The rise of global competitiveness calls upon firms to manage their supply and distribution chains. The market is getting more complicated. A supplier needs to keep diversifying. Distribution channels keep evolving. The cost of supply chain management is on the increase. Businesses have no option but to manage all supplier and distributor related risks. The supply chain management has to chip in with efficient solutions to handle the resulting dangers.
In the wave of increasing costs of the supply chain, organizations still have to play their corporate social responsibility. There is a need to come up with strategies to manage existing and projected risks. In the end, firms are required to satisfy their customers. This document examines some of the vast implications of not running and controlling the supply chain.
The inability of not managing supply chain activities implies tainting a firm’s reputation. In the business world, reputation is all one needs to grow. Reputation determines the visibility of an organization. Reputation helps in establishing and shaping a company’s image. The opinions that the general public have towards a business determine the clarity of such an institution. Highly reputable companies are at a tremendous risk of facing public backlash than a less trustworthy company.
For highly acclaimed organizations, the stakeholders always have high expectations of producing quality products and services. The need for institutions to be accountable for their actions also increases based on public perception. A highly reputable firm is thus bound to suffer if it does not fulfill its mandate of satisfying its customers. Stakeholders tend to give encouraging compliments when a reputable company does something right.
On the other hand, negative comments are likely to come by when the same reputable companies do not fulfill their mandate (Brooks, Highhouse, Russell, & Mohr, 2013)
Similarly, the inability to manage and control the supply chain leads to loss of powers over suppliers. There must exist a tied relationship between suppliers and the company. One cannot separate the role of supply chain management from that of suppliers. Both have a role in ensuring that there are enough resources responsible for the smooth running of organizations. In the typical; businesses world, suppliers can render a business ineffective by withdrawing their services.
This, therefore, makes it a necessity for companies to draft ways of managing their suppliers. In most cases, what happens is that suppliers control the link between companies and the second- tier suppliers.it is common knowledge that institutions that have more powers over their suppliers have an added advantage when it comes to supplier considerations (Dickinson & Sommers, 2012).
Additionally, firms that have mutual relationships with their suppliers have more control on the decision making processes of such suppliers. So what happens? There is a need for firms to invest in certain suppliers if they aim to control them. Suppliers are likely to give in to the demands of firms if at all such firms contribute more in revenue allocations of these suppliers. The merit of having the power of suppliers has to do with the leverage of controlling activities of your supplier. There is a need for firms to aim to sustain control over their suppliers.
Likewise, firms that fail to manage and control their supply chain suffer from visibility issues. Just like reputation, companies with high visibility are likely to face increased pressure and demand to perform. Why does this happen? According to King and McDonnell, 2015, Companies that enjoy increased visibility often receive more media attention which in turn may subject them to issues of stakeholder activism.
There is always pressure for visible companies to perform and sustain the needs of their stakeholders. Stakeholders do not accept excuses for decreased demand from highly visible companies. In the real sense, visibility may be looked on to as a blessing in disguise. The need for firms to remain visible therefore calls upon them to gain control of their suppliers to sustain the needs of their suppliers. Failure to manage and control supply chain taints the visibility of companies.
Moreover, companies are required to participate in corporate social responsibility (CSR) initiatives voluntarily. But again, the ability to be socially responsible is pegged on the management and control of their supply chain. The merit of companies participating in CSR has to do with improving the brand image. An improved brand image, in turn, has the power of attracting and sustaining current and potential suppliers.
Additionally, the ability of firms to understand their supplier base enhances by their involvement through CSR activities. However, the downside of active participation in CSR is that such companies may face harsh penalties in instances where they do something that tarnishes their image and visibility (King & McDonnell, 2015). Companies that aim to have the power of their suppliers must participate in CSR.
Another issue that crops up has to do with supply chain complexity. Organizations have a role of effectively managing and controlling their supply chain activities. Through the control, issues of supply chain complexity get managed. Large companies encounter various complexities in the supply chain. The complexity of the supply chain, in turn, increases the load of monitoring and evaluating the various components that run supply chain networks. The complexity of the supply chain has the consequence of burdening the firm with the management of multiple suppliers. These suppliers have different terms of agreements. The position held by suppliers in the firm also gets complicated.
In the same way, the cost of evaluating the roles of various suppliers increase. At the same time, firms have to monitor their resources to avoid making losses. The inability to choose which supplier best align with market demands also become a critical issue of supply chain management.
The complexity of the supply chain also affects the relationship that companies have with their suppliers. It is easier for a company to maintain the relationship with a small number of suppliers. However, managing relations with diverse suppliers forms a tall order for the supply chain department. The inability for companies to manage the wide base of suppliers due to their wide operations has the consequence of losing control of such suppliers. The effect may be worse in that the firm may fail to sustain customer needs.
Additionally, another case that complicates the work of the supply chain has to do with organizational complexity. The more complex an organization is, the more complicated the roles of supply chain management become. Organizational complexity happens due to increased diversification in institutional operations. Increased diversification, in turn, increases the need for information processing about consumer and supplier needs.
Most companies fail to consider the role of the supply chain in diversification. What comes out is that the burden of supply chain increases with an increase in organizational complexity. The purpose of supply chain management in such a scenario has to do with managing and controlling both current and new suppliers. Slight mismanagement of suppliers, in this case, will adversely affect the diversification process. The shortage of one supplier will ultimately halt operations in the concerned department. This shortage will derail the achievement of the set goal.
Furthermore, the issue of CSR comes up again when handling the case of organizational complexity. The more a company diversifies its operations the more socially responsible it has to be. Diversification also attracts the need for the review of visibility needs. As seen earlier, supply chain management has a fundamental role in shaping and establishing a firm’s visibility.
Similarly, the supply chain management has got to set a good rapport with various suppliers and stakeholders involved. Whenever an organization becomes complex, new suppliers, stakeholders and customers come on board. The supply chain management has to devise ways of managing and controlling the operations of the new entrants. At the same time, the supply chain management has to maintain shared links with the current stakeholders. Slight mismanagement will, therefore, taint the image and reputation of the company.
In conclusion, we have to note that supply chain management is the engine of the company. Supply chain determines the success or failure of both profit and non-profit making organizations. The administration of the firm’s reputation and visibility bestow on the supply chain. The effects of organizational complexities also call for an active supply chain department. Generally, all facets of the organization owe their success to the effectiveness of the supply chain.
Most businesses have closed their doors due to the inability to maintain and sustain their relationship with suppliers. Suppliers are necessary for the operations of any given company. In the real sense, organizations need suppliers more than the suppliers need these organizations. It is the role of the supply chain to ensure that the welfare of the supplier is well catered to promote satisfaction. The willingness of suppliers to come to the board enhances by good supply chain advocacy.
- Brooks, M. E., Highhouse, S., Russell, S. S., & Mohr, D. C. (2013). Familiarity, ambivalence, and firm reputation: Is corporate fame a double-edged sword? The journal of Applied Pyschology, 88: 904-914.
- Dckinson, V.,& Sommers, G. A. (2012). Which competitive efforts lead to future abnormal economic rents? Using accounting ratios to assess competitive advantage. Journal of Business Finance & Accounting, 39: 360-398.
- King, B.G., & Mcdonnell, M. H. (2015). Good firms, good targets: The relationship between corporate social responsibility, reputation, and activist targeting. In K.tsutsui, & A. Lim (Eds.), corporate social responsibility in a globalizing world: 430-454. New York, NY: Cambridge University Press.