Current supply chains in the world face unique challenges that vary across geographies, industries, and business strategies. Various unpredictable factors exist such as social and economic upheavals, geopolitical conflicts, natural disasters and many more. Supply chain management has grown in significance over time and there is a great need for managing risk across all suppliers. Moreover, an effective procurement team should be constituted to work in a profession that has undergone radical changes that are becoming more global and complex. The supply chain function has evolved from a tactical buying function to strategic supply management in current organizations. Therefore, the supply management function is complete with specific responsibilities that impact corporate performance directly. Current procurement professionals focus on understanding the total business as well as identifying the best suppliers to help the business to achieve its objectives. Oryx Company recognizes the pivotal role played by the supply chain management function and it has ensured that it gets the necessary support from the organization. The company deals in IT products and it serves a significant portion of the market in the industry it operates in.
Oryx Company responds to predictable variability in the supply chain in a manner that maximizes profitability. Therefore, the company utilizes techniques in two broad categories. The first category involves managing supply using inventory, capacity, and backlogs and subcontracting. The second category of techniques involves managing supply by using short term price discounts and trade promotions. Such techniques enable Oryx Company to significantly increase its profitability by matching supply and demand in a more coordinated way. The company carries enough manufacturing capacity necessary to meet demand in any given period. This is important because ensures that there are low inventory costs involved in production since no inventory is carried from period to period.
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The company also works with its retail partners in the supply chain to offer a price promotion during periods when demand is low. The promotion conducted by the company shifts some of the demand for the products into slow periods. Such an approach ensures that demand is spread evenly throughout the year hence reducing seasonal surges significantly. Moreover, such an established demand pattern ensures that the cost of supplying is significantly reduced. As such, Oryx Company divides the task of supply and demand management between different functions in the organization. Typically, marketing manages demand while operations manage supply in the organization. Making supply and demand decisions independently in an organization makes coordination in the supply chain increasingly difficult hence decreasing profits. Therefore, it is important to make demand and supply decisions in a coordinated fashion by ensuring that the supply chain partners work together across the organization in order to maximize profits.
The company has adopted two strategies to manage the supply chain. The first strategy involves use of an adaptive supply chain with integrated execution and rapid planning. The second strategy involves alignment of the supply chain with business goals. The organization has adapted its supply chain to the changing market opportunities and events based on better prediction of demand and risk. This has been done by putting in place dynamic planning and continuous alignment of operations in the organization. Continuous and dynamic supply chain adjustments are always done to rapidly respond to market changes in the industry and minimize shocks across the supply networks. The result of such initiatives includes enhanced collaboration across the value chain and better visibility in the supply chain. The company has also aligned its supply chain with the goals of the business. This has been done by connecting sales and operations planning with corporate planning within the organization. Integrated business planning ensures that the right balance between supply and demand is achieved efficiently.
Oryx Company manages demand through pricing initiatives and complementary services. Such approaches push up the demand during periods of low demand. Discounts and break even pricing are always used to spread demand throughout the year. The discounts and the competitive price offered stimulate demand for the products hence facilitating continuous supply of products to the market (Tomlin, 2009). Price incentives enable the company to gain a vast market share during seasons of relatively low demand. Providing complementary services also helps to generate demand for the company’s products. Proper segmentation ensures that the needs of the consumers from different stages of the family lifecycle are effectively met. This ensures that what consumers need beside what is already provided is anticipated. When the products accomplish more of the needs of the consumers, their demand grows significantly.
There are several ways in which outsourcing effect the supply chain. Sourcing decisions influence the quality of the products, production schedule, products’ lead time, inventory cost and shipping costs. The sourcing decisions affect the quality of products especially when low cost suppliers are chosen. Moreover, poor quality affects almost every aspect of the supply chain in an organization. Low cost suppliers always promise equal or even superior quality hence there is a great need for the procurement team to ensure that the quality of the final product is not compromised (Lee, 2008). Sourcing decisions affect the production schedule significantly. When the chosen suppliers fail to deliver on time, the delayed delivery results to unscheduled production downtime, which may be costly in both short and long run. Normally, low cost suppliers operate on thin margins which may make them unable to meet urgent needs of the organization in terms of production. Sourcing decisions may affect the products’ lead time in case of late deliveries hence causing disruptions in the production schedule. This may increase labor costs because staff should be paid for overtime in case of extra hours worked. The sourcing decisions also affect the inventory costs in the organizations especially when the supplier delivers too early (Lee, 2008). This makes inventory cost to significantly rise. Sourcing decisions also influence shipping costs especially when an unreliable supplier is chosen. The shipping costs will increased through expedited orders or rush shipments to customers.
Risk management in sourcing affects the supply chain in a variety of ways. The risk management in sourcing makes organizations to focus on the supply risk within the sourcing process and fail to consider the broader supply risks that are inherited from the nature of the items that are being sourced or the modes of transport used. Therefore, failure to mitigate product specific risks and transport risks may lead to serious losses which may negatively affect the supply chain. The process of identifying and analyzing the particular sourcing risks is not only costly but is time consuming. Therefore, sourcing risk management may result to delays in the supply chain.
Oryx Company should adopt a demand driven planning that is based on real-time demand insights. This ensures that there is a complete view as well as an effective response to risks such as political upheaval, suppliers going out of business and natural calamities that are likely to affect manufacturing. The company can then adjust pricing and promotion strategies that will help to shape demand. Furthermore, the company should develop an effective forecast for risk and price through a framework that can combine the two. This will ensure that the company sustains growth and profitability in a competitive industry.
In conclusion, appropriate supply chain risk management techniques assist organizations in ensuring that they achieve their objectives. Oryx Company is doing fairly well in terms of proper supply chain management. Therefore, it needs to improve its forecasting in order to identify supply chain risks and opportunities. Moreover, the company needs improve its supply and demand management decisions in order to coordinate the supply chain and maximize profitability.
References
Lee, T. Y. S. (2008). Supply chain risk management. International Journal of Information and Decision Sciences , 1 (1), 98-114.
Tomlin, B. (2009). Impact of supply learning when suppliers are unreliable. Manufacturing and Service Operations Management , 11(2), 192-209
