‘Evolution’ is the key to survival in today’s fast moving world where everything has to be done instantly or you will be left behind. In the wake of globalization, business organizations too have to cope with the expansion of the markets and the increase in demand. And for that matter supply chains too have expanded rapidly over the years with the objective to lower costs, increase productivity and to fulfil the rising demands in the emerging markets. However, with such rapid progress there is always a chance of disruption in the supply chain and if the disruption is not controlled properly then there is always a chance of the whole supply chain crashing down. Hence, the supply chain management needs to maintain the expected yields of the system in risk situations. And in order to achieve that, business organizations and the procurement managers have to first identify the potential risks and have to evaluate their impacts and consequently design risk mitigation plans to locate and relocate resources to deal with any risk events (Heckmann, 2015).
Through this article we will focus on the various risks that the Motomes group may have to face while assessing their supply chain management and to suggest them few risk mitigation policies that can help them overcome the situation. We will also be highlighting the ways to increase the productivity for the Motomes group that can assist them in meeting with the requirements of the markets.
Critical Evaluation of the Supply Chain Risks
Managing risk is of utmost important in any walk of life and business is not an exception where risks can disrupt the outcomes of any operations in the business. Same things can be said about the supply chain and many of the industrial cases and incidents have shown that there can be different outcomes after the risk events due to lack of actions or we can say due to diverse actions taken while facing supply chain disruptions and disturbances (Wieland, 2012).
The different types of risks that can be associated with the Motomes group can be categorized within the following categories:
- Material Flow risk
- Financial Flow risk
- Market risk
- Brand risk
- Strategic risk
- Human resources risk
- Contract failure
- Supply security
- Outsourcing and offshoring risk
- Information flow risk
Material flow is associated with the physical movement of the raw and finished materials within and between the supply chain elements. That includes the transportation of the raw materials, the delivery movement, storage of the goods and the inventories. The Motomes group has to assess the risk of the material flow as in the event of any risk the material flow will be disturbed or disrupted. Transportation incapability, lack of capacity, halted manufacturing and the inability to getting access to inventories are some of the disruptions that can be caused due to the material flow failure (Wallenberg, 2011).
- Source- It involves the acquisition of physical products and services. There are various risks attached to sourcing that includes single source risk, supplier selection risk, sourcing flexibility risk and supply capacity (Johnson, 2017).
- Make- It involves process and product design risk, operational disruption and production capacity risk (Karakhan, 2019).
- Deliver- It involves demand volatility due to seasonality and the balance of the excess inventory and the unmet demand.
- Supply chain scope- It involves logistics, environment awareness and degradation, political risks and supply chain partner’s relationships.
Financial flow also referred as cash flow and it represents the cash receivables and spending cash streams. It is one of the most important aspect of any business operations and also within the supply chain system. And any disturbances or disruption in the financial flow can cause huge financial losses for the company. These disruptions in the financial flow involves improper investments and the inability to settle payments (Mace, 2015).
- Exchange rate risk- It involves the risk of the change in the exchange rates and for that matter business partners must design a framework that can work for both the parties.
- Price and cost risk- It involves the change in the pricing of the products due to various manufacturing strategies. Exchange rate here also plays an important role.
- Financial strength of the supply chain partners- It involves the monitoring of the financial status of the supply chain partners.
Market risk is associated with the losses incurred by the business organizations in the wake of sudden changes in the external supply market. A sudden hike in the prices of material can hamper the cost of production and that can create a disruption in whole supply chain process. The Motomes group may too get affected by the rise in the prices of materials and that can result in the high cost of production for them (Martinez, 2018).
Risks associate with the brands
The market presence of a business entity can get a hit if they will not be able to deliver the goods within the stipulated time as it will allow other business entity to place their products. And for that matter the Motomes group’s brand value can be affected badly if they will not be able to manufacture their product as per the demands in the market (Omatayo, 2015).
Making the right strategy for the system is essential and for that matter one have to strategize every move before executing the plans. It helps the business organizations to take timely decisions in terms of increasing the production capacity as per the needs and the demands of the customers. The disruption in making the right strategy can cost the Motomes group to not get the optimum production capacity.
It is one of the most important aspect of any supply chain management. A business organization must take care of its human resources in terms of employee management and the customer satisfaction. The skills level of the employees must be monitored in order to get the best out of them as any discrepancies in this matter can hamper the production capacity and the handling of the operations. The Motomes group have not handled their employees well enough and for that matter their production capacity did not reached its optimum level (Sadgrove, 2016).
There is always a sense of instability in the market and it can cause huge disruption in the supply chain processes. The instability can cause communication failure can disrupt supply failure.
Outsourcing and off shoring risks
Outsourcing can be tricky as one have to be dependent on the potentials of the third party. Outsourcing and offshoring is risky in terms of sharing the information on the manufacturing processes and the product design (Titi, 2016).
Information flow risk involves the usage of the new age technology in terms of production and communication. Lack of it can cause huge disruption the supply chain process.
Project Plan- Weiss and Wysocki’s 5 Phase Life Cycle Model
The Weiss and Wysocki’s 5 phase life cycle model is one of the most used project management tool that focusses on the entire life cycle of a project and allows business entity to deliver the project within the stipulated time. For our study we will deploy this model to enable the Motomes group to get the best out of their outsourcing activities.
