Critical Factors Affecting Supply Chain Management

Environmental uncertainty refers to the environmental issues in the product chain. Ettlie and Reza described this as the unexpected changes of customer, supplier, competitor, and technology. It was said by Yusuf that government support plays an important role for business success. Paulraj and Chen mentioned that environmental uncertainty is an important factor in the realization of strategic supply management plans. The increase of outsourcing activities in the industry had augmented the awareness of the importance of strategic supply management, which leads to better relationship among organizations. Under this factor, three sub-factors were identified: environment, government support, and uncertainty aspects from overseas.

Company environment

This sub-factor is related to the company's relationship with suppliers and their level of trust and commitment. Company environment is also related to the company's expectations of quality, on time delivery, competition in the sector, and the level of rivalry among firms. In order to respond effectively to demand, companies realize that imports are a good option for obtaining flexibility in response, even though working with countries from overseas implies working with uncertainty. According to a study carried out by Ambrose et al., uncertainty negatively affects company performance. But this can be reduced if a strategic relationship with critical suppliers is established. Thus, companies need to implement new strategies that allow them to deal with environmental uncertainties in the supply chain in order to perform in a proficient manner.

Government support

The level of support that the company receives from the government when importing raw materials or products from overseas or using domestic materials. It includes the use of norms, regulations, policies, and advice for the sector. The research conducted by Elzarka et al., describes how government can make a series of reforms to encourage exportats by increasing manufacturing sector's competitiveness in the international market through logistics competency. The increase of international trade for acquiring resources from other countries introduces complicated matters such as language barriers, transportation, transportation costs, exchange rates, tariffs, and administrative practices.

Uncertainty aspects from overseas

When requiring the outsourcing of raw materials or products, it is important to acknowledge the existence of environmental factors such as political uncertainties in other countries that can increase risk for suppliers, provoke decisions of no investment, change business strategies, and in general influence business decisions. Social uncertainties such as religion, environment, language, cultural issues, limitations of communication and also the technology used in other countries might interfere with supply chain planning and function.