Sample Paper on Supply Chain Inventory People Technology and Risk

Supply Chain Inventory, People, Technology and Risk

Introduction

The transfer of goods’ ownership from the manufacturer to the consumer is a critical step in any organization. Each producer wishes to avail the products to the market in time, right quantity and quality; hence, the supply chain should be effective (Kull 2008). Excelling companies identify the risks to their distribution channels and have strong mitigation strategies to avoid the adverse effects. The human resource, technology involved, the distribution channels, and the risks involved play a fundamental role in leading the company towards achieving its goals and objectives. In light of this, Hewlett-Packard (HP) is a multinational company that deals in information technology in provision of hardware, software, computers and computer accessories, and other services to the consumers. It is located in California, United States of America and serves customers from the wide scope of the entire world. In 2000, HP faced a major supply crisis that resulted in a huge loss to the company. A number of 250, 000 printers were not shipped due to breakdowns in the supply chain (Schoegel 2012). Thereafter, the company decided to develop new frameworks for measuring and managing supply chain. Therefore, this paper looks at the supply chain management using HP as a case study. In addition, it conducts a literature review study in identifying the issues of supply chain management from other literal works.

How HP utilizes inventory, people and technology

HP is very cautious in identifying and prioritizing risks in the supply chain by assessing suppliers against key performance indicators (KPI). Managing the inventory is important in ensuring that the supply chain is effective and it saves time and cost. Additionally, management of inventory aids in reducing the probability of fraud and obsolescence (Peck 2006). According to the HP’s business technology optimization (BTO) portfolio, the company has to gain full awareness of the products until they reach the end-user. As a result, HP invented HP DDM (HP Discovery and Dependency Mapping) software, which enables the company to meet the inventory management challenges. Since HP has consumers in across various geographical locations, the task of distributing its products is very challenging. Some of its products such as software are transacted on an online platform. HP DDM helps in giving an accurate follow-up of the company’s products via a reliable discovery and inventory techniques. This software has a multiple management systems for contacts, help desk, and operation management. It detects the products’ state from a distance and the centralized management can be able to keep up to date with the information in the supply chain. This helps in deriving the most value from the product and reducing cost by mitigating risks. It is designed for high performance and administrative controls with enhanced security features for it detects each product and delivers core configuration information back to a central repository.

On the other hand, HP believes that it cannot attain its objectives without managing the personnel -people- in the supply chain. The management starts from job placement, as HP feels compelled to put great emphasis on adaptability and cultural fit. Each employee is hired on permanent basis to avoid the uncertainty of job security among employees (Schoegel 2012). The management positions are filed by people from within who have proved worth through promotion. Employees are divided into groups of 30 where each group attends classes for six months. The training encourages bonding and knowing personal policies, performance evaluation, and personal development. It makes them become integrated as the HP family; hence, they undertake their tasks effectively. The supply chain people embrace MBO (management by objectives) where a team works for multiple product line across all units. Each member participates in influencing the way a task is accomplished. Therefore, HP introduced a framework known as procurement risk management (PRM) that encompasses both the process and technology. It incorporates the BTO, measuring of risks, optimizing risks, and embracing technology (HP DDM) to manage the risks in supply chain.

Literature Review

Mussa (2012) asserts that the supply chains have tremendously risen up over the decades with the aim of increasing productivity to fulfill demands in emerging markets. This makes the process challenging as it reduces an individual control over the process. Risks witnessed from companies such as Ericson, Enron, BP, and HP among others make supply chain management face pressing need to maintain expected yields of the system in risk situations. Spekman and Davis (2004) feel that risks can be mitigated by integrated internal information systems, a rapport forged among supply chain partners, and viewing risk on the flows of material and information. Before looking at the management of risks, it is important to define what a risk in supply chain is. Supply risk is defined as the manifestation of uncertainties that may hinder the inward flow of the supply chain (Tang 2006). The internal flow risks may result from human error, fraud, disruption of system failures, sabotage, changes in the systems that employees are not familiar with. It incorporates the process, people and systems; hence, Chopra (2004) states that people and technology can be used to manage risks. Tang (2006) strongly believes that risk is measurable and manageable by estimating the probabilities of the outcome.

