Introduction
Customer-intimate firms know that their clients have a hierarchy of needs beyond their requirement for a product. Attached to every product is basic service, service that customers expect as part and parcel of the product purchase. While operational-excellence companies and product-leadership firms never look beyond a client's need for product or basic service, the customer-intimate firm understands that a client that needs a product has a broader, underlying problem that they are trying to solve. A customer-intimate firm often has the expertise to change the way a client manages the underlying problem ( 1997). The most common characteristic of customer-intimate companies is that they offer a unique range of superior services, from education to hands on help, so that customers can get the most out of their products (1997).
Supply chain management (SCM) is a modern management concept, the goal of which is to improve the efficiency and effectiveness of a company’s entire supply chain operations. The supply chain runs from raw material suppliers at one end, right through all the intermediate processing stages, to the customer at the other (1999). The focus of SCM or logistics management is on adding value and eliminating inefficiencies at each stage of a company’s supply chain. This will include, for example, the optimization of stock or inventory movements; planning for peak activity periods; and the organization of transport and distribution systems. The process seeks to ensure that the right materials, supplies and personnel are in the right place at the right time. The emphasis of SCM on adding value at each intermediate stage, has given rise to the term value chain. Supply chain or value chain management emphasizes the strategic value-adding and financial role of a company’s entire logistics management process ( 1999).
In recognition of the new emphasis on providing the best net value for the customers, logistics represents a key bundle of resources that can be applied successfully to this end. In effect, this formally recognizes the fact that customer value can be created by providing elements of customer service such as product availability, timeliness and consistency of delivery, and ease of placing orders. The net impact is that logistical service is becoming recognized as an essential element of customer satisfaction in a growing number of product markets today. The logistics process has several unique characteristics (1991). First, it is comprehensive, extending from the original source of raw materials to the location of the final customer. In fact, the logistics process can, and does, span organizational boundaries in terms of encompassing very comprehensive, industry wide channels of supply and distribution.
The second characteristic is that it pertains to the flows of both product and information, and considers each as essential to the value-creating process. This concept has received broad acceptance and acknowledges the critical role of logistics in the overall area of information processing and management. Third is that logistics represents a viable means to satisfy and create value for the external customer of the firm and/or the channel of distribution. It is this dimension that truly justifies the recent attention directed toward the new role of logistics management (1991). The paper discusses about logistics management and the risk within it. The paper focuses on risk situation within the domain of logistics management. The paper will use the technique of systems modeling then it will characterize the situation as a complex dynamic system.
Risk analysis and management
A major concern in recent years in managing projects has been the continuing problem of dealing with risk and uncertainty. Such concerns are prompted by increasingly severe financial and legal consequences of poor risk management. The continuing budget and time overruns as well as the negative impact of poor project management on corporate image are no longer tolerated by funders or shareholders. In response to continuing failure to manage project risks, organizations are investing in more sophisticated and accurate quantitative risk management solutions. However, many of these techniques still fail to deliver the expected result ( 2001).
The ineffectiveness of traditional quantitative risk analysis to manage projects effectively has also been highlighted by who also confirmed risk factors outside the scope of quantitative risk analysis as a contributory element to failure. Quantitative risk analysis is an extremely useful tool for assessing risk, but it can only deal with risks that have been identified. There appears to be some confusion between the concept of identification and assessment. In many cases, managers and decision makers assume that if quantitative risk analysis has been carried out then most potential risks have been addressed, and they do not engage in a critical evaluation of the procedure. Although risks identified may have been assessed effectively, what about risks that have not been identified? If a key risk element concerns human factors, then why not include this in the process (2001).
A good example of the lack of awareness of human factors within the risk assessment process involved an organization that dealt with nuclear processing and subsequent storage of nuclear waste. The project concerned the design and development of an appropriate repository for the waste, which had a potential for high risk to society over a substantial timescale. Within the initial phase of the project development at the design and conceptual phase, quantitative risk analysis focused on the failure rate of technological issues. No provision was made for conducting risk assessment on the project team or any other people involved in the process, except in terms of technology. One of the human factor issues related to serious conflict between members of the central project team resulting from misperceptions about roles and objectives of the project. In taking a stakeholder perspective to risk management, it is necessary to explore why the vested interest of an individual or group may be a key indicator of their likely decision-making processes, which ultimately shape their responses to the process and potential risk ( 2001).
An explanation for trying to understand the importance of the vested interests of stakeholders may lie in decision theory, which states that in making decisions, people choose between alternatives; rather, they select preferences between options. Empirical evidence concerning risk responses is also often ignored in the risk analysis process. People vary in their estimation of risk so that the same set of circumstances may be evaluated differently by individuals. There is a tendency to overestimate fabulous risk and to confuse probability with consequence. Thus, there might be a temptation to focus on low probability risk with severe consequences rather than high probability risk with lower potential losses. Evidence suggests that individuals do not understand, trust, or use accurately probability estimates (2001). Risk is an important consideration not only for management of business but for logistics management as well.
