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Benefits and Challenges of Implementing Supply Chain

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Introduction

For any business to be successful in the contemporary business arena, it must maintain an effective supply chain. Supply chain refers to the people, activities, resources, and systems within an organization that is involved in transferring a service or a product from the suppliers to the consumers. The supply chain also applies to actions taken in the process of turning natural resources and raw materials into finished goods. This means that a company must take into account the effect on stakeholders, including customers, foreign tourists, and employees of the supply chain activities. It is crucial to remember that goods can re-enter the process in complex supply chains if the residual values are to be recycled. To create a strong positive relationship with their customers, firms need to adopt social responsibilities that involve maintaining a clean environment, producing safe products, and controlling noise, among others. As Greeff and Ghoshal (2004) suggested, organizations are responsible for auditing the goods and the needs of the suppliers. If the supply activities are not explicitly managed, managers should ensure that visibility needs are increased within the supply chain. Another thing to note is that manufacturers should work with local stakeholders as a way to make social responsibility effective in supply chains (Butell, 2008). This paper aims at evaluating the benefits and challenges of the benefits and challenges of adopting more environmentally and socially responsible practices internally and to track complex supply chains to ensure that all methods are implemented ecologically and socially responsible.

Enterprises’ Sustainability

Given the intense rivalry on the local and global markets, businesses need to have premium products that meet consumers ‘ needs. According to Diane (2011), one of the strategies of applying principles of business sustainability is by creating a sustainable supply chain. For example, Starbucks Corporation has implemented numerous approaches involving social responsibility in its attempt to build a stable link with its stakeholders. Since the intense competition on local and global markets, businesses need premium goods that meet the needs of customers. According to Diane (2011), one of the approaches to incorporate entrepreneurial sustainability concepts is to build a sustainable supply chain. Starbucks Company, for example, has adopted various solutions that include social responsibility in its effort to create a consistent bond with its stakeholders. High-quality product for the company (Berkshire Hathaway Inc., 2003). Two notable implications of securing supply chain sustainability are first to mitigate the risks involved in depleting products’ inventory and secondly to promote environmentally sustainable practices. According to the Starbucks management report of 2008, the company has created a robust positive relationship with the farmers, exporters, and suppliers (Neef, 2004). Consequently, the company was able to achieve more excellent stability, consistent supply of its brands, and more opportunities to increase the amount of coffee bought from the farmers. As the demand for coffee improves globally, Starbucks has continued to use its relationship with members of the supply chain for its future expansion.

Benefits and Challenges of Implementing Supply Chain

Philanthropic Activities and Positive Image for the Companies 

While local companies using local raw materials may not be negatively affected by the actions of supply chain partners, Sheffi (2001), argues that organizations sourcing from developed and developing countries must be aware of the fragility of their supply chain members as well as the social context that surrounds these members. It is vital to note that while they are motivated by economic considerations, supply chain sustainability activities also adopt the characteristics of philanthropic activities (Mentzer, 2001). For example, Starbucks assist the coffee farmers in various countries with health facilities and education for their children. For its part, Costco Company embarks on preserving cultural artifacts in Mexico. Another company that has adopted the philanthropic activities as a way of addressing social gaps is L’Occitane. The company engages in providing support on literacy training, provision of health care facilities, and providing childcare as well as health facilities for the women who transport shea butter to the production facilities. As a result of these activities by the companies mentioned above, they have not only benefited from keen awareness in the global market but also have created a positive image in the eyes of the public.

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Risk Management 

One of the essential elements of enterprise sustainability is risk management. Enterprise risks refer to the hazards that are related to business reputation or brand reputation due to ecological, social, and economic implications. It is worth noting that any damage by the members of the supply chain which can emerge for example in the form of fraud like in the case of Enron and production of defective brands like Mattel toys which contained lead among others may create an inferior image for the entire supply chain (Sheffi, 20010. While it is possible to detect and address economic risks, social risks are hardly predicted based on the fact that generational transitions have resulted in the development of social drivers which are different across the cultures. For instance, in around 2006, customers improved their preference for SUV models, an aspect that made G.M. profits to increase to a very high level drastically. However, when the price of the gas increased by $ 4 per gallon, the demand for the model reduced an aspect that negatively affected the activities of G.M. This implies that organizations must ensure the protection of its resources and events across the supply chain (Sharpira, 1986). When firms make an effort to address their risks by transferring to the customers and continue to do so in any decision-making process, they negatively affect their sustainability since this process reduces the customers’ economic stability. Companies that aim at remaining competitive must avoid such transferring of risk behavior since even if they seem like good risk management initiatives; they involve passing the risk to parties who are vital in the long term sustainability of the firms.

