Cummins Inc. – Analysis of the strategic fit between competitive strategy and supply chain risk management
*Enterprises today are finding that they are relying more and more on supply chain partners for their success. Enterprises spend most of their budget on purchasing goods and services from its supply chain partners. While globalization, extended supply chains and supplier consolidation offer many benefits in efficiency and effectiveness, they can also make supply chains more brittle and can increase risks of supply-chain disruption. Effective supply-chain risk management (SCRM) is essential to any successful business. It is also a capability many enterprises are yet to develop. The supply chain triad shown in figure 1 conceptually represents the key elements that should be of key focus in a SCRM. Identifying, evaluating, treating and monitoring supply chain risk will differ across individual enterprises depending on their industry, the nature of their extended supply chains, and their tolerance for risk.
Figure 1: Risk Management Framework
Supply Chain Process Overview
At Cummins Inc. supply chain risk management (SCRM) is embedded in the DNA of
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A “Risk Map,” “Risk Dashboard,” and a list of the “Top 10 Risks” and their corresponding mitigation strategies are maintained to keep the company operational and be able to spring back from disruptions quickly. Various tools are used to assess the risk such as failure mode and effects analysis, fault tree analysis and probability models are also utilized. A Scatterplot tool is used to depict the probability of failure index vs profit at risk index identifies partners that have higher risk of failure and the corresponding financial impact on the profit as shown in figure 3. The company prioritizes the suppliers that have high risk of failure and a high impact on the profit and work their way
We unleash the Power of Cummins by motivating our employees to act like owners working together. We strive to exceed customer expectations by always being first to the market with the best quality products available. Cummins partners with our customers to make succeed by demanding that everything that we do leads us to a cleaner, healthier and safer environment. We create wealth for all stakeholders through advanced product development. (Cummins, Inc.) The SWOT analysis will provide a realistic picture of our organization in relation to its internal and external environments so we can better establish strategy in pursuit of its mission. (Cummins2)
Cummins has a history of innovation beginning in 1919 when it was founded and produced its first diesel engine, a 1.5 to 8 horsepower model used to power pumps. In 1929, a Cummins engine powered the first diesel-powered U.S car. The company continued to advance in the diesel engine and power generation industry, and in 1958 Cummins Filtration was started to meet the high-performance requirements of Cummins diesel engines (Cummins Inc.). In 1985, Cummins introduced aerodynamic contours to Class 8 trucks years ahead of its time. This new shape greatly reduced air flow drag and, combined with a lightweight engine, attained up to 20 percent higher fuel efficiency than similar vehicles at the time. In 1999, Beijing Public Transit launched a fleet of 300 buses with Cummins B5.9 engines to improve city air quality, being the first clean, alternative fuel fleet in Asia and remains the largest in the world, with more than 3500 Cummins Westport natural gas powered buses (Cummins Inc.). These are just a few examples demonstrating a history marked by improvement and innovation of new technologies in order to reduce emissions and increase efficiencies for the benefit of the environment.
Cummins Inc. is a manufacturing, distribution, service, and sales organization. Until recently, every region had their own compensation reward system that was designed specific to that region and specific to the market it served. In 2015 we moved away from individual performance based bonus structure to a companywide profit sharing plan. This benefit to this program is the unified goal of reducing costs while driving company PBIT. The goal is good and motives for the company are understandable, but local motivation is hampered when you are looking at GLOBAL PBIT goal. The challenge we face now is the lack of motivation for individual and team results that go beyond the expected AOP and work-plan. When there was pay for performance plans for
In recent years, many organizations particularly in a high risk industry have experienced significant losses. For this reason, they have been more considered the importance of the concept 'High Reliability Organization' (HROs). Weick and Sutcliffe (2001) as cited in Takagi and Nakanishi (2006), claim that a comprehending of the HRO concept can lead to clearly understand a technical system within an organization. This leads to minimize any failures from unexpected circumstances. To be more precise, it can be said that the HRO principle assists the organization to determine the risk factors that may negatively affect a company performance in an early stage of a project life cycle. Similarly, Laporte and Consolini (1991) as cited in Aase and Tjensvoll (n.d.) state that any high risk organizations who has applied the HROs principles tend to have an outstanding safety records.
In 1986, Cummins, Inc. took acquisition of Onan Corporation which was owned by Cooper Industries. David W. founded Onan in Minneapolis in 1920. Onan was one of the leading suppliers of generators sets to the United States military during World War II. Furthermore Cummins Inc. acquired Nelson Industries Inc. for $450 million in cash and debt of $38 million. Nelson was a leading company which produced exhaust, air filtration and emission systems.
