Product and Supply Chain
Because of globalization world economies are increasingly becoming interdependent. The global market forces have made some business enterprises more vulnerable to economic crisis. Manufacturers have to take cognizance of the fact that global food prices are soaring because of supply constrains occasioned by bad weather. Surge in interest rates for investors who depend on bonds to provide a steady yield is an aspect of global market forces. Periods of long ultra-low interest rates steadily erode these investors income. Rising interest rates also erode these investors principal. Robust growth in emerging markets is a boon for the entire global economy. However, it comes with a price. Soaring inflation in emerging markets is majorly caused by ultra-low interest rates and strong capital flows. This is something that manufacturers in emerging economies have to be wary of. The global economy is becoming more connected. With the complex flows of capital, goods and information, people are interlinked in a network that spans geographies, social groups and economies in a way that permits large-scale interactions.
Manufacturers risk management efforts are often invested in financial risk management while others focus their efforts on corporate matters paying minimal attention to specific risks that take place across the supply chain. Supply chain risks occur at macro, extended value chain, operations, or functional areas that directly affect the ability of an enterprise to meet its customer demands (Deloitte, 2013). Macro environment risks have potential effects across the entire supply chain. Extended value chain risks originate in upstream and downstream...
Operational risks relate to internal process risks. Functional risks exist among enabling functions that support supply chain processes. Other categories of risks are legal/political / competition, natural/hazard, social and technological/operational (Deloitte, 2013). Some of the examples of the operational/technological risks are forecast errors, material shortages, capacity constraints and quality problems to mention but a few. Social risks include labor shortages, loss of key personnel, strikes, accidents and absenteeism. Natural risks are attributed to fire, severe thunderstorm, floods, earthquake, epidemic and famine. Competition related risks include interest rate fluctuation, exchange rate fluctuation and commodity price fluctuation. Legal/political risks entail law suits, governmental incentives, new regulations and customs risks to mention but a few (Deloitte, 2013). To manage such risks, a manufacturer has to understand where such vulnerabilities for risks occur within the supply chain. If risks at not managed at that level, then there are chances that it can damage operational efficiency or even disrupt the supply chain to the extent that customer demand cannot be met. An enterprise's risk management efforts focus on the supply chain because of inherent levels of complexity and potential effect on corporate reputation. It focuses on creating an environment within corporation using strategies and tactics to create resilience across supply chains. Risk management involves understanding the risk environment, identifying and assessing current risks, quantifying and prioritizing risks, developing risk mitigation strategy and business case and…
