This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.
The concept of supply chain became familiar since mid 1980's following globalization became predominantly economic order of the day. Due to the existing tight market computation in the global economy, companies required being efficient in production or service delivering process as well as being cost effective, so that remain competitive in the global market. To this effect, especially multinational companies obliged to see different strategy options which can be remedy for reducing their cost of production. The concepts of out sourcing, offshoring, global sourcing, etc considered as supply chain strategy for companies to keep their cost of production minimum and to maintaining competitiveness. Due to the emerging of these concepts and the increasing trends of terrorist attack all over the world, supply chain became more complex than ever before. In order to make manageable the increasing trend of supply chain complexity, parties involved end- to end in the supply chain, individual countries, regional groups, and international organizations are exerting their efforts in developing appropriate supply chain management strategies and various supply chain security initiatives.
This brief paper is structured in five sections. Following introduction, sections 2 presents conceptual framework of supply chain. Section 3 discuses about supply chain security initiatives. Section 4 deals with the implication of the new distribution contract for Bright Spark Pty Ltd. At the end, Section 5 dwells on conclusion remarks and recommendations.
2.1. Supply Chain Management
There are various definitions for supply chain management which defined by different scholars and interested groups from different perspectives. According to the Wikipedia, the free encyclopedia, one of the most common and accepted definitions of Supply Chain Management is that "the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. A supply chain, as opposed to supply chain management, is a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer."
Supply chain management (SCM) more precisely defined as "the task of integrating organizational units along Supply chain and coordinating flows (materials, information, financial) in order to fulfill (ultimate) customer demands with the aim of improving competitiveness of supply chain (SC) as a whole ".This definition clearly states that there are three different flows, which are material flows, information flows and financial flows, between the point of origin and the point of final destination so that ultimately to meet customer requirement. In the existing global world, parties involved end- to-end in the supply chain required to perform high efficiency and effectiveness in the flow of materials and information in order to satisfy customer demand and to be competitive in the international market.
This is to mean the performance of each parties of the supply chain is highly imperative to the achievement of ultimate objective of bringing customer satisfaction. In this regard, Encyclopedia of Business ( 2nd ed.) clearly stated that "Supply chain management (SCM) is a broadened management focus that considers the combined impact of all the companies involved in the production of goods and services, from suppliers to manufacturers to wholesalers to retailers to final consumers and beyond to disposal and recycling. This approach to managing production and logistics networks assumes all companies involved in the process of delivering goods to consumers are part of a network, pipeline, or supply chain. It encompasses everything required to satisfy customers and includes determining which products they will buy, how to produce them, and how to deliver them. The supply chain philosophy ensures that customers receive the right products at the right time at an acceptable price and at the desired location."
In supply chain management there are two driving interests, the customer demand and the company's interest of maximizing profit. In order to balance between the two interests, companies required to enhance the efficiency and effectiveness of their supply chain management.
Effective supply chain management requires simultaneous improvements in both customer service levels and the internal operating efficiencies of the companies in the supply chain. Customer service at its most basic level means consistently high order fill rates, high on-time delivery rates, and a very low rate of products returned by customers for whatever reason. Internal efficiency for organizations in a supply chain means that these organizations get an attractive rate of return on their investments in inventory and other assets and that they find ways to lower their operating and sales expenses.
In order to bring such efficiency and capabilities, the parties involved at all level of supply chain are required to make decision at the right times, in the five basic elements of supply chain activities i.e. production, inventory, location, transportation and information. In this connection, in Basic concepts of supply chain management (pp. 6&7) stated that companies in any supply chain must make decisions individually and collectively regarding their actions in five areas:
Production-What products does the market want? How much of which products should be produced and by when? This activity includes the creation of master production schedules that take into account plant capacities, workload balancing, quality control, and equipment maintenance.
Inventory-What inventory should be stocked at each stage in a supply chain? How much inventory should be held as raw materials, semi finished, or finished goods? The primary purpose of inventory is to act as a buffer against uncertainty in the supply chain. However, holding inventory can be expensive, so what are the optimal inventory levels and reorder points?
Location-Where should facilities for production and inventory storage be located? Where are the most cost efficient locations for production and for storage of inventory? Should existing facilities be used or new ones built? Once these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer.