Improved Production Process

Once a company adopts environmental sustainability as one of the strategic initiatives and a high level of commitment is portrayed by all the members of the supply chain including top and middle-level managers, the organization can go on with the implementation of policies that result in collaboration with the suppliers. As the organization continues with environmental sustainability, it becomes the objective of the firm and is applied in all the departments, including the production facilities. By establishing environmentally friendly products, services, and processes, in addition to collaboration with suppliers, firms can avoid sub-optimization in the manufacturing stage.

Challenges of Implementing Practices Internally

Although the importance of the supply chain in the distribution of products is the creation of a positive image of an organization, several challenges face the practices internally. For example, According to Sharpira (1986), managers’ attitude towards risks is poor. Most firms note the significance of risk assessment programs and goes ahead to use various methods, including simple qualitative plans and formal quantitative models to mitigate supply chain risks. However, Sharpira (1986) argues that most organizations invest limited resources and time to reduce the risks in the supply chain. As a result, the production processes are negatively affected thus affecting the distribution process, loss of resources, and incurring high costs.

Another challenge that faces an organization is that there exist few data points, and there is a lack of reasonable estimates of the likelihood of the occurrence of specific disruptions. As a result, firms face problems in computing cost/benefit as well as return on investment analysis. This makes it challenging to justify risk reduction initiatives that the managers within the supply chain. For most firms, especially with poor communication and information systems to capture data, there is a challenge in implementing environmental programs as the result of poor collaboration with customers (Greeff and Ghoshal, 2004). Members of the supply chain or such firms must realize that green information systems act as the backbone for environmental management efforts that enjoy strong support from all the members of the supply chain. Lack of ecological collaboration with suppliers due to the lack of green information systems for emerging companies is a notable challenge that further deteriorates the activities of the supply chain. It includes the need for organizations to allocate more funds towards modern information systems which are green and to adopt stronger collaboration with the suppliers.

Monitoring Complex Supply Chains

A complex supply chain emerges as a result of globalization. Given the fact that firms have now turned to go global in their efforts to face off their rival in the international markets, more stakeholders are involved in the production, distribution, production of raw materials, designing and decision making processes. The supply chain of big companies such as Coca-Cola Ford Explorer, Google, and Enron can be complicated due to various aspects. These include numerousness, opacity, variety, dynamic effects, and interconnections. This implies that for such firms to maintain an adequate supply chain, they must keep close monitoring of the supply chain activities and partners. The section below discusses the benefits and challenges of control complex supply chains.

Benefits

As more companies emulate internal environmental strategies within the supply chain, close monitoring will result in a reduction of costs. It is worth remembering, if the number of suppliers is high and close monitoring is not done, cases of fraud or loss of resources is high. This implies that the companies may experience reduced profits and therefore, the need to hire experienced supply chain managers. Another benefit of having a close look at the supply chain is that it results in increased efficiency. As a result of the optimal coordination among the members of the supply chain, Kenneth (2012) argues that the chain processes can provide the impact that is effective and will have positive results for the entire organization. Customers, especially the one using brands from large companies or the one purchasing in bulk, are interested in transparency while dealing with the firms. This means that supply managers should apply close monitoring of what the supply partners are doing in since it is the only way of increasing customer satisfaction since it will create a high level of transparency as well as avoidance of defects. If such monitoring was done by the Google team, it could experience the political damage that entailed revealing of dissident information that touched on the Governing Chinese. Similarly, Enron’s top executives were able to identify the causes of fraud that occurred in its operations by close monitoring. The reason for surveillance is that it contributes to competitive advantage because there are a systematic recording and control of the complex relationships that exist among supply chain participants. In this way, businesses would be better able to track the quality of the raw materials and goods coming from each point of the supply chain. When an issue is reported, it can be addressed quickly by professional managers.

