Value Chain Management and Risk Matrix

Supply Chain Management

The supply chain management is defined as the connection between company and its suppliers to deliver finished product to end user. Following parties are directly linked in the journey of product i.e. from initial supplier to consumer.

·        Producer

·        Vendor

·        Warehouse

·        Transportation

·        Distribution centers

·        Retailors

While many people believe logistics—or the transportation of goods—to be synonymous with the supply chain, it is only one part of the equation. The supply chain involves the coordination of how and when products are manufactured along with how they are transported. The primary concerns of supply chain management are the cost of materials and effective product delivery. Proper supply chain management can reduce consumer costs and increase profits for the manufacturer (Sweeney, 2009).

The supply chain comprises the flow of all information, products, materials, and funds between different stages of creating and selling a product to the end-user. The concept of the supply chain comes from an operational management perspective. Every step in the process—including creating a good or service, manufacturing it, transporting it to a place of sale, and selling it—is part of a company's supply chain.

Value Chain Management

The term value chain refers to the process in which businesses receive raw materials, add value to them through production, manufacturing, and other processes to create a finished product, and then sell the finished product to consumers. The concept of the value chain comes from a business management perspective. Value chain managers look for opportunities to add value to the business. They may look for ways to cut back on shortages, prepare product plans, and work with others in the chain to add value to the customer (Traver, 2020)

There are five steps in the value chain process. They give a company the ability to create value exceeding the cost of providing its goods or service to customers. Maximizing the activities in any one of the five steps allows a company to have a competitive advantage over competitors in its industry. The five steps or activities are:

1. Inbound Logistics: Receiving, warehousing, and inventory control.
2. Operations: Value-creating activities that transform inputs into products, such as assembly and manufacturing.
3. Outbound Logistics: Activities required to get a finished product to a customer. These include warehousing, inventory management, order fulfillment, and shipping.
4. Marketing and Sales: Activities associated with getting a buyer to purchase a product.
5. Service: Activities that maintain and enhance a product's value, such as customer support and warranty service.

Risk Matrix

A risk matrix is a chart that plots the severity of an event occurring on one axis, and the probability of it occurring on the other. You can also format the matrix as a table, where the risk likelihood and impact are columns, and the risks are listed in rows.

According to Resilience360, those top 10 supply-chain risks are:

·        Global trade wars and Brexit

·        Raw material shortages

·        Safety recalls

·        Climate change risk

·        Tougher environmental regulations

·        Economic uncertainty

·        Cargo theft

·        Container ship fires.

Once risks have been identified and assessed, all techniques to manage the risk fall into one or more of these four major categories:

·        Avoidance (eliminate, withdraw from or not become involved)

·        Reduction (optimize – mitigate)

·        Sharing (transfer – outsource or insure)

·        Retention (accept and budget)

Bibliography

Sweeney, E., 2009. Supply Chain Management and the Value Chain. Practitioners Journal, Volume 10, p. 13.

Traver, E., 2020. Investopedia. [Online]

Available at: https://www.investopedia.com/ask/answers/043015/what-difference-between-value-chain-and-supply-chain.asp#:~:text=Supply%20Chain%3A%20An%20Overview&text=While%20a%20supply%20chain%20involves,to%20create%20a%20competitive%20advantage.