Transportation-How should inventory be moved from one supply chain location to another? Air freight and truck delivery are generally fast and reliable but they are expensive. Shipping by sea or rail is much less expensive but usually involves longer transit times and more uncertainty. This uncertainty must be compensated for by stocking higher levels of inventory. When is it better to use which mode of transportation?
Information-How much data should be collected and how much information should be shared? Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it.
The relationship between the above mentioned five supply chain drivers are described in the following diagram:
Figure 1 Source: Basic Concepts of Supply Chain Management, Page 17.
A competitive advantage will exist only if several key attributes exist in a supply chain. Five guiding principles are necessary for effective supply chains. Each principle is detailed below:
Know the customer. Without a clear understanding and definition of customer requirements, a supply chain cannot be effectively constructed. To gain this understanding requires the use of classical market research techniques, the construction of an information infrastructure to capture customer transaction data, and the storage and analysis of these data from an operational perspective.
Adopt lean philosophies. During the past two decades, operationally excellent companies have focused on creating lean organizations. As a consequence, these companies have shortened internal lead times and made them more predictable and repeatable, reduced work-in-process inventories from months of supply to days, implemented just-in-time delivery strategies for their most costly component materials, and have worked to dramatically reduce setup times. These actions have substantially reduced indirect costs and improved use of physical space.
Create a supply chain information infrastructure. An effective information infrastructure, both intra-and inter-organizationally, is necessary for a supply chain to achieve competitive advantage.
Integrate business processes. Business processes must be established both intra- and inter-organizationally to support the supply chain's strategic objectives, as illustrated in Figure 2, below. These processes, coupled with the information infrastructure, support the efficient flow of material through the supply chain.
Figure 2 - Integrated information systems and business processes
Unite decision support systems. Academics and software providers have designed and
built Decision Support System (DSS) environments for individual companies and supply chains. These environments are based on different philosophical models. Also, they differ in how they forecast demand, and how they drive production and allocation decisions. Their goal is to generate plans that simultaneously consider all elements of the supply chain.
Global Sourcing Model
Wikipedia, the free encyclopedia defined Global sourcing as "a term used to describe practice of sourcing from the global market for goods and services across geopolitical boundaries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs."
The global sourcing of goods and services has advantages and disadvantages that can go beyond low cost. Some advantages of global sourcing, beyond low cost, include: learning how to do business in a potential market, tapping into skills or resources unavailable domestically, developing alternate supplier/vendor sources to stimulate competition, and increasing total supply capacity. Some key disadvantages of global sourcing can include: hidden costs associated with different cultures and time zones, exposure to financial and political risks in countries with (often) emerging economies, increased risk of the loss of intellectual property, and increased monitoring costs relative to domestic supply. For manufactured goods, some key disadvantages include long lead times, the risk of port shutdowns interrupting supply, and the difficulty of monitoring product quality (Wikipedia, 2009).
Supply Chain Risk
As supply chain is defined as a set of organizations directly linked by one or more of the upstream and downstream flows of products, services, finances, and information from a source to a customer, it is vulnerable to a number of risk factors that can disrupt the healthiness of the whole supply chain. It is more severe in the case of international supply chain since it is governed by the law of global phenomena. Some of the risks that will occur in supply chain are even difficult to predict.
The supply chain risks can come in many forms such as natural disasters (severe weather, fire, and earthquake), flu / pandemic (very difficult to predict), economic risks, political risks, strikes, terrorism, transportation risks, unstable demand, and unstable supply.
Supply Chain Risk Management Manager of any organization involved in the supply chain is responsible to take action to mitigate the types of risks mentioned above. The manager first has to understand the risk factors that can disrupt the supply chain. Then, it is important to prioritize the risks according to the level of risk. Finally, in order to take action, the manager has to develop mitigation strategies.
Kinaxis [2008, p.6] states that the mitigation strategies can be different depending on the situation. The mitigation strategies could include;
For risks related to the supply base:
sourcing from different suppliers,
developing supply sources in other parts of the world,
alternate modes of transportation, and
product re-design to use standard components.
For risks related to demand variability:
postponement strategies, and
Benefits of Supply Chain
All parties of supply chain are mutually benefited. If not, supply chain may not exist at all. Because each parties of the supply chain decide to be a member of a specific supply chain only when that individual assumed to be beneficiary from the final objective of that chain. The benefit can be short term or long term depends on the nature of the business. The types of benefit goes to individuals engaged in the supply chain also vary in accordance with their specific role in the supply chain.
