Chapter 8
Improving Supply Chains and Strenghtening Customer Relationships
using Enterpise Information systems
Managing in the Digital World: Supply Chain Havoc
1. How can organizations better manage their global supply chain?
Many companies have an extremely fragile supply chain, because many of them implement a just-in-time inventory system. This is where the company keeps inventory at a minimum level in order to control costs, but weather, labor issues, or natural disasters can devastate the just-in-time system. If a natural disaster were to stop shipments coming to the company who relies on just-in-time delivery, this would cause a complete stop to the operation and could have devastating effects.
In order for a company to better manage their supply chain, more flexibility is needed. One possible suggestion would be to spread production over multiple locations in order to minimize the risk of a natural disaster causing a halt to the operation. The company should take caution regarding cost and risk considerations of any decision they should make regarding more flexible supply chains.
2. What are the trade-offs when developing a supply chain strategy?
There are many trade-offs when developing a supply chain strategy. One trade-off is cost and risk. Just-in-time inventory systems are more cost effective, but increases risk. The less cost of a supply chain system can lead to more risks. Another trade-off is flexibility and costs. If a company where to become more flexible by spreading production over multiple locations, this can lead to greater costs as opposed to a just-in-time system. The more flexible a supply chain, the more costly it can be.
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