environmental risks and transportation risks in the Best Buy supply chain and risk management strategies that the company uses to manage the risks
Change is always inevitable in the supply chain and other departments, and Best buy is no exception. Like in many other businesses, risks in Best Buy supply chain have been evolving, and as a result, they have become more and more prevalent with each passing time. However, the company has used different strategies to manage various types of risks by changing strategies every one or two years to deal with changing landscape of risks, and therefore, no means of transportation that Best Buy supply chain can use to avoid risks. Risks exist almost everywhere, and therefore, they are inevitable and unavoidable. Therefore, understanding different types of risks in the supply chain is key to reducing their impact. This paper will discuss both environmental risks and transportation risks in the Best Buy supply chain and risk management strategies that the company uses to manage the risks its supply chain is facing.
Environmental risk
Today businesses are exposed to several risks in operating their supply chain than never before. As a result of increased laws and regulations on environmental sustainability and ever-changing environmental conditions, organizations need to apply a proactive approach in identifying and making counter-strategies that would reduce these risks. If an organization does not have appropriate risk mitigation strategies in place, then its supply chain will be negatively impacted by the environmental factors. This is because environmental risks are present throughout the lifecycle of an organization’s products. Therefore, there is a need to deal with such risks to avoid serious future effects such as penalties, legal actions, and disruption of the supply chain, which would have an adverse projection of an organization. Therefore, it is important to understand the environmental risks that may affect the company’s suppliers and how such factors would affect the operations of the organization.
There are many forms and types of environmental risks that affect Best Buy’s supply chain in different ways. The most significant environmental risks are natural calamities and extreme weather, which have posed a serious threat to the company’s effective and efficient operation in its supply chains. Extremely cold and hot temperatures and floods are some environmental risks that have affected Best Buy receiving raw materials on time for production and transporting its finished goods to final consumers hence affecting operations of the company.
Another environmental risk that affects the operations of businesses is poor disposal of wastes. This makes the organizational supply chain face lawful actions such as penalties, fines, and other legal actions that may disrupt the operations of the supply chain and the company as a whole. Since many environmental risks are inevitable and unavoidable, Best Buy supply chain managers have complied with rules and regulations that the governments have put in place concerning safe disposal of its wastes, and it has been rare for the company to receive penalties due to unsafe environmental practices.
Transportation risk
In supply chain and business in general, transportation is an important service as it ensures the distribution of raw materials to the organization’s production line, distribution of finished products to the final consumers, and even during disposal of waste products. However, there are transportation risks that a company has to deal with them for its supply chain to operate smoothly. Best Buy has been facing several transportation risks, which include delay from suppliers leading to late delivery of raw materials, high transportation costs, and strict transportation policies that would affect the delivery of both raw materials for production or finished goods to end customers for use leading to shortages.
Risk Management
Best Buy is faced with different types of risks that affect their day-to-day operations. Many of these business risks are inevitable and unavoidable, and therefore the company’s management has tried to develop effective strategies that would reduce the impacts of such risks. In organizations, different departments are faced by different risks, and as a result, the strategies used to reduce the impact of such risks also differ. Risk management in the supply chain is strategic steps that are taken to identify, evaluate, and alleviate the risks that may be facing a company’s supply chain. A compressive approach of supply chain risk management involves managing all kinds of risks for all players and objects of the supply chain like suppliers, ports, locations, distributors, and many more. If the supply chain risk management is done effectively, it embeds and integrates all other core business processes to function like one unit.
The risks that mainly face Best Buy supply chains include financial risks, reputational risks, environmental risks, and artificial risks. The suppliers of materials to the organization often come across scenarios that would threaten their financial position. Best Buy’s financial risks usually result from market volatility and suppliers’ insolvency. The reputational risk of the company’s supply chain has resulted from suppliers and the organization’s managers engaging in activities that would negatively affect the company’s image. In the case of the company’s supply chain, non-compliance with government and social requirements damages the reputation of the organization’s supply chain. Environmental risks usually result from natural disasters such as floods and earthquakes. For an organization or supplier, there is a possibility that its supply chain would be disturbed by natural calamities. As a result of the globalization of business and rapid climatic changes, Best Buy has faced several environmental risks that have affected the supply of supplies and the distribution of its products. Excess rains and very cold temperatures are some risks that have affected the company’s supply chain and its operations in general. Artificial risks result from man actions such as explosions and fires and poor disposal of waste products by organizations.
To deal with the above risks, Best Buy follows three steps, which include risk identification, risk assessment, and risk mitigation. Risk identification involves recognizing the type of risk that is disrupting the company’s supply chain. Establishing risks profile ensures that the organization understands what type of risk is affecting its supply chain. After a risk profile is established, the second step is to assess all the risks and find out the effects that different risks will have on business. The management should be aware of players and partners who may have a significant impact on their sales, profitability, and daily operations. Risk mitigation is the last step in risk management, and it involves preventive and reactive measures of addressing specific risks to secure and protect its brands and products.