 

 

  • Supply chain risk management (SCRM)

According to Mussa (2012), the Supply Chain Risk Management (SCRM) involves the ability of an organization to understand and manage its economic, environmental, and social risks in the supply chain, which can be materialized through a contingency plan. Contingency plan is an approach that a company takes where it has the ability to get ready for a probability of future emergency or disruption. Sodhi et al. (2012) says that the approach needs continuous suppliers’ assessment, development and maintenance of alternative capacities, and back-up information systems and specific emergency response plans. To Mussa (2012), technology provides the best platform in mitigating the risks involved in distributing end products. In case of global supply, the risk dimension can be viewed in two stages that technology plays a huge role. The stages include risk analysis (risk identification, estimation, and evaluation), and risk control (mitigation and monitoring) (Mussa 2012). The first process covers the recognition of the risk, a hypothesis, and concrete analysis. Risk analysis stage starts by listing the risks, which are likely to face the firm. The list is drafted by checking the history of the company emergencies, hazardous objects, and collaborative opinion from all the departments. Data is compiled with the back-up information is stored for future reference (Kull 2008).

Risk estimation involves acknowledging the time and the frequency of the risk, probability, and the impact. Tang (2006) says that disruption profile is acquired by associating the supply chain performance with time. The significance of time is relative to the time of risk impact. Estimation involves being aware of the employees in the supply chain, their productivity, and their quality of work (Trappey & Wu 2010). This information is compared to the expected risk impact to see the time they can take to handle the risk. Now with the full detailed information or a list of the probable risks, time, and the significance of the risk impact, the management can embrace the evaluation factor (Schoegel 2012). This is where the channel managers decide how to act upon the risks when the need arises (Mussa 2012; Natarajarathinam, Capar, & Narayanan, 2009). They have to identify which mitigation strategy should be implemented for a certain risk. Sodhi et al. (2012) suggest that various mitigation strategies can be implemented to tackle different types of risks. Evaluation is an important part of the risk analysis stage where people look into various case studies to know how they handled their cases. For example, Erickson revised their SCRM after a fire incident affected their distribution operations. As a result, they installed a feedback-loop of risk identification, assessment, treatment and risk monitoring. This system monitors the supply chain process and gives up-to-date feedback and in case of a mishap it is able to detect. Erickson has already identified the risk, estimated it and evaluated a probable strategy.

Evaluation process helps the management to acknowledge the available mitigation techniques and choose the most suitable. This leads us to the second stage of risk control that involves risk mitigation and monitoring. Mussa (2012) says that Ericson installed fire fighters engines that are able to detect any fire outbreak and put it out automatically. The process was quite expensive but Mussa (2012) says it is worth the cost. Risk should be closely monitored and reviewed to ensure that the firm is capable of mitigating the risk. Therefore, risk control involves regular review of the risk and the mitigation strategy to avoid any mishap.

  • Inventory, people and technology in supply chain

One of the most important factors is to understand that the organization aims at meeting the market demand at all the time. Tang (2006) says that all manufacturers should embrace the just-in-time formula in provision of their products. This means availability of inventory is quite important in the entire process. Sodhi et al. (2012) believes that the first step should involve conducting a market study to identify the actual demand of the product. This translates to incorporating a good team that will derive information from the ground to the firm. Knowing the actual demand will enable the firm to have adequate inventory to provide to the market.

Another important factor is the issue of labor availability and capability to handle the task. Sodhi et al. (2012) says that the supply flow largely depends on the human resource because they enhance productive in the right time. They should be familiar with the task and be ready to handle the work with minimal supervision. Finally, technology is the backbone of the entire process. As discussed earlier, firms require investing in up-to-date technology that enhances quality and supervision from all the points of the supply chain. The interconnection between the personnel, stock and technology requires a well-designed framework. Several considerations should be made such as logistics, price vitality, alternative energy source, environmental degradation, and ethical issues among others (Mussa, 2012; Olson & Wu 2010).

Risk mitigation at Hewlett-Packard (HP)

HP produces a number of commodities that are sourced, manufactured or stored in multiple locations resulting to complexity. The management and control of all these areas is quite challenging making the supply chain vulnerable to fraud and inventory obsolescence. My risk mitigation strategy would involve a number of steps. To begin with, the strategy would comprise a fraud risk assessment that includes results from past incidents to identify the vulnerable areas. The second step would involve designing several supply chains with their distinct managements to avoid complexity and work backlog. Segmenting the supply chain will aid in reducing the impact of disruption as managing would become much easier. It would also aid in identifying the commodities, which do not move quickly as they are the most risky. Segmentation of the supply chain would be followed by regionalizing them. This means that not all the products are stored in one manufacturing plant, but they are distributed in various regions. It is a good approach bearing in mind the Japanese automakers firm that was hit by tsunami in 2011 destroying all the stock stored in the plant. Regionalizing will aid in reducing this risk.

