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The coordination and management of the supply chain handle both the production and delivery of a good or service to clients (Min et al. 2019). This includes sourcing, manufacturing, distribution, movement, and arrangement of goods and services (Zekhnini et al. 2020). This report aims at analyzing the risks associated with the transnational supply chain of Under Armour Company, along with the identification of specific risks exposure and potential impact on the company, and strategy for management of the risks. In the following paragraphs, the introduction to the company, elements of global supply risks, and recommendations for effective supply chain management will be given, followed by the overall conclusion.
In 1996, Kevin Plank founded the American sportswear and apparel company Under Armour. The company is well known for its cutting-edge, high-performance sporting equipment (Under Armour 2023). The business is well-known for supporting and promoting top athletes in a range of sports, and as a result, it has gained the trust of numerous professional athletes and sports fans all over the world (Under Armour 2023).
The business offers footwear, apparel, and accessories for kids, women, and adults (Under Armour 2022).
The company provides garments in a variety of styles and fits to improve comfort and mobility, enhance active activity, regulate body temperature, and boost performance regardless of the weather (Cardoso Filho et al. 2019).
A transnational supply chain is one that focuses on cost savings and efficiency through the automation of transactions and process optimization (Lei et al. 2021). In order to optimize its transnational supply chain, Under Armour uses cutting-edge technologies and automation systems to manage its inventory, monitor manufacturing and delivery timetables, and trace products across the supply chain. The firm also employs data analytics and predictive modeling to forecast demand and enhance production and distribution operations (Yan and Yu 2023).
These are supply chain management's essential components in further detail:
Global supply risks are disruptions or unpredictabilities that might occur in the global supply chain and affect the availability, worth, or cost of goods and services (Shih 2020). Pandemics, economic sanctions, trade restrictions, political upheaval, natural disasters, and economic sanctions are only a few of the possible causes of these dangers. A disruption in the global supply chain can have significant repercussions for companies and customers everywhere. For instance, if a natural disaster or trade embargo impairs the production of a key component of a product, delivery delays or increased costs for the final good may follow. An identical hack on a logistics company may halt the flow of goods and cause financial damage (Shih 2020).
Expanding inventories, diversifying supplier bases, investing in technology and data analytics, and collaborating with partners to build strong supply chains are just a few of the strategies that businesses may employ to combat global supply threats. Through trade agreements, infrastructure investments, and emergency preparedness initiatives, governments can also take steps to lower supply risk (Shih 2020).
Coordination of the transfer of products and services across international borders is a component of transnational supply chain management. While it offers businesses many advantages, including lower costs and access to new markets, it also carries a number of risks that must be carefully managed if the company is to succeed. Strategic risks, operational risks, and financial risks are the three primary categories of hazards connected to global supply chains that will be covered in the following paragraphs of this section. It confronts risks related to its global supply network, much like any other multinational corporation.
Strategic risks: Strategic risks are those that can affect a company's overall success as a result of its strategic decisions. For instance, a business can decide to obtain raw materials from a specific nation due to the cheaper prices (Shih 2020). If the nation encounters political unrest or a natural disaster that could impair the supply of supplies, this choice could be dangerous. Similarly to this, a business may decide to enter a new market, but if it does not adequately research the market or modify its goods and services for the regional market, it may not succeed in meeting its goals.
In terms of the case given, Under Armour's dependence on major suppliers is one of the biggest strategic risks the company confronts. The business is susceptible to supply chain interruptions since it only sources its raw materials from a small number of suppliers (Gurtu and Johny 2021). The ability of the business to create and deliver its products to the market may be impacted by any supply chains disruptions, such as natural disasters, political upheaval, or a supplier going bankrupt.
Operational risks: Operational risks are risks that develop as a result of the company's regular business operations. These dangers can include logistical difficulties as well as problems with quality control. For instance, complicated customs procedures may make it difficult for a business to plan the transfer of commodities across international borders, which could result in delays and higher expenses (Shih 2020). Similar difficulties preserving product quality throughout transit may arise for a firm, resulting in irate clients and a decline in sales.
