What are the risks of an extended supply chain? In order to remain competitive, a company must offer superior quality goods or services at the lowest prices possible. Supply chain enables a company to reduce the cost while increasing the efficiency. However, there are risks that are associated with such benefits. These issues should be properly addressed when a company is trying to rely heavily on supply chain management in order to stay competitive within its industry. A company is exposed to risk by sharing confidential information to its vendors.
For example, Apple recently reported that arts and specs for both the iPhone 5 and the iPad mini leaked out well before their release dates. Apple accused its vendors for information leak. “Apple’s security practices are targeted marking sure US employees don’t leak stuff, but everything comes out from China now. ” A company is held accountable for its vendors being socially responsible. This includes making sure that vendors do not employ minors. For example, Nestle’s cocoa supplier, Ivory Coast, failed to pass the Fair Labor Association’s inspection because it employed children to process cocoa.
Nestle’s held accountable for Ivory Coast’s violation of FLA, it will seriously damage the company’s image as well as its profits. While a proper supply chain management produces cost effective products, there is a setback as it is difficult to quality control products that a vendor produces from oversea. For example, in 2007, Toys R Us vendor Mattel produced 83 products containing lead based paint, which is hazardous to health. Consequently, Toys R Us had to recall 967,000 affected toys from reaching consumers. A natural disaster or political instability of a vendor’s country could affect a company’s operation.
For example, Dallas-based Texas Instruments said late Monday that it had suffered substantial damage to its production plant in Miho, Japan and slight damage to its Aizu-wakamatsu plant. Both facilities are located north of Tokyo in the areas most affected by the disaster. The company makes silicon wafers at its Miho plant, which are the thin pieces of silicon glass used to manufacture microchips. In conclusion, for those companies that rely heavily on extended supply chain management to remain lucrative should consider the following strategies to avoid the risks mentioned above.
First, a company should have more flexibility. Flexibility, in this context, means that a company should incorporate a vendor-auditing program to make sure that it is meeting your standard. Second, a company should only share non-confidential information to its vendors to prevent them from compromising vital information. Lastly, a company should have multiple vendors to run a project in case one vendor fails to complete the project on timely manner. These are the key preventive strategy to avoid or mitigate the risks of a supply chain management.