Research Paper on Risk Management of Best Buy

Introduction

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 them 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.

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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 (Mukhtar, Romli, Abdullateef & Al-bashiri, 2019). 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 future severe 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.

Many forms and types of environmental risks 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 (Best Buy, 2016). 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, which 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 (Best Buy, 2016). 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 the safe disposal of its wastes. Therefore the company is not penalized because of any 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 (Novack, Gibson, Suzuki & Coyle, 2019). 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 of finished goods to end customers for use leading to shortages (Best Buy, 2016).

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 (Best Buy, 2016). 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 (Brindley, 2017). 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 (Brindley, 2017). 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 reduce the above risks, Best Buy assesses its suppliers' ability to meet the EICC codes, which enables the company to monitor the performance of its suppliers as well as help them to build their capacity. The company's evaluation takes into consideration many social risks, suppliers' willingness to be transparent, and several other dimensions of business (Best Buy, 2016). After an assessment, the company classifies its suppliers according to their risk levels. After classifying its suppliers according to their risk level, the company focuses on auditing and capacity building on those suppliers identified as high and medium risk. Through focusing its efforts on such suppliers, the company is able to enhance environmental practices, and other important practices that reduce the company's supply chain risks, and the company have a reliable supply chain as well as protecting its supply chain workers (Best Buy, 2016). In the year 2016, the company updated risk evaluation strategies to include new measures to ensure more accurate risk classifications.

References

Best Buy, (2016). Responsible sourcing. https://corporate.bestbuy.com/wp-content/uploads/2016/06/FY16-Full-Report-FINAL-sourcing-section.pdfBrindley, C. (2017). Supply chain risk. Routledge.

Mukhtar, A., Romli, A., Abdullateef, M., & Al-bashiri, H. (2019, August). Environmental Risks in Supply Chain: Recommendations and Directions for Future Research. In IOP Conference Series: Materials Science and Engineering (Vol. 551, No. 1, p. 012034). IOP Publishing.

Novack, R. A., Gibson, B. J., Suzuki, Y., & Coyle, J. J. (2019). Transportation: A Global Supply Chain Perspective.