IMPORTANCE OF INTERNAL SUPPLY CHAIN

Definition: Internal Supply chain refers to the internal environment of an organization which is in the
control of the company and needs to be move smoothly in order to create balanced and effective working
environment.

Importance of Internal Supply Chain: Internal Supply chain plays an important role in the success of an
organization as it includes all activities that are required to produce and deliver the final product.

Threats to the Internal Supply Chain:

 Changing demand trends: Change in demand occurs for every product and it’s an uncertain event
so companies must be able to cope up with such situations when the demand of their product
exceeds or decrease from the normal demand which directly affects the profit of the company.
Possible ways to handle such situations include holding extra supplier so that he can provide raw
material on urgent basis or renting space to store extra stock.
 Machine break downs: It refers to the failure of machine which causes unplanned downtime of
production and directly affects the whole supply chain of the company. To cope up with such
situations a company needs to be more aware of the conditions of their machinery and should
monitor the operations on routine basis in order to avoid any inconvenience.
 Change of Technology: it is necessary for an organization to move with the technological
advancement. Technological change affects the working of employees as it is sometimes difficult
to use such technology and requires training but at the same time helps in optimizing the
company operations.

Balancing of Internal and External Supply Chain Risks:

Though external factors are beyond the control of the company but knowing them would help in making a
contingency plan to survive in uncertain situations.

 Financial: Company should assess the financial conditions and should take into consideration all
the debts, interest payments and taxes when making any decision.
 Economic Factors: Economic downturns are not in the control of company but by keeping a close
view of customer demand and buying behaviour. Company can reduce the impact of economic
factors by making possible forecasts of the demand.
 Employees: Employee turnover is a big issue for most companies as employees are external
factor and a company just can’t control the activities of employees but can increase their
motivation by rewarding them.
 Suppliers: Supplier failure can impact the flow of supply chain to avoid such failure company
should understand the lead times of their operations and should have a backup supplier for
urgency.
 Natural or Man-made disasters: Companies should be aware of their location risk factors and
should have a disaster contingency plan in order to avoid potential losses.
 Commodities: Change in the cost of the commodities can be mitigate by keeping an eye on the
prices of inputs and know -how of cheaper suppliers so that appropriate measures could be taken
in case of uncertain rise in prices.

Conclusion and Recommendations: Make a list of internal and external factors and update and revisit it
monthly so that proper measures could be taken and risk could be minimized.
 DIFFERENCE BETWEEN INTERNAL AND EXTERNAL SUPPLY
CHAIN RISKS ON ITS PERFORMANCE
1. The likelihood of external and internal supply chain risks is different
2. The impact of external risks is greater than the internal one
3. Companies with high degree of supply chain risk management depicts a more performance than
the ones with low degree.
In this Global and competitive market it is important to properly manage the supply chain process
so that the right product can be delivered to the customer. The aim of the study in this article is to study
the influence of internal and external supply chain risks on the performance of Supply chain.

Importance of Supply Chain:

The main goal of the business is to survive which is impossible without analysing the damages
and harms to the system that affects the survival of an organization. Supply chain consists of the flow of
information, materials, money and goods from retailer to manufacturer to distributor and then to customer
and similar in the reverse process.
Risk Management:
These are the coping strategies that provide success to the organization by effectively controlling
and accepting the exposure of risk. It’s about hunting opportunities as according to Financial Risk
Manager, the higher the risk the higher will be return.
Research of 2011, Thun et Al:
Research was done to find out the supply chain risk management practices using survey
methodology in German Automotive industry acquiring 67 manufacturing plants. The research paper
identifies the likelihood of internal and external supply chain, investigated the instruments that deals with
supply chain risks. The cluster analysis was done by grouping the plants in order to check the high
degree of supply chain risks management.
Difference between the Internal and External Supply Chain:
Internal SC refers to the internal boundaries of an organization such as faults of machines,
technological issues, increased prices of raw materials etc. Whereas, External SC are the
environmental/external factors that affects the supply chain directly or indirectly such as, political factors,
economic conditions, supplier failure etc.

RESEARCH METHODOLOGY:

In terms of purpose it is an applied research and the method or implementation is descriptive

survey type. Data is collected through research field in which food industries companies of Rasht are
taken into consideration having 108 units and sample is consists of 84 units. Hypothesis was tested
through Anova ( sig level 0.001 which is less them 0.05 shows the difference between the different levels
of supply chain risk management on corporate performance), t- test (shows that data is normally
distributed as significance level is greater than 0.05- depicts that there is a minor difference between the
likelihood to occur internal and external supply chain risks) and regression model (beta value of 0.012-
0.152 of external risk shows that there is a greater impact of external SC on the performance of Supply
chain).

ENDING NOTE AND SUGGESSTIONS:

The results prove the hypothesis statements to be true and according to the results following
recommendations are provided in the paper:

 Identify potential risks in each part of the supply chain and assess the chain to have better respond
and flexible chain instead of risky.
 Manage and Avoid risk occurrence and continuously take measures to deal with the risks.
 Practice proactive and reactive risk management tools such as multiple sources, use of quality
suppliers and, different smooth routes of distribution channel.