In this respect, Constructing Excellence [2004, p.1] summarized the benefits for individual companies, end-users and project clients in the supply chain as follows:
The benefits for individual companies in the supply chain include:
â€¢ reduced real costs, with margins maintenance
â€¢ incentive to remove waste from the process
â€¢ greater certainty of out-turn costs
â€¢ delivery of better underlying value to the client
â€¢ more repeat business with key clients
â€¢ greater confidence in longer-term planning
The benefits for end-users and project clients include a more responsive industry delivering facilities that better meet user needs, delivered to time and cost with minimum defects. This in turn creates higher customer satisfaction levels and an improved reputation for the industry.
Supply Chain Security
The international supply chain is vulnerable since it consists of many different parties which handle large amounts of goods and information and since there are many occasions where goods must be reloaded. Vulnerability is twofold: partly the risk that the supply chain is broken due to a terrorist attack, partly the risk that terrorists use a mode of transport to make an attack. At the same time the economy of countries is also vulnerable since many companies are dependent on the supply chain for their production, and supplies for people in general are dependent on international trade.
Following the 9/11 terrorist attacks against the World Trade Center in New York and the Pentagon in Washington DC, the issue of supply chain security became a priority agenda of individual countries, regional and international organizations such as World Customs Organization (WCO), International Maritime Organization (IMO), EU, APEC, etc. In the study guide [2010, p. 46] clearly underlined how security of trade is now become as important as free trade, stated as follow:
'The terror and tragedy of September 11, 2001, have emphasized the need for reforms in border and transport infrastructure. Terrorist attacks can seriously disrupt the passage of people, goods, and modes of transport across borders. Measures designed to stop terrorism can add certainty and stability to the global economy, raise investor confidence, and facilitate trade. Secure trade is now as important as free trade.' (World Bank, 2003, p182)
This was a turning point to paradigm shift in thinking of board control from minimum intervention in the movement of international trade towards full scale checking. Such extreme position is being clearly reflected specially in most security initiatives of the United States. In this regards, security Freight Initiative (SFI) - 100% Cargo Screening, which caused great controversy, can be cited as a good example.
There are various security initiatives developed by individual countries such as USA, regional groups such as EU, APEC and international organizations such as WCO from different perspectives. Some of such security initiatives are Advanced Manifest Reporting -including 10+2, Security Freight Initiative, CT-PAT, Authorized Economic Operator, WCO Framework of Standards, Secure trade in APEC Region, etc.
3.1. The United States' Security Initiatives
Prior to the terrorist attack of September 11, USA had developed different security programs due to frequent terrorist attacks taken place targeted against the USA institutions and interests. Immediately after the events of 9/11, The American government and Customs launched the security initiative programs already developed. Some of the programs are Customs-Trade Partnership Against Terrorism (C-TPAT), Advance Manifest Regulation ("24-hour rule"), Container Security Initiative (CSI), Free and Secure Trade (FAST) and Automated Commercial Environment (ACE).
Customs-Trade Partnership Against Terrorism (C-TPAT)
C-TPAT is the core of the system. A voluntary certification program that is intended to guarantee importers is not subjected to more inspections than they were prior to September 11. Kommerskollegium, [2008,p. 30] states that according to the American customs, the Customs-Trade Partnership Against Terrorism (CTPAT) is an initiative that has the aim that companies and authorities shall work together to strengthen and improve the entire international supply chain. C-TPAT only applies to imports to the USA. It has farther stated that"â€¦ the American customs could only guarantee that certified companies would not be subjected to a higher frequency of inspections than before September 11. However, in the American custom's strategic plan for C-TPAT23 more ambitious goals are expressed: to enhance security for a significant proportion of the consignments arriving in the USA; to give both benefits and incentives to those companies that fulfil or exceed the requirements laid down in C-TPAT, and to concentrate CPB's resources on the consignments that are assessed to have the highest risk."
C-TPAT primarily includes companies with operations in the USA and certain specially invited foreign manufacturers. The objective of the selection of companies to participate in the program was to select those companies that are directly responsible for parts of the transport chain into the USA and that constitute a low risk but handle a large volume Kommerskollegium, [2008,p. 30].