Thirdly, the strategy would improve the control by putting in place an effective governance structure. Transactions should be authorized by few executive members who are not compromised by collusion or management override. This is where the firm should employ the use of unique user identifications and passwords. Gaining access to the product while not working should be highly discouraged to avoid stock disruption. Additionally, the monitoring system should be highly effective that includes independent checks on performance and compliance with policies and procedures. The fourth step involves segregating task management where several individuals manage the supply chain process from start to finish. However, not all these strategies can be achieved without educating the members of staff. It is important to educate and train the employees about the risks of fraud and the consequences. Similarly, the work welfare should be very good to reduce their temptations of conducting a fraudulent activity in the firm.

Cost benefit analysis

Cost benefit analysis estimates and totals the correspondent money value and the ultimate benefits of a project to determine their viability. There are a number of financial and non-financial benefits that consumers or producers can receive from evaluating the cost benefit analysis. CBA allows all the risks and uncertainty associated with a new project are handled using the probability theory. Supply chain management requires evaluating the benefits that are attributed to risk mitigation and risk management. The process of supply chain risk management is quite costly and the managements need to predict the outcome before risking investing in the mitigation strategies. It calculates the common factor of time value of money calculations in one platform. The identified risk from our case study of HP Company is increased loss of products through fraud and pilferage. Similarly, there are severe breakages of the accessories during transportation leading to a number of losses. The proposed mitigation strategy is to install centralized locking systems with motion sensor cameras. Therefore, a cost benefit analysis is inventible to outline the benefits and challenges associated in this project in order to prove its viability.

Cost-Benefit Analysis

Security data Manual security Centralized locking system with motion sensor cameras
Security personnel 13 3
Security time (man hours) 24 5
Flexibility 2 5
Cost ($300*13) per month $1000 (once)
Electricity consumption $30 $50
     
     

 

The cost of purchasing the machinery is $1000 and it requires only three security personnel to control it. Their salary amounts to $900 (300*3) which would take those five hours shift to control the centralized unit. Electricity expenditure of the system will cost $50 meaning the cost of installing and managing for one month will be $1950. On the other hand, the security personnel are paid $3900 (300*13) where they are physically visible at work for 24 hours. Their electricity consumption since they have to be physically present even at night amounts to $30, which means the total expenditure will be close to $4000 in one month. Actually, it is important to note when the machine is purchased they will be no further expenditure other than maintenance which is not very regular. This means that the organization will save $2050 in a month and close to 10 man hours in a day without forgetting the flexibility of the monitoring systems. It does not require a person being at the door to check people in. it also builds people’s confidence as they are aware of its security.

In conclusion, supply chain risks are real and they are very detrimental to an organization progress; hence, managers should be able to manage them. It is quite clear that managers should be willing to invest in additional supply chain resilience even when the benefits are in long-term occurrence. Secondly, the supply members should be able to recognize and measure the risks involved in the distribution process. This project proves that people, inventory and technology are three most important components of mitigating disruption in the supply chain.

 

References

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Kull, T., Closs, D., 2008. The risk of second-tier supplier failures in serial supply chains: Implications for order policies and distributor autonomy. European Journal of Operational Research 186, 1158–1174.

Malone, Michael (2007). Bill & Dave: How Hewlett and Packard Built the World’s Greatest Company. Portfolio Hardcover. pp. 39–41

Musa, S.N., Wei, S., Tang, O., 2012. Information flow and mitigation strategy in a supply chain under disruption. Working paper, Department of Management and Engineering, Linköping University

Natarajarathinam, M, Capar, I, & Narayanan, A., 2009. Managing Supply Chains in times of Crisis: a Review of Literature and Insights. International Journal of Physical Distribution and Logistics Management, Vol. 39, No. 7, pg. 535-573

Olson, D, & Wu, D., 2010. A Review of Enterprise Risk Management in Supply Chain. Kybernetes, Vol. 39, No. 5, p. 694-706

Peck, H., 2006. Reconciling supply chain vulnerability, risk and supply chain management. International Journal of Logistics: Research and Application, Vol. 9, No. (2), June 2006, 127-142.

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Spekman, R.E., Davis, E.W., 2004. Risky business: expanding the discussion on risk and the extended enterprise. International Journal of Physical Distribution and Logistics Management 34 (5), 414-433.

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