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Also, the cost of global trade is on the rise.

What is Logistics Management? Definition & Importance in Supply Chain - AIMS Lecture

As offshore labor costs increase, global sourcing does not guarantee lower overall cost of goods. In both situations, supply chain management expertise and network flexibility are needed to analyze and respond to these issues. At the same time, globalization can present expansion opportunities. Organizations with flexible supply chain networks that can adapt to the requirements of new markets will be well positioned to grow.

Economic crises such as the recent global recession have a tremendous negative impact on consumer demand and production. Weaker organizations that fail to anticipate the changes, adjust capacity, and reduce inventory levels in their supply chains will not survive. To weather these economic downturns with minimal damage, organizations should build adaptive operating models buoyed by flexible supply chain capacity and a variable cost structure.

They can review product options, compare prices, and check availability in real-time using mobile devices. This leads to increased expectations for greater product variety, customized goods, off-season availability of inventory, and rapid fulfillment at a cost comparable to in-store offerings. To satisfy these consumer expectations, retailers must be able to leverage inventory as a shared resource and use distributed order management technology to fill orders from the optimal node in the supply chain. In addition, shrinking product life cycles, the emergence of new technologies to facilitate supply chain transformation, and increases in government regulation of supply chain processes like transportation are compelling reasons to remain nimble.

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A flexible and responsive supply chain will adapt to these changes with negligible disruption. Beyond the business challenges that emerge over time, organizations may also encounter sudden and severe supply chain disruptions. These atypical events—natural disasters, cataclysmic weather, labor strikes, supplier failures, and so on—negatively affect the flow of goods and make the organization vulnerable to financial, reputational, and relational damages. Given the cost of disruptions, it is imperative for organizations to manage these supply chain risks.

Common predisruption steps include risk identification, risk assessment, and risk reduction. To reduce vulnerability to disruption risks, Sheffi recommends that organizations collaborate on security and safety issues, build redundancies into their supply chains, and invest in people through cross-training.

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In addition to preventative risk management steps, it is imperative to establish disruption management capabilities. For known risks, it is important to design resilient supply chains that are flexible enough to bounce back quickly from major incidents Sheffi, For risks that are unlikely to occur but are potentially catastrophic, supply chain managers must engage in contingency planning and test the plans.

The CTO process allows Dell to overcome component shortages by configuring systems in different ways and by enticing customers to specify configurations with components that are readily available. Dell also builds strong long-term relationships with primary suppliers to ensure its priority customer status in times of supply uncertainty. Finally, Dell preemptively qualifies and reviews secondary suppliers to reduce the risk of inventory shortages. Account Sign In.


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Managing the supply chain : the definitive guide for the business professional. Simchi-Levi, David.


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