In terms of the case given, there is a certain amount of operational risk in any company's supply chain management. Under Armour's operational risks include issues with quality control, production delays, and transportation challenges (Xu et al. 2019). The company must ensure that its suppliers consistently meet its quality requirements because any issues during production could hinder its ability to get its items to market.
Financial risks: Risks associated with financial transactions or changes in the financial markets are referred to as financial risks. Transnational supply chain management exposes businesses to dangers like interest rate risk, credit risk, and exchange rate risk. For instance, if the value of the foreign currency varies dramatically and drives up expenses, a company that imports raw materials from a foreign nation may be subject to exchange rate risk (Shih 2020).
In terms of the case given, there is a certain level of financial risk associated with production costs, supply chain financing, and exchange rate fluctuations. Due to the fact that Under Armour imports its goods and raw materials from numerous countries, it is subject to exchange rate risk (Miroudot 2020). Unfavorable changes in currency exchange rates can drive up manufacturing costs and squeeze a business's profit margins. The corporation may also have problems securing financing for its supply chain activities as a result of the turmoil in the financial markets (Gurtu and Johny 2021).
In conclusion, there are three main types of risks related to Under Armour's global supply chain, financial risks related to supply chain financing and exchange rate fluctuations, operational risks related to quality control, production delays, and transportation issues, and strategic risks related to the company's reliance on key suppliers. To reduce these risks, the organization must have a strong framework for managing supply chain risks.
The various risks to which Under Armour is exposed and their potential effects on the business are detailed in the paragraphs that follow.
Generally, reliance on significant suppliers is one of the major strategic concerns related to global supply networks. A business may become vulnerable to supply chain disruptions if it depends too heavily on one supplier or a limited number of suppliers. If the supplier encounters financial difficulties, production issues, or geopolitical problems that affect the accessibility of goods or services, this may occur. In global supply chains, where businesses may be sourcing materials or components from suppliers in nations with distinct legislative frameworks, political systems, and commercial practices, the issue of supplier reliance can be particularly acute.
In terms of the given case, Under Armour is susceptible to supply chain interruptions because it only sources its raw ingredients from a small number of vendors. The ability of the business to create and deliver its products to the market may be impacted by any supply chains disruptions, such as natural disasters, political upheaval, or a supplier going bankrupt. For instance, in 2019 the business experienced a disruption in its supply chain as a result of the bankruptcy of one of its suppliers, which delayed the delivery of its goods to the market (Shih 2020). This risk has a large potential effect on Under Armour. Delays in product delivery brought on by supply chain disruptions may result in a reduction in sales and revenue. Additionally, it might affect the company's reputation since if things aren't delivered on time, buyers might stop trusting the brand (Shih 2020).
Risks Related to Regulations and Compliance
Generally, the risk of rules and compliance is another significant strategic risk connected to global supply networks (Sodhi and Tang 2019). Businesses that operate in many jurisdictions are subject to a variety of laws, rules, and standards that may have an effect on how they conduct business and manage their supply chains. The regulatory environment can be complicated and is always changing, and businesses that don't keep up with these changes or don't adhere to the relevant laws and standards risk facing harsh penalties, fines, and reputational harm.
In terms of the given case, due to the fact that Under Armour works internationally, it must adhere to a variety of laws and guidelines on labor, the environment, and safety. If these rules are not followed, the company risk fines, legal action, and reputational harm. Risks associated with compliance and regulation may have a big influence on Under Armour (Sodhi and Tang 2019). Financial losses may result from fines and lawsuits, while loss of clients and market share may come from reputational damage to the business.
The danger of quality assurance issues is one of the major operational concerns connected to global supply chains. Companies frequently deal with vendors who use varied production techniques, quality standards, and quality control procedures when sourcing materials or components from providers in various locations or nations (Gharaei et al. 2019). This can make it difficult to guarantee that the goods or parts obtained from vendors fulfill the necessary quality requirements. Lack of early detection and resolution of quality issues in the supply chain can have a substantial financial and reputational impact. For instance, it could take more time and money to find and rectify issues if a company obtains components from a supplier that does not satisfy the necessary quality requirements.