Challenges

As companies enter the global market, they face competition from the already established firms. This implies that they will need to develop more outlets where their brands can be sold to consumers. Additionally, firms will have to attract more suppliers and employees. As a result, such firms face the problem of numerousness which calls for extensive monitoring requiring sophisticated and connected tolls to predict disruptions and monitor risks. As a result, companies that are unable to invest in the new technologies face a problem of losing quite several resources, thus being outdone in the global market. Another critical challenge is the creation of interconnections. While the entire organization aims at increasing the overall profit, the suppliers based on their number may start competing among themselves. As a result, companies with complex supply chains may face difficulties in maintaining a close look at the way all the distributors are suppliers are performing their activities (Rao, 2008). A related aspect of interconnections touches on job lead time and the utilization rates, which have a direct impact on the revenue generated by the company. Given the increased number of stations locally and globally, managers may find strange interactions between them which may not even be indicated by the workflow path.

Increasing Complexity

While it is vital to maintain close monitoring of the supply chain in big companies, the case of increased complexity has still emerged. Global firms have started outsourcing most of their business areas to suppliers worldwide. As a result, the simple assembly line that companies have been using changes into a complex manufacturing process. This means that manufacturers are responsible for managing quite a several product lines which are made up of parts emerging from different suppliers. In some cases, other suppliers may be hired to sub-assembly these parts. The expansive geographic location that companies enter implies that they must comply with the local government regulations. For firms in aerospace products and life science, it may be a challenging issue to deal with such rules in addition to monitoring their suppliers. 

Lack of Data

Butell (2008) depicts that when organizations go global, it does not matter whether the information available is right or wrong, but operational decisions must be made. However, due to a lack of collaboration systems and improper communication, an increase in risks is now directly related to a lack of data. Given their global level, companies are exposed to risks such as economic instability, floods, and calamities such as earthquakes. For example, in the 2011 Thailand floods, companies resulted in rerouting of work to other suppliers who did not experience the waves. This resulted in a loss of real-time data and information on how many companies were affected.

More Need for Higher Quality, Cheaper and Faster Activities

Whenever new markets emerge, rivals come out. By competing in the international market, you are only limited by the sky. This implies that any firm can compete making the demand to be high, especially in the scenario where an order is available. With the situation occurring regularly, a big challenge among the manufacturers has emerged. For the manufacturers, they are at a dilemma whether the lowest cost bidder can deliver their products and sub-assemblies parts on time, and according to the detailed designs. Besides, they are not sure whether the suppliers are in a position to perform multiple models according to the requirements of the consumers. While some suppliers are experienced to provide quality products and parts, others do not deliver their products within the specified timeframe. Thus, there is a challenge in managing the suppliers an aspect that results in poor communication with their customers.

Conclusion

From the above discussion, it is clear that the supply chain has become an essential part of business locally and globally. With the call by the international community for companies to protect the environment in production facilities and while transporting their brands, there have emerged challenges in managing supply chains. However, there have developed various benefits for companies during the implementation of more environmentally and socially responsible practices internally. The sustainability of enterprises, for example, due to corporate social responsibilities (CSR), has made many firms to increase their profits. Any of the notable companies that used CSR programs create a strong positive relationship with the stakeholders include Starbucks and Coca –Cola, among others. Additionally, other companies have embarked on investing in philanthropic activities, and as a result, they have benefited from the positive image from the public eyes and the governments (Mortimer, 2004). These firms include Costco and L’Occitane. As the organizations face economic, social, political, and cultural risks, their supply chain is exposed to poor performance. This means that there needs to be managing risks that may jeopardize the operations of the companies. Lack of risk management, especially on the aspects of brand quality and finance has exposed some companies such as Mattel Toys, Enron, and General Motors, to the negative image that has negatively affected their activities. A high level of commitment is another positive impact of enacting more environmentally and socially responsible supply chain practices.

Despite the above benefits, there have emerged challenges that need to be dealt with efficiently. For example, some managers do not value the importance of data leading to a lack of comparison and poor evaluation of the supply chain (Buffet, 1982). Additionally, there is a lack of adequate data to detect disruptions. In the area of monitoring complex supply chains, firms experience some benefits. For example, they can detect frauds and suppliers who produce sub-standards brands. However, as a result of globalization, companies face challenges that have an impact on operations. These include increasing complexity, lack of data, more need for higher quality, cheaper and faster activities. It is relevant for local and international companies to monitor their supply chain, especially in the contemporary business atmosphere are competitive, and when firms aim at outdoing others in the market.

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