It is the first phase while commencing any project and also the most important one. It is the phase that enables project managers to set the goals for the project and set the objectives for the same. It also involves determining the preliminary resources that are at the disposal of the project managers for the completion of the projects. The most important aspect of this phase is to identify all the risks that are attached to the project. Everything at this phase must be defined so that there will be a clarity in terms of the goals and objectives of the project (Weiss, 2002).
This phase involves in identifying all the project activities that have to carry out while working on the project. It also is the phase where the costing of the project is estimated and also the estimated time is determined on the basis of the project activities. Then the next step is to sequencing the project activities as per the priority of the project. After sequencing the project activities project managers identifies the critical activities that needed special attention and time. After the completion of identification of the critical activities the project manager must write the project proposal for all the stakeholders so that the objectives of the project can be communicated to all the stakeholders (Weiss, 2002).
During this phase one must determine the personal needs for the project as it allow the business entity to understand the needs of the personnel. And then recruit a competent project manager that have prior experience of managing projects. The project managers must form a capable project team that can handle the project well in terms of its completion and deliverance. Project manager must organize the whole project in order to get the best out of them and assign proper work packages to each member of the project team (Torabi, 2016).
It is another phase that provides stability to the entire project as it involves defining the management style that will inculcated in the project and establishment of the project control tools. Status reports have to be prepared during this phase to monitor the whole project and its various stages. Timely reviewing the project schedules is also another important aspect of this phase. Any change that have to be done can be issued during phases to the team.
After the completion of the project and project managers must obtain the client acceptance on the same and start installing deliverables for delivering the project to the client. After installing the deliverables, document the whole project for any future references and issue the final report. After the issuance of the final report conduction of the post implementation audit must be performed for future references.
The Motomes group must follow this five phase project plan to ensure a better outsourcing project. Project management is an art defined by the science for doing it effectively and efficiently. In today’s times the process of project management has gained worldwide acceptance in terms of completing a project within stipulated time as we all know as in today’s era time is of utmost importance and saving time is equivalent to saving money.
Role of procurement in delivering the outsourcing plan
The management of the Motomes Group can monitor, assess and identify the supply chain and market risks associated with the supplier to avoid the cost burden of raw material. In order to minimize the supplier risk conduction of supplier pre-qualification and process of appraisal can be followed by the management of Motomes group.
The outsourcing plan requires lot of planning as any disruption in the process can hinder the whole supply chain process and that will cost heavily on the finances of the Motomes group. The effective management of the suppliers and the contractors will enhance the productivity of the group and help them in minimizing the risks in terms of operations, finance and reputation (Zhang, 2016).
Risk register and risk mitigation plan
|Different risks||The way of arising risks||Likelihood||Impact||Score of risk||Risk priority|
|Shortage of cash||Lack of finance related strategic plan such as fixing cost for different activities||High||Moderate||17||1|
|Operation risk such as damages of product||Lack of effective management in handling operation within the workplace||High||18||2|
|Market risk such as reduction in market presence||Lack of effective strategy in increasing the market presence in comparison to other brand||Medium||Low||13||4|
|Human risk||Lack of employee satisfaction and employee management||High||High||18||3|
|Information and technology risk||Lack of technological development to innovate new design and functioning of product||Medium||Moderate||12||5|
Table 1: Risk register
(Source as influenced by Mace et al. 2015, p.647)
|Different risks||The way of mitigating risks||Responsible person||Controlling technique|
|Financial risks||Effective management of supply chain and effective handling of operation management||The financial manager, accounts manager as well as management which handles supply chain system||This needs to measure on weekly basis|
|Market risks such as lack of exposure and market presence||Effective planning of strategy and inclusion of strategy to increase market share||Operation managers||It needs to be monitored on monthly basis|
|Human risks||Providing effective training to and monitoring the satisfaction level of the employee||HR management||Needs to monitored on daily basis|
|Information and technology||Implementation of advanced technology in production and building effective skill of the employee||Administrative manager and operation management||Needs to be monitored on monthly basis.|
Table 2: Risk mitigation
(Source as influenced by Karakhan et al. 2019, p.825)
Risk mitigation is the most important aspect of risk management process and for that matter the Motomes group must follow the risk mitigation plan so that they can reduce the risks attached to their supply chain process.
Contingency plan is a must for any business entity as it allows them to create backup in the wake up of any incidents that creates disruptions in their process. It helps them to withstand any significant unforeseen future events. It is more of like a plan b where a company can switch on from the previous plans to the next plan if they do not get the desired results from the past plan (Essig, 2016).
The Motomes group need to design a contingency plan in order to improve their production capacity of the outsourcing plan does not work for them. The group must also allocates its resources for contingency plan as they have to meet the increased demands in the near future. They must also be prepared for a succession planning as the present management is not been able to deliver the goods for them and an organizational change can help them in getting the desired goals.
Supply risk management is one of the most important aspect that every business organization plan in order to avoid disruptions in their whole operations. As we have studied the business process of the Motomes group and identified their potential risks in terms of outsourcing we came to understand that proper risk identification and mitigation must be employed in order to manage the whole outsourcing plan as it will increase the production capacity of the group. Through the risk identification Processes Company will be able to address its risks in a much more capable way and through risk mitigation they will be able to reduce the risk that can hamper their supply chain process.
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