, reverse logistics refers to the process of taking back products from the consumers to the suppliers (Mbovu & Mburu, 2018). Customers return products to suppliers if they are unsatisfying or against expectations. For example, a customer can return a product if it is overpriced, faulty, or does not meet the expected specifications. Similarly, some customers return products if they differ from the ordered items. However, some companies include reverse logistics as a strategy to promote environmental sustainability. Businesses agree with their customers to return materials that can be recycled or reused to the suppliers to reduce pollution and emissions associated with climate change. Regardless of the reason for return, businesses aim to make reverse logistics as efficient as possible to minimize losses. Reverse logistics have several problems and issues that determine profitability and business feasibility.
Product Condition and Safety
One of the primary concerns in reverse logistics is product condition and safety. In most cases, products returned by customers are not in the same conditions as they were after the sale. Often, the products have several defects since most customers use the products first before returning once they develop defects. Therefore, most returned products require renovations and maintenance before being resold. The lower value of the returned products leads to losses as customers are refunded or supplied with alternative products. Some of the defects on the returned products occur during transit from the consumer to the supplier (Mahadevan, 2018). In most cases, customers are expected to transport the products from their residences to the suppliers on private means. Therefore, the safety requirements for transporting some products are violated, raising product safety concerns since damages can be costly to repair.
Customer Relations
The ease of returning products to a supplier is a major factor influencing customer decisions to buy from a particular supplier. Customers prefer to buy from a store that accepts returned products in most cases. The efficiency of reverse logistics is a defining factor in customer satisfaction and loyalty. Reverse logistics prove a business's transparency and willingness to take responsibility if a product is unsatisfactory. Returned products can be refurbished, repaired, or replaced to ensure customer satisfaction (Mbovu & Mburu, 2018). However, businesses often incur significant losses as the supplier incurs additional costs. According to Mbovu and Mburu (2018), medium businesses incur between 9 and 15 percent of the revenue on reverse logistics and product repair, replacement, or refurbishment returns. Therefore, reverse logistics should be an integral part of supply chain management since mismanagements can have devastating impacts on a business's financial performance.
Ecological Objectives
In most manufacturing industries, the supply chain is one of the highest environmental polluters. Product wrappings and residues are one of the largest sources of solid wastes. Also, chemicals and metals used in electrical devices can be hazardous to the environment (Grabara et al., 2014). Therefore, reverse logistics solves the environmental concern by enabling the return of reusable and recyclable materials to the suppliers. Organizations organize logistics to collect materials from the consumers a few days after product sale to avoid disposal in landfills. Besides reverse logistics facilitating product reuse and recycling, the process saves energy and costs that would be used to make new products. For example, recycling aluminum only consumes five percent of the total energy required to process an aluminum ore (Grabara et al., 2014). Therefore, reverse logistics forms an effective strategy to reduce carbon emissions in industries. In the long run, the effort promotes corporate social responsibility and appears to customers are businesses are considered environmentally friendly.
Human Resource Management in Return Logistics
Few studies have focused on the roles of human resources in return logistics. Addressing product safety issues, optimizing the impacts of return logistics on customer satisfaction, and maintaining environmental sustainability through recycling and reusing are all dependent on human source efficiency. According to García-Sánchez et al. (2018), the efficiency of return logistics is influenced significantly by workers’ technological skills. Technological skills are essential in handling continuous information from multiple participants involved in the supply chain. Workers are expected to assess the information critically to facilitate collaborations among the available agents. In addition, employee technological know-how determines the efficiency of the recycling, remanufacturing, and reusing processes. The processes determine the likelihood of a returned product being resold and impact a business's profitability.
Moreover, innovativeness in return logistics is a crucial determinant of efficiency. Innovativeness involves coming up with new ideas and inventions to optimize return logistics to ascertain that the process is profitable regardless of the supplier incurring more costs. García-Sánchez et al. (2018) explain that the supply chain's degree of innovativeness depends on top management support. Innovations require organizational flexibility as new ideas necessitate changes in structure and operations. Therefore, organizational innovations in return logistics must be supported by a change-oriented leadership and organizational structure. Leaders must allocate resources to facilitate the sustainability goals since the global market is increasingly sensitive to satisfaction and organizations’ corporate social responsibility.