A company that intends to be C-TPAT certified must meet requirements in a number of different
fields. The requirements are different for different types of companies and the role they have in the supply chain, but there is a considerable degree of overlapping between the requirements Kommerskollegium, [2008, p. 31]. It has farther elaborated that importers must conduct a comprehensive assessment of their entire international supply chains, defined from point of origin (manufacturer, supplier, vendor) to the point of distribution. The areas in which there are requirements on importers in C-TPAT are listed in summary form in fact below:
Business partner requirements;
Physical access controls;
Physical security; and
C-TPAT has also clearly specified the requirements that the participant companies have to fulfill. The requirements are including that participating companies to have extensive cooperation with their partners in the supply chain, the importers to have documented routines for the selection of business partners, importers those are eligible for C-TPAT certification to have documentation that shows business partners' potential status in C-TPAT, written documentations for those companies not eligible for C-TPAT certification that shows they can comply with the security requirements specified in C-TPAT (verified by contracts, certificates/letters from managing directors), certificate that shows whether the company complies with the WCO's SAFE framework issued by a foreign customs authority Kommerskollegium, [2008, p. 31].
Furthermore in C-TPAT it is stipulated that the importance of the importer to indicate the place where a product is packed or consigned from, ensuring the importer its partners have satisfactory routines that prevent the cargo being changed or manipulated in any way when it is dispatched and the importer has to regularly checked both processes and premises of the business partner whether it has fulfill the requirements of the importer and the importer ensuring that their partners document any connections with the security programs of other customs authorities and whether having sound financial position to meet heightened security requirements. In addition to this, in C-TPAT it is clearly stated that business partners must be C-TPAT compatible Kommerskollegium, [2008, p. 31].
Advance Manifest Regulation ("24-hour rule"), legislation that requires that goods that are imported into the USA shall be notified to the American customs 24 hours before they leave the port of shipment Kommerskollegium, [2008, p. 29].The rule makes it possible for customs personnel in the USA to make an advance examination of high risk consignments before a container is loaded in a foreign port. If a company breaks the rule the result may be legal action and permission to discharge the entire ship may not be given. The Customs' Automated Targeting System (ATS) applies hundreds of pre-programmed selection criteria to determine the containers that shall be extracted for inspection and each consignment is given a factor based on terrorist risk Kommerskollegium, [2008, p. 39].
Container Security Initiative (CSI), a network of security-certified ports outside the USA with
American customs personnel stationed there Kommerskollegium, [2008, p. 29].The main objective of the CSI is the early identification and inspection of containers that can be used for terrorism Kommerskollegium, [2008, p. 37].
Free and Secure Trade (FAST) is an agreement between the USA, Canada and Mexico which
regulates the coordination of customs clearance between the countries and has the aim of speeding up the processing of certified companies and carriers at border crossings Kommerskollegium, [2008, p. 29]. The participating countries have agreed to coordinate, to the maximum possible, their processes for the clearance of shipments at the border Kommerskollegium, [2008, p. 40].
SAFE Port Act, In October 2006 the American Congress approved further consolidation of the legislation in respect of port security in the so-called SAFE Port Act. This is an extensive legislative package which includes, among other things, strengthening CSI and Câ€‘TPAT. In addition, the package contains instructions to the Department of Homeland Security to produce a proposal on ways in which further information can be submitted in respect of cargo and transport to American ports with the aim of making a better risk assessment. The proposal is referred to informally as "10+2" - usually with a reference to the SAFE Port Act. Kommerskollegium, [2008, p. 40].
Regional Groups Security Initiatives
EU Security Initiatives
After September 11, 2001, the European authorities have followed their American counterparts and presented a large number of proposals for security programs: Kommerskollegium, [2008, p. 50].
Rules for civil aviation security 2002,
Enhancing ship and port facility security 2004 and enhancing port security 2005,
Amendment of the Community customs code and introduction of authorized economic operators (AEO) and 24-hour advance notification,
Enhancing supply chain security, and
Further reinforcement of civil aviation security, under preparation in 2007.
At the end of 2003, the Commission presented a proposal to the European Parliament and Council on measures to improve security in the supply chain. The proposal was adopted as a regulation of the European Parliament and Council amending Council Regulation (EEC) no. 2913/92 establishing the Community Customs Code Kommerskollegium, [2008, p. 51].