In terms of the given case, Under Armour must make sure that all of its suppliers regularly fulfill its high criteria for quality. Any problems throughout the manufacturing process may affect the items' quality, which could lead to client complaints and product returns. Quality control problems can lead to a loss of consumer confidence and reputation as well as cash losses via returns and legal action (Gharaei et al. 2019).
A number of factors, including equipment breakdown, labor unrest, or a lack of raw materials, can cause production delays. These delays can affect how quickly products are delivered to market, which could cost businesses money. This risk has a large potential effect on Under Armour (Xu et al. 2019). Losses in sales and revenue can result from production delays, and if products aren't delivered on schedule, the company's reputation may also be impacted.
Moving products for Under Armour from suppliers to distribution facilities and then to retail stores is necessary. The speed at which goods are supplied to the market may be impacted by any transportation issues, such as shipping delays or customs issues (Xu et al. 2019). This danger could have a significant impact on Under Armour. Product deliveries could be delayed due to transportation problems, which could lower sales and revenue. A company's reputation may suffer if it doesn't make scheduled deliveries of items.
Under Armour needs money in order to run its supply chain. The volatility of the financial markets may have an impact on the accessibility of money and the cost of borrowing (Miroudot 2020). This danger could have a significant impact on Under Armour. If funding for the company's supply chain activities cannot be obtained, it may disrupt the manufacturing and distribution of its products, which could lower sales and revenue.
Under Armour needs to implement a thorough supply chain risk management plan that includes the following components:
In order to identify potential hazards and prioritize them based on their likelihood and potential impact, Under Armour should undertake a risk assessment of its supply chain. An examination of the company's vendors, logistics service providers, and other supply chain partners ought to be part of this audit (DuHadway et al. 2019). Additionally, the business should evaluate its own susceptibility to supply chain interruptions and its capabilities to handle them.
As discussed above, a wide variety of hazards, including geopolitical risks, regulatory risks, operational risks, and financial risks, are frequently present in the transnational supply chain of Under Armour. By distributing these risks over a number of suppliers, geographic areas, and marketplaces, diversification can assist the business in managing these risks. The ability of diversity to lessen a company's dependence on a single supplier or market is one of its main advantages (DuHadway et al. 2019).
A business can lessen its reliance on any one supplier or market by diversifying its supply chain. This can assist reduce the risk of supply disruptions and make it possible for the business to continue operating in the event of a disruption. By collaborating with a number of different suppliers, logistics companies, and other partners, Under Armour should diversify its supply chain. By doing so, the company's reliance on a single vendor or location can be decreased, and the effects of supply chain interruptions can be lessened.
In order to ensure visibility and transparency across the supply chain, Under Armour should develop clear communication lines with its logistical partners, vendors, and other partners. This can assist the business in early risk identification and proactive risk mitigation. The business should also tell its clients about its supply chain procedures and the measures it takes to control supply chain risks (Budreviciute et al. 2020).
A company's resilience is defined as its capacity to tolerate and bounce back from supply chain disturbances. This can be accomplished in a number of ways, including by keeping buffer stockpiles of essential components, creating other sources of supply, and putting in place reliable contingency plans (Zekhnini et al. 2020). Companies may lessen the effects of disruptions and ensure the continuation of operations by incorporating resilience into their supply networks.
The ability of a business to alter with the business environment is referred to as flexibility. This can be accomplished by taking steps like building flexible logistics and distribution networks, developing agile production processes, and diversifying the supply chain. Companies can respond swiftly to changes in the business environment and lower their risk exposure by incorporating flexibility into their processes.
By creating backup plans and other sourcing choices, Under Armour should strengthen the supply chain's adaptability and resilience (Zekhnini et al. 2020). To increase the effectiveness and agility of the supply chain, the organization should also make investments in technology and automation.
Continuous improvement refers to a method of continual supply chain operations analysis, review, and improvement (Zekhnini et al. 2020). During this process, potential risks are identified, their likelihood and impact are evaluated, and countermeasures are put in place. A company may build a more dependable and resilient supply chain that is better able to resist disruptions and guarantee continuity of operations by continuously upgrading its operations (Zekhnini et al. 2020). The total effectiveness and efficiency of supply chain activities can also be improved through continuous improvement. A company may save lead times, increase quality, and boost customer satisfaction by identifying and removing inefficiencies and bottlenecks. This can lower the risk of supply chain interruptions while increasing competitiveness and profitability.
