Course: Supply Chain Management
Supply Chain Management as a Network3
The appearance of the network3
Managing the Supply Chain4
Improve the profitability by improving the supply chain4
Relationships within Supply Chain Management5
The value/risk model6
Managing Different Types of Risks6
The Triple-A Supply Chain9
Disruption and Risk Management in Supply Chains10
Risk can lead to disruption10
How to align goals and work towards them with partners11
Outcome if it is impossible to mitigate the risk12
Incentive alignment and risk-sharing12
Managing supply chain relationships on volatile markets from a risk sharing perspective Introduction
As a result of shorter product life cycles, higher rates of change and advances within technology companies need to make a choice regarding their supply chain and its components. The globalization of the world has also caused a higher level of outsourced production; this has caused a more advanced supply chain whereas relations have become highly important. Increasing fluctuations and variations in both supply and demand leads to complications in relationships between suppliers, producers and consumers. Moreover, this allows new types of collaborations between the parties in the supply chain.
By establishing relationships and writing contracts, companies can prevent risks and create an environment where it is easier to make right decisions that benefit the entire supply chain and creates more value, therefore more actors can gain from the relationship. However, there is a risk aspect, the deeper collaboration is, the higher risk it entails. When the risk for risks are raised the importance of solving the problems which appreciates the risks, increase as well. These include, inter alia, forecasting, orders and purchase of raw material, planning staff and available capital.
In order for a relationship in the supply chain to be possible, it requires both parties to have an incentive to enter the relationship and to stay as well. Collaborations are supposed to be more profitable than working alone. In addition, all parties involved in the supply chain needs to have incentives enough to manage their own as well as other actors’ risks. Handling this may be done by establishing contracts, but also deepening of relationships for mutual gain of the different outcomes.
If it is possible to find a layout where multiple parties benefit from the relationship there are prerequisites for a discussion and negotiation about how different actors shall take advantage of changes, based on what values they provide and the risks they are being exposed to due to the change.
Increasing uncertainty are going to have an impact the supply chain, the question is only to what extent and if it is possible to prevent such an impact?
The aim of this report is to investigate how risks within the supply chain related to relations could be avoided and how the relations could be used to add value to the customer in the end of the value chain. The rapport will therefore be limited to relevant literature and concepts serving our purpose within the field of supply chain relationships and incentive alignment. The study will however not rely on empirical data but only scientific articles and facts. Supply Chain Management as a Network
Successful supply chain management requires cross-functional integration as well as marketing that are playing a critical role. Suppliers, the brand identity and the sales activities are stronger aligned these days than in the past. These factors are crucial to become successful in the long run. Managers have to understand the strength in a well-synchronized network of activities, rather...