Risk situation in the context of logistics management
Opinion corresponds, traditionally speaking, to rhetoric as a form of mutual influence. Science appears to escape this rule only by making use of statistical procedures. This requires enormous efforts in gathering data and calculating; and it must in the end prove to have been worth the trouble. Statements are thus produced that claim to be scientifically well founded. This might be perfectly reasonable if latent structures that would otherwise escape attention can in this way be rendered visible. However, this does nothing to change the fact that, in the present, opinion is the only possible approach to the future thus reducing participants in all social controversies requiring appraisal of the future to the knowledge-form of opinion, and bringing their efforts at convincing others down to the level of rhetoric (1993). The risk situation of modern society thus has a double effect. To reduce risk, greater demands are made for scientifically guaranteed security within the context of probability/improbability, thus forcing them to adopt the rhetorical mode.
Science itself may behave reticently, but in so doing it exposes itself to criticism that it does nothing to promote its comprehensibility, or to face up to its societal responsibilities. If science responds to this demand, it risks having to appear unsound or, at third or fourth hand, of presenting contradictory views on the same subject although careful investigation reveals no internal differences of opinion among scientists. Science's risk increases in proportion to society's risk-aversion (1993). The risk situation in the context of logistics management can related to having a secured record of supplies. In logistics management having a secured record of supplies is an important thing. Having a record of supplies is a risky thing that a company has to do. Having a record of supplies may give a company benefits such as efficient list of supplies but it can also cause problems with regards to the secrecy of the information contained in each record.
The system
Systems modeling is an attempt to draw all the key dimensions present into a single model. This is, in general, a highly mathematicised approach, and is usually applied to relatively 'hard' and quantifiable systems. A more generalist systems approach, which can be extended to soft systems that cannot be quantified on an equivalent basis, emphasizes the development of an understanding of the pattern of interaction between the systems concerned. This usually involves drawing on a range of models and analytical tools and constructs developed in the various specialist disciplines involved. The role of a general systems approach is to provide a perspective and a context for assimilating and integrating the insights offered by different techniques ( 1996).
In logistics management there can be different risks that a company encounters. To counter problems coming out of the risk a system would likely be used. The system would be able to input different information and data that are important to the logistic section of a company. The system would then arrange the said records according to the classification they belong to. To protect the system a specific password would be asked to the user so that only those authorized by the company can access the information they need. This system will help in lowering the levels of risk in the organization. It also provides assistance on making sure that the business will operate smoothly. The first figure will give a diagram of how the system works
Figure 1 Diagram of the system
Accessing the system
Degree of control
The system will be well operated and maintained so that the system will provide benefits to a company and not problems. The system will run smoothly if there will be able and responsible personnel that will check the system and make sure that people who uses it will comply to guidelines in using the system. If the diagram will be used as a basis for running the system lesser problems can be encountered.
Levels of uncertainty
People with a high tolerance for uncertainty may need to experience extreme levels of uncertainty before they become motivated to seek information, at least in an interactive manner. Those with a low tolerance for uncertainty may be motivated to seek information from relatively small amounts of uncertainty, although even they may not rely on interactive strategies to reduce uncertainty and instead use passive and third-party strategies (2004). The level of uncertainty of the system is not too high and this can be maintained by making sure that proper use of the system is a top focus of a company. The system will not create problems as long as it is used well. As shown by the diagram the level of uncertainty will be lessened by the password protection.
Growth potential
The diagram can describe that there can still be improvements for the system. The system will be able to grow and be upgraded as soon as a need for such becomes imminent. The system is highly adaptable to change and it can still accept upgrades. The upgrade will depend on how beneficial the system is and how imminent is there for changes to transpire.
Risk mitigation
Risk mitigation is commonly employed in quality management. Quality control processes surface quality problems that arise. Note that quality control techniques, such as control charts, serve a risk identification function. For example, quality control chart patterns might suggest a problem with a grinding machine. An inspection of the machine leads technicians to conclude that a loose drive belt is causing non conformance of the product to specifications. Worse yet, the loose belt might ultimately tear and cause substantial disruptions to the production effort. To mitigate the likelihood of drive belt based problems, the technicians tighten the belt and implement a policy of routinely tightening it once a month (2003). The risk mitigation method that can be used for this system is tightening the security features of the said system. By doing so the system will work well and few problems can be encountered. As the diagram shows a security feature of the system is the password protection wherein users have to enter the password before they can add or access the data bank.
Conclusion
As mentioned the focus of SCM or logistics management is on adding value and eliminating inefficiencies at each stage of a company’s supply chain. This will include, for example, the optimization of stock or inventory movements; planning for peak activity periods; and the organization of transport and distribution systems. A major concern in recent years in managing projects has been the continuing problem of dealing with risk and uncertainty. Risk is an important consideration not only for management of business but for logistics management as well. The risk situation in the context of logistics management can related to having a secured record of supplies. In logistics management having a secured record of supplies is an important thing. A system would be used to have a secured record of supplies. The system would be able to input different information and data that are important to the logistic section of a company.
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