Diagnosing the Supply Chain and Prioritizing Risks
Diagnosing the supply chain is a vital activity that all economies should indulge in, occasionally, to reduce the many risks that occur in the dynamic world of business. In this respect, the management that is responsible for monitoring supply chains should have a succinct research in the production to figure any of the risks that are involved. The management should additionally focus on all the avenues and infrastructure that is used by the parties in the transportation of the produce to the end user. Moreover, the management should keenly evaluate the processes involved in the chain step-by-step and come up with a proper outline of how things should, and will, be done (Bosman, 2006, pp. 2-10).
On another note, the management should come up with a draft of the main risks that could affect the chain. There are some risks that are more definite while other risks will never occur in some areas. This will create an avenue for the management to find relevant measures that could be used in making sure that the supply chain is safe.
Similarly, the management will come up with better chains that could avoid some of the risks. This could be change of channels or procedures involved (Bosman, 2006, pp.11-20). It is in the best interests of the management to make sure that the supply chains are devoid of risks that easily affect the market’s demand of goods and services.
How to Reduce Risks in Auto Parts Supply Chain
There are a number of ways that could be used in reducing the risks in auto parts chain. First of all, there is the diversification strategy. The producers and manufacturers should design avenues of dividing the supply of the auto parts. This will include projecting other methods of business transactions in supplying the auto parts. Inclusion of other methods in the supply of the auto parts will reduce the atrocities that could affect the supply of the auto parts.
The management could design a number of suppliers in different parts and regions who will be capable of supplying the products and services. This will reduce losses incurred in case one of the suppliers is affected. Secondly, the management in-charge of the supply chains should look for ways of changing the supply chains periodically (Badr, & Stephan, 2007, pp.291-294). This could be done by increasing the chains that are used in the supply of the auto parts. For instance, they could change the type of transport that is used. The change of the transport and infrastructure will generally reduce the amount of loss that could be incurred if some catastrophe hits the supply chain.
Effects in Japan’s Earthquake to the World
The earthquake that happened in Japan had a number of effects that have been felt by the whole world. First of all, it reduced the manufacturing of vehicles and other auto parts in the country. This is due to the fact that many manufacturing plants were destroyed during the earth quake. Apparently, the largest plant that makes the auto parts was totally destroyed plunging the manufactures into huge losses.
Again, there are a number of vehicles that were destroyed in the earthquake. Many traders in the area had to incur losses since they had invested dearly in the business (Badr, & Stephan, 2007, pp.294-296). Similarly, the earthquake destroyed buildings in which the auto parts and other machineries were manufactured.
Why it is an Important Issue?
This is an important issue due to its effects and atrocities. It plunged many parts of the world into insufficiency in regard to auto parts and other machines (Nakamoto, 2011, pp.2-15). Japan has been known to be the leading auto parts producer in the world. In this regard, there are many countries that rely on Japan for the auto parts and other machines. Also, there are many assembling industries that were brought to a standstill in their businesses. This is due to the lack of the supply of the auto parts and other machineries.
Some assembly factories were also forced to close their businesses temporarily or completely while waiting for an increase in the production of auto parts and other machineries. Secondly, the motor and auto industry was a leading economic activity in the country. It, reportedly, offered a good number of employment opportunities to jobless people. Similarly, the auto parts industry was a leading tax payer to the government in its budgetary estimates. In this regard, the government lost a surmountable amount of its economical revenue (Nakamoto, 2011, pp.4-7).
Justification of Statement
The statement shows how multinational companies have increased their market dominance in the auto parts industry by choosing on the geographical distribution. This has been a setback to many multinational companies in their business. To begin with, the companies decide to focus on large scale production in a particular point. All the auto parts and machines are produced at one point then distributed to other points in the market. When a catastrophe strikes, many of the auto parts are destroyed incurring huge losses.
Risk Management Plan
The risk management plan should be incepted in the manufacturing companies to reduce the losses that are incurred in case of a catastrophe. For instance, the management should have a deeper research on the atrocities that can be foreseen. Secondly, the management should focus on diversification of risks in the plants (Norrman, 2003, pp.4-10). This could include relocation to other parts of the world and outsourcing to other people whom are dealing with the same business.
List of References
- Badr, Y., & Stephan, J. 2007. Security and risk management in supply chains. Jounieh: national institute of applied statistics.
- Bosman. R., 2006. The new supply chain challenge: Risk management in a global economy. London: FM Global.
- Nakamoto, M., 2011. Japanese production suffers record fall. Tokyo: CNN.
- Norrman, A., 2003. Erickson’s proactive supply chain risk management approach after a serious sub-supplier accident. Lund: Department of industrial management and logistics.