To ensure the efficacy and relevance of its supply chain risk management plan, Under Armour should regularly review and enhance it. This may entail performing routine risk analyses, keeping an eye on supplier performance, and getting stakeholder input.
The recommendations are described below.
Budreviciute, A., Damiati, S., Sabir, D.K., Onder, K., Schuller-Goetzburg, P., Plakys, G., Katileviciute, A., Khoja, S. and Kodzius, R., 2020. Management and prevention strategies for non-communicable diseases (NCDs) and their risk factors. Frontiers in public health, p.788.
Cardoso Filho, C.A., Claudino, J.G., Lima, W.P., Amadio, A.C. and Serrão, J.C., 2019. Under Armour Women's Charged Assert 8 Running Shoe, (3), pp.252-257.
DuHadway, S., Carnovale, S. and Hazen, B., 2019. Understanding risk management for intentional supply chain disruptions: Risk detection, risk mitigation, and risk recovery. Annals of Operations Research, 283, pp.179-198.
Gharaei, A., Karimi, M. and Shekarabi, S.A.H., 2019. An integrated multi-product, multi-buyer supply chain under penalty, green, and quality control policies and a vendor-managed inventory with consignment stock agreement: The outer approximation with equality relaxation and augmented penalty algorithm. Applied Mathematical Modelling, 69, pp.223-254.
Gurtu, A. and Johny, J., 2021. Supply chain risk management: A literature review. Risks, 9 (1), p.16.
Khaireddine, H., Salhi, B., Aljabr, J. and Jarboui, A., 2020. Impact of board characteristics on governance, environmental and ethical disclosure. Society and Business Review, 15 (3), pp.273-295.
Lei, Z., Lim, M.K., Cui, L. and Wang, Y., 2021. Modeling of risk transmission and control strategy in the transnational supply chain. International Journal of Production Research, 59 (1), pp.148-167.
Min, S., Zacharia, Z.G. and Smith, C.D., 2019. Defining supply chain management: In the past, present, and future. Journal of business logistics, 40 (1), pp.44-55.
Miroudot, S., 2020. Resilience versus robustness in global value chains: Some policy implications. COVID-19 and trade policy: Why turning inward won’t work, 2020, pp.117-130.
Sawyerr, E. and Harrison, C., 2020. Developing resilient supply chains: lessons from high-reliability organizations. Supply Chain Management: An International Journal, 25(1), pp.77-100.
Shih, W.C., 2020. Global supply chains in a post-pandemic world. Harvard Business Review, 98 (5), pp.82-89.
Sodhi, M.S. and Tang, C.S., 2019. Research opportunities in supply chain transparency. Production and Operations Management, 28 (12), pp.2946-2959.
Studer, W.P. and De Brito Mello, L.C.B., 2021. Core elements underlying supply chain management in the construction industry: A systematic literature review. Buildings, 11 (12), p.569.
Under Armour, 2022. Annual Report-2021. Available at: https://about.underarmour.com/en/investors/financials/annual-report-2021.html (Accessed on 16 April 2023).
Under Armour, 2023. Home. Available at: https://about.underarmour.com/ (Accessed on 16 April 2023).
Xu, M., Cui, Y., Hu, M., Xu, X., Zhang, Z., Liang, S. and Qu, S., 2019. Supply chain sustainability risk and assessment. Journal of Cleaner Production, 225 , pp.857-867.
Yan, X. and Yu, H., 2023. Channel structures of transnational supply chains. Journal of Industrial and Management Optimization, 19 (6), pp.4294-4320.
Zekhnini, K., Cherrafi, A., Bouhaddou, I., Benghabrit, Y. and Garza-Reyes, J.A., 2020. Supply chain management 4.0: a literature review and research framework. Benchmarking: An International Journal, 28 (2), pp.465-501.
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