The Impact of Supply Chain Risk in Small Business Manufacturing

 

Background of the problem

            It is the dream of every business whether big or small to be able to achieve maximum profit. This is always evidence that the business is making progress. Despite it all, there always un-foreseeable factors that come in that if not anticipated may end up ruining a business. Supply chain risk is one of these factors. The supply chain is an integral part of any business more so those in manufacturing. This is because the chain explains how the goods from manufacturing to the consumer. In between, there are many steps than need to be taken depending on the product.

            A survey by the American business continuity institute in 2011 found that that at least 85% of companies who had a global supply chain experienced at least one global supply chain disruption in a year. Often than not the cost of such disruptions is often very high and often lead to fewer revenues, delays in delivery, customer loss, increased down time and even loss of reputation. In fact, some companies have experienced lower shareholder returns due to such disruptions.

            Supply chain risk can arise from any point of the supply chain. These can be very challenging to any business owner. The key to managing them is being able to identify them then subsequently minimize them.

Problem statement

            Supply chain risks are a very costly business. This is because a problem in one part of the chain is likely to cause a ripple effect in the whole chain (Waters, 2011). This means that if there is a problem in say production, then ultimately delivery will not be able to take place. Most costly outcomes of risk events in a supply chain include margin erosion (Zsidisin & Ritchie, 2008). This happens where the profits of the company start going down and in some cases, the company incurs losses. Margin erosions in most cases scare away investors as well as shareholders.

            The second highest outcome is usually sudden demand change. In this case, the consumers of the product change the demand that they had of the product. In most cases, the demand of the product greatly diminishes (Gurnani, Mehrotra & Ray, 2012). This means that the company will have to cut down on its production or risk losses. This change ultimately deflects on the profits by creating a loss.

            Physical product flow disruption is also a consequence of supply chain risks. In this case, the product stops moving. This impacts the supply for the products do not reach the consumers. A standstill also affects the workers as well as the management of the business (Khan & Zsidisin, 2011). It should also be noted that product flow disruption also makes the consumers loose faith in the product which is also another bad for the business.

            The quality of a product relies on its supply. A customer will judge a product depending on the state in which the product reaches them. This means that any problem that may occur in the supply chain may end up affecting the quality of the product. Poorly produced or distributed goods mean that the customer will rate the quality as poor. Ultimately, this will lead to the customer opting for other products that are of a higher quality than that of the manufacture. That is bad for business (Kouvelis, 2011).

            It has been noted that there is a lot of laxity where a supply chain risk has been noted. This laxity leads to non-compliance of regulations by the relevant stakeholders as well as or with worker safety failure. Such laxity is often detrimental to the company who not only have to repair the damage and salvage what was lost but are also likely to face steep penalties that only serve to increase the loses (Sodhi & Tang, 2012).

            Finally, supply chain risks are likely to affect the manufactures social responsibility. Not only is the company obliged to its suppliers but also to the people who work in the company and the community as a whole. Losses mean bankruptcy which means shutting down and loss of jobs and poverty in the community.

Purpose statement

            The purpose of this study is to outline the impact of supply chain risk in small business manufactures which is ultimately detrimental. Small business manufactures should be able to anticipate supply chain risks that come in form of internal operational risks, Functional support risks, extended value chain risks and Macro-environmental risks Problems. Indeed, like the bigger competitors, they are likely to face these problems. This knowledge will help them look for ways to minimize the risks, if and when they come. It should be noted that these risks are very devastating to smaller manufacturing businesses and may even lead to their demise if not properly monitored, reduced and managed.

 

 

 

 

 

Works Cited

Gurnani, H., Mehrotra, A., & Ray, S. (2012). Supply chain disruptions: Theory and practice of managing risk. London: Springer-Verlag London Limited.

Khan, O., & Zsidisin, G. A. (2011). Handbook for supply chain risk management: Case studies, effective practices, and emerging trends. Ft. Lauderdale, FL: J. Ross Pub.

Kouvelis, P. (2011). The handbook of integrated risk management in global supply chains. Hoboken, NJ: Wiley.

Sodhi, M. M. S., & Tang, C. S. (2012). Managing supply chain risk. New York: Springer.

Waters, C. D. J. (2011). Supply chain risk management: Vulnerability and resilience in logistics. London: Kogan Page.

Zsidisin, G. A., & Ritchie, B. (2008). Supply chain risk: A handbook of assessment, management, and performance. New York: Springer.