APEC/STAR Security Initiatives
Where the theme of security for transport and travel is concerned, Asia Pacific Economic Cooperation (APEC) has arranged the so-called STAR conferences (STAR - Secure Trade in the APEC region) since 2003. The conference in 2007, STAR V, was held in Australia in June and focused on cost-effective solutions to enhance security in travel and transport in the region. STAR is an initiative which, in common with C-TPAT and CSI, was created as a reaction to the terrorist attacks of September 11, 2001. The heads of government in the APEC states have therefore created an action plan which aims to enhance security for goods, ships, aircraft and passengers with the aid of a number of security measures Kommerskollegium, [2008, p. 61].
International Security Initiatives
Currently there are three major international security standards, all of which have been drawn up to enhance security in the supply chain at the global level: The World Customs Organization's Framework of Standards to Secure and Facilitate Global Trade (WCO's SAFE framework); the
International Ship and Port Facility Security Code (ISPS Code), and ISO/PAS 28000.
WCO's SAFE framework
The framework is one of the most ambitious initiatives for security in the supply chain, since it includes all member states in the WCO and is based on cooperation both between different customs authorities and between companies and customs authorities. Moreover, the framework also applies to all modes of transport.
Objectives and principles
According to the WCO, SAFE is intended to establish standards that create security in the supply
chain in order to create confidence and predictability. Security shall be made possible for all modes of transport in the supply chain. Furthermore, the role and function of the customs authorities shall be strengthened through SAFE, as well as cooperation between customs authorities to enable them to enhance their prospects of identifying high risk consignments. Another important component is to strengthen cooperation between customs authorities and companies, while promoting smooth flows of goods through secure supply chains Kommerskollegium, [2008, pp. 19 & 20].
Three target groups have been identified that will derive benefits from SAFE: states/governments, customs authorities and companies. The economic growth and development of states and governments will be strengthened since SAFE secures and simplifies international trade and, at the same time, combats terrorism. Extended and enhanced cooperation between customs authorities will have the effect that they can make inspections earlier in the supply chain and, in addition, allocate their resources more effectively. Where companies are concerned, the international trade facilitation will have the effect that it is easier to move goods between countries, and Authorized Economic Operators (AEO) will find that their goods are cleared more rapidly by the customs which, in turn, will produce savings in the form of reductions in time and costs Kommerskollegium, [2008, p. 20].
SAFE is based on four core elements which are intended to permeate the work of improving security in the supply chain: Advance electronic information, Risk management, outbound inspection, and Business partnership Kommerskollegium, [2008, p. 20].
Business partnership: SAFE defines benefits that customs authorities shall offer businesses that
meet minimal supply chain security as well as standards and best practices. SAFE consists of 17 security standards broken down into two pillars: customs to customs network arrangements and customs to business partnerships. This structure follows the WCO's existing security and facilitation measures and programs that have been developed by the member states. Kommerskollegium, [2008, p. 20].
The Implication of The New Distribution Contract For Bright Spark Pty Ltd
The Bright Spark Pty Ltd is company engaged in the production of technology products. The company uses a verity of raw materials and semi-finished components sourced from different countries. The key component that goes to the final product is currently sourced from a country that has significantly lower labor costs than other potential suppliers and the government is prepared to provide additional tax incentives to retain the business. The sourcing country has been listed by the US Government as a security concern. The final assembly process takes place in Malaysia and the finished product is exported from Tanjung Pelepas which is a CSI port. It is first time to the company to export US market. The new distributer, Flotsam and Jetsam inc. is a member of the US C-TPAT program.
The new distributer, Flotsam and Jetsam inc. being a member of the US C-TPAT program is an opportunity to the Bright Spark Pty Ltd. Because, the company is benefited from not being subject to frequent inspection and get a better facilitation compare to non-member importers. As a result the product can easily enter to the America Market.
However, the successful implementation of the negotiated distribution contract entered between Bright Spark Pty Ltd and Fiotsam and Jetsam Inc. depends, among other things, upon the implementation of a well thought supply chain management strategy and the efforts made by Bright Spark Pty Ltd to provide the information for Fiotsam and Jetsam Inc. required by US C-TPAT. According to US C-TPAT program, the importer required to provide information about business partners such as present certificate that shows whether the company complies with the WCO's SAFE framework issued by a foreign customs authority, to indicate the place where a product is packed or consigned from, etc. Since the key component is sourced from country which has been listed by the US Government as a security concern and the production site Country (Malaysia) is not assumed to be free from susceptible to terrorist attack, the company expected to assure whether the whole supply chain is secured. This is not an easy task; because it requires taking self evaluation on internal security system of the company as well as external security system starting from sourcing countries covered the whole supply chain. Such inspection process may require substantial amount of budget.