Effects of IT Inventions and Innovations on Logistics and Supply Chain Management Efficiency
The demand for efficiency in logistics and SCM has been influenced by the growing market competition and changing customer needs. Customers have continuously shifted their preferences regarding the supply of goods and services. Today, convenience is fundamental in determining customer satisfaction. Luckily, IT inventions and innovations have addressed the concerns by facilitating sustainable development and real-time control of the processes. Bhandari (n.d) information technology has created a strategic opportunity that organizations can utilize to develop a competitive advantage in the supply chain. The commonly used technologies in the supply chain can be categorized as automated identification technologies, communication technologies, and information technologies (Bhandari, 2012). The technologies have improved efficiency to appeal to more consumers and influence growth.
Automated identification technologies include data entry programs and logic controllers. The supply chain's most appropriate automatic identification technologies include bar codes and radio frequency identification (Bhandari, 2012). bar codes have been revolutionary in supply chains as they have simplified inventory identification, minimized paperwork, and reduced human errors. Essentially, bar codes have improved logistics and supply chain management by increasing operational speeds, dependability, and precision (Bhandari, 2012). Bar codes have increased optimized procurement operations, processing, production operations, and distribution operations hence contributing to supply chain reliability. Similarly, radio frequency identification has improved logistics and supply chain management data capture. RFIDs have enabled businesses to improve inventory management, complex distribution systems, tracking, and toll collection (Bhandari, 2012). Fundamentally, identification technologies improve how businesses collect and handle data.
On the other hand, communication technologies improve the speed and accuracy of information exchange. Communication technologies such as electronic data interchange have transformed how people within the supply chain share information and documents. EDI's have enabled paperless file transfers, widening control over a wider region. Therefore, businesses can monitor their supply chains remotely since information can be shared electronically. Other communication technologies include geographical positioning systems that enable accurate tracking and monitoring (Bhandari, 2012). GPS has improved the supply chain and logistics since businesses can monitor driver behaviors and routes. Others include GIS, web-based tracking, automated guided vehicle system, and IDS (Bhandari, 2012). Communication technologies have improved the supply chain and logistics by facilitating information sharing regardless of geographical distance.
Lastly, information technologies include hardware and software used to collect, process, and analyze information. Some of the information technologies used in logistics and SCM include enterprise resource and distribution requirement development (Bhandari, 2012). Some of the benefits of supply chain management and logistics include faster response, low inventory costs, and lower logistical expenditures (Bhandari, 2012). Basheer et al. (2018) note that the economic impacts of information technologies are vital since cost control is a measure of economic stability. Bhandari (2012) contends that information technologies have optimized procurement, planning, scheduling, inventory management, and customer services.
In conclusion, a risk management foundation can be built through stakeholder relationships, information sharing, flexibility, and multiple sourcing. The enablers join stakeholders along the supply chain to facilitate collaboration, leading to better and faster decisions. Besides, the enablers improve an organization's protective and reactive mechanisms, thus allowing effective recovery after a risky situation. Reverse logistics are also critical aspects of supply chain management. The processes can include the return of unsatisfactory products and the collection of renewable materials from the consumers. One of the critical issues in reverse logistics is product conditions and safety since customers often return products after they are faulty. Moreover, customer relations are vital in reverse logistics as they determine customer satisfaction. Companies foster customer satisfaction by channeling reverse logistics into an environmental conservation strategy to reduce pollution and climate change. However, the efficiency of reverse logistics is dependent on employee technological knowledge. Employees need to be technologically innovative to improve operations and reliability. Information technology is the future of supply chain management and logistics as there is an increasing need for accuracy, dependability, and speed. Through automated identification technologies, communication technologies, and information technologies, IT has improved logistics by enabling remote monitoring and information sharing. Therefore, companies should prioritize employee training to gather technological skills for optimum supply chain management and logistics performance.
References
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