The globalization of the economy, new information technologies, and the rapid development of transport create enormous opportunities for entrepreneurs. Geographical distance does not constitute a significant obstacle when choosing suppliers, production sites, and sales markets. Economic partners can communicate with each other using new IT solutions, overcoming the distance barrier, and the ease of access to various means of transport streamlines and accelerates distribution processes. Consequently, customers have become more demanding. They demand diversified products of the highest technical quality, delivered on time and at the lowest possible price. These requirements have led to the search for new solutions that would make satisfying customer needs less costly and feasible for manufacturers. It is no wonder that more and more entrepreneurs are deciding to participate in global supply chains by directing their production to where production costs are lowest (China, India, Taiwan, Thailand), as well as implementing new management concepts. The purpose of this article is to indicate the impact of new solutions on the security of one of the three basic processes occurring in the supply chain, namely the flow of physical goods. Furthermore, the article attempts to identify threats to the stream of physical goods and indicate stages for mitigating the risk of their occurrence.
Increasing competitiveness
Customer requirements (especially in the B2B market), new opportunities in global conditions, as well as rapid progress in the transport and electronic communication sector have contributed to the development of strategies to increase competitiveness through the management of processes occurring in the supply chain. This management aims to increase the efficiency and effectiveness of basic processes oriented towards satisfying market demand. These include the flow of raw materials, materials, semi-finished products, and finished goods, the flow of information concerning these goods, and financial operations between supply chain links. To effectively manage these processes, every economic entity should be aware of the need to cooperate with the participants of its chain and feel the need to implement joint actions oriented towards improving processes and maintaining their continuity throughout the entire supply chain.
New solutions and the threat they entail
Increasing customer requirements regarding the diversification and quality of finished products have resulted in the introduction of many management concepts, such as Toyota Production System, Lean management, and outsourcing. Their implementation influences the increase in the quality level of products, reduces inventory maintenance costs, and the number of non-value-added activities. At the same time, however, these concepts contribute to the creation of so-called fragile systems, through:
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the elimination of natural buffers in the form of stocks in production warehouses,
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the reduction of the number of suppliers,
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the increase in dependence between supply chain partners,
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the reduction of lead times and thus increased responsibility of entrepreneurs and pressure on the efficiency of processes in the supply chain.
In global conditions, often very long transport times increase the probability of disruptions occurring during transit. This is because goods flow in a changing environment (transshipment terminals, airports, seaports, inland ports, logistics service centers), as well as in changing means of transport. Additionally, significant distance hinders contact and control of activities at suppliers. Furthermore, the significant distance between links in global supply chains, as well as their usually large number, make it difficult to record current demand, thereby leading to the creation of the bullwhip effect.
Factors affecting delivery security
The main stream of the supply chain is the flow of physical goods. Due to the fact that the process of goods flow is vulnerable to sudden changes in the environment, the efficiency of supply chain activities can be seriously disrupted. The fragility of the created systems results from the susceptibility of the processes occurring within them to the occurrence of unexpected disturbances in the environment in which they take place. The direct consequences of such events can be: reduced technical quality of the delivered goods, delay in delivery, or its absence. These lead to the emergence of disruptions and their propagation along the supply chain in the form of delays and downtime in the execution of production and distribution orders.
To avoid the consequences of such situations, the process of risk management in the supply chain, implemented by all its participants, can be used. Effective risk management in flow processes in the supply chain requires, above all:
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identifying threats to goods moving between links
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taking actions to minimize the probability of the identified threats occurring
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determining the impact of realized threats on processes occurring in the supply chain
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introducing actions to minimize the effects of realized threats
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controlling the effectiveness of introduced actions and monitoring the level of risk in the supply chain.
The article comes from the journal “Logistyka” 3/2009.