In addition to this, since it is for the first time the company exporting the product to the US market, the consignment will be high risk for US Customs and Border Protection (CBP) agency, because as risk management principle new trader is unknown and it will be more risk than the existing one. Therefore, this will be a challenge for the new distributer to convince the CBP unless the company provides detail profile of the company to the importing country. In this regard, the profile of the company in the exporting country customs administration and security agencies is imperative for the satisfaction of the importing country.
Due to the existing high level security concern of the importing country, it is also required to fulfill the requirement of all related security initiatives including; Customs-Trade Partnership Against Terrorism (C-TPAT), Advance Manifest Regulation ("24-hour rule"), Container Security Initiative (CSI), SAFE Port Act, and Automated Commercial Environment (ACE).
Bright Spark's products are assembled in Malaysia from a variety of raw materials and semi-finished components that are sourced from different countries in the world. In addition to this, a key component that goes in to the final product is sourced from a country that has been listed as a "security concern". This condition is highly vulnerable to terrorist attack. Terrorism is one of the risk factors that could disrupt the supply chain, and this condition could affect the competitive position, profitability, credibility, and customer relationship of the Bright Spark Pty Ltd.
The prevalent sourcing strategy of the company indicates that almost all verity of raw materials and semi-finished components including the key component of the finished products sourced from different countries. Global sourcing often aims to exploit global efficiencies in the delivery of a product or service. These efficiencies include low cost skilled labor, low cost raw material and other economic factors like tax breaks and low trade tariffs. However, since such fully dependency on global sources vulnerable to uncertainty, it has its own disadvantages. Some of key disadvantages include long lead times, the risk of port shutdowns interrupting supply, and the difficulty of monitoring product quality. In addition to this, the company could exposed to hidden costs associated with different cultures and time zones, exposure to financial and political risks in sourcing countries that could disrupt the supply chain. This could also have an implication on the new distribution contract.
Conclusion and Recommendation
The Bright Spark Pty Ltd. has both opportunity and drawbacks to supply the US market in the most cost effective means. In order to effectively exploit the opportunity and take remedial action on the drawbacks, Bright Spark needs to have a supply chain management plan considering the key elements of supply chain: production, supply, inventory, location, transportation, and information and take into account related national, regional and international supply chain security initiatives.
The company has to respect the United States security standards requirements and guideline. The requirements are including having extensive cooperation with their partners in the supply chain; provide certificates, if any, that shows whether the company complies with the WCO's SAFE framework issued by a foreign customs authority, providing detail information about the company's profile and documents that indicate the place where a product is packed or consigned from and security measure performance of the company, etc.
The company needs to have a rigorous supply chain management strategy that incorporates risk management. It has to assess and map the security profiles of all tiers of suppliers and carriers in the supply chain and work with them to have security standards and ensure that the supply network is visible and secured. Since the product is shipped via the CSI port where the importing country has security concern, it has to invest on security measures in order to fulfill the security initiatives standards of the importing country in order to be beneficiary from getting maximum facilitation so that reduce cycle time and inspection fees.
As part of the risk management plan, Bright Spark needs to have a contingency plan. Currently its preferred key component supplier is in a country which has been listed by the US Government as a "security concern." It should identify alternate key component suppliers from different countries with fewer security risks and with low labor cost and that provide tax incentive in order to ensure supply chain continuity in case disruption occurs at the preferred supplier. The company needs to follow flexible sourcing strategy which allows having multiple suppliers for key components and considering a make-and-buy strategy where it produces certain amount of the key component in-house (onshore) and outsource a certain volume of the product to other suppliers.
To conclude, the company requires allocating substantial investment resources for implementation of security measures to satisfy the importing country security standard so that to avoid security inspection and being beneficiary from facilitation. Develop supply chain management strategy is very crucial for the company to avoid risks that disrupt in supply chain and to be reliable supplier according to the contract agreement and finally to satisfy the customer need. By doing so, Bright Spark can enjoy from being strong competitor in huge American market.