Sustainable Solutions for SCM

• Globalisation – it allows transferring production capacities to developing countries, achieving cost savings and entering new markets. However, global chains are exposed to greater disruptions because of their complexity and size, further extending logistic flows; an important role is also played by cultural differences. • Outsourcing – the original benefits of outsourcing are cost reductions and allowing the company to concentrate on its key business activities. However, these benefits are balanced by increased vulnerability to disruptions in terms of loss of control and further breakdown of the supply chain into a more complex system that is more difficult to control. • Lean processes – the reason behind the lean approach is, again, the costs that are spent inefficiently and are thus “wasted.” A typical example includes excessive inventory or multiplication of suppliers in the supply chain. However, if these “buffers” are not available, it is much more likely to be affected by a disruption. • Centralisation – enables the cost savings achieved by economies of scale, mainly thanks to better possibilities for distribution of fixed costs. The degree of centralisation however goes hand in hand with decreasing flexibility of the chain and the result is, again, increasing its vulnerability. With maximum centralisation, the failure of the entire systemcan be caused by a single disruption. • IT-dependence – logistic flows in today’s supply chains are very closely linked to IT systems. The failure or instability of IT systems may disrupt the continuity of these flows. • Complex products and services – the complexity and diversity of today’s products are constantly increasing. This increase goes hand in hand with increasing complexity of a supply chain behind the given product. The level of complexity then increases the vulnerability of the supply chain to disruptions. • Deficit of information – good information management is one of the basic prerequisites of supply chain management. Insufficient sharing of information and knowledge among the individual companies exposes the chain to more risk. • Specialised factories – special, irreplaceable components of the supply chain have the same impact on the supply chain as centralisation – they reduce flexibility, thus increasing the vulnerability. • Volatility of demand – increasing instability of demand leads to its more difficult predictability thus increasing the vulnerability. • Technological innovations – progress and research are the engines of business. Without innovations, companies and the whole supply chains would quickly become unable to compete. Innovations also increase the vulnerability because it represents novelty and change. Any serious disruption will have a typical profile in terms of its effect on company performance. Supply chain performance can be measured by sales, profits or level of production. The nature of the disruption and the dynamics of the company’s response can be characterised by the eight stages described in Figure 1.10:

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