The risk management plan is for Flayton Electronics following their breach in security of their customer’s information. The document provides an explanation and description of the risk management process undertaken throughout the life cycle of this project. The project manger will be responsible for reviewing and maintaining the Project Risk Management Plan. The manager will ensure that all the risk process factors are appropriate to deal with the risks highlighted in the project.
Risk can be defined as “potential disturbances with their negative consequences”. Sharma & Bhat (2011). The objective of this assignment is to examine Mattel’s Toy recalls. In doing so a risk assessment of Mattel’s supply chain practises before the recall will be formed, the actions taken by all parties involved in the production of those toys that were recalled will be examined, the recalls impact on Mattel will be examined, the transparency and accountability of global supply chains will be identified, and Mattel’s current supply chain will be assessed to identify whether they now effectively managing risk.
It is suggested for any organization to review, reassess any existing supply chain management or any delivery techniques, before developing a new supply chain method so that any exposure to high risk of failure is reduced. Somerset as a company taken advantage of outsourcing and transferred it product manufacturing to China leveraging low cost labor and raw material. The labor cost and other cheap material reduce Somerset overhead cost, but there is always the risk of not delivering product on time due to the foreign country political climate, change in tax and tariff and local
Kersten, W., & Bemeleit, B. (2006). Managing risks in supply chains: How to build reliable collaboration in logistics. Berlin: Erich Schmidt.
Then risk analysis where all the analysis are performed in order to see what strategies they should take in order to reduce the risk effects and results. • With transfer and acceptance they give a responsibility to a person where that person monitor the risk in order to avoid adverse effects which might create an issue in future. • Supply chain risk management helps in generating good relationships, good reputation, and patient health and safety. It also helps in making better decisions, provide opportunity to build a good position in the market and balanced risk ratio. • This article also talks about the application of Analytic Hierarchy process which has four stages-
No firm can be a success without some form of risk management. Risk are the uncertainty in investments requiring an assessment. Risk assessment is a structured and systematic procedure, which is dependent upon the correct identification of hazards and an appropriate assessment of risks arising from them, with a view to making inter-risk comparisons for purposes of their control and avoidance (Nikolić and Ružić-Dimitrijevi, 2009). ERM is a practice that firms implement to manage risks and provide opportunities. ERM is a framework of identifying, evaluating, responding, and monitoring risks that hinder a firm’s objectives. The following paper is a comparison and evaluation to recommended practices for risk manage using article “Risk Leverage
Supply chain management has been defined as that process that involves the management of information, materials, and all the finances that are handled within and across the entire supply chain process (Christopher, 2016). The management is usually done through out the entire supply chain management from that moment when the suppliers are involved through all the manufacturing activities, different distribution activities, and the way that the products are served to the final product consumer (Turban, et al., 2002). The process also includes all the activities that different organizations offers to their customers as after sale services for purposes perfecting their services and products towards their highly valued customers (Christopher,
Over the past decade, risk and uncertainty have increasingly become major issues which impact business activities. Many organizations are raising awareness to minimize the adverse consequences by implementing the process of Risk Management Framework which plays a significant role in mitigating almost all categories of risks. According to Ward (2005), the objective of risk management is to enhance a company’s performance. In particular, the importance of the framework is to assist top management in developing a sensible risk management strategy and program.
Risk mitigation is also the process of controlling actions, which are identified, and selecting the suitable ones to reduce risk according to project objectives (Pa, 2015). Risk mitigation is important in IT organizations in so many ways. According to Ahdieh, Hashemitaba, Ow (2012), mitigation of risk provides a mechanism for managers to handle risk effectively by providing the step wise execution of the risk handling (as cited in Pa, 2015, pg. 49). Some risks, once identified, can readily be eliminated or reduced. However, most risks are much more difficult to mitigate, particularly high-impact, low-probability risks. Therefore, risk mitigation and control need to be long-term efforts by IT project managers throughout the project lifecycle. There are three types of risk mitigation strategies that hold unique to Business Continuity and Disaster
19. Sodhi, Sunil Chopra and ManMohan S. Managing Risk to Avoid Supply Chain Breakdown. MITSloan Management Review. [Online] October 15, 2004. [Cited: February 25, 2010.] http://sloanreview.mit.edu/the-magazine/articles/2004/fall/46109/managing-risk-to-avoid-supplychain-breakdown/.