Supply Chains Part 2

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sourcing decisions in the supply chain

range of choices for defining links in the supply chain 1.vertical integration-100% ownership 2. virtual integration-joint venture or equity partner 3. strategic alliances - long term relationship 4. arm's length transaction-short term contract

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sourcing decisions define organizational boundaries - How do we choose? Protecting intellectual property Loss of control Relative cost and quality Required skills / processes Core competencies What are they now? What should they be in the future?

1.protecting intellectual property 2.loss of control 3.relative cost and quality 4.required skills/processes 5.core competencies-What are they now? AND What should they be in the future?

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global sourcing - possible benefits

1.reduced production costs 2.labor availability 3.wider choice of suppliers gives better materials and better products for our customers

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global sourcing- added complexity

1.increased complexity of order fulfillment process, marketing efforts 2.managing exchange rate fluctuations (risk) 3. minimizing tariff and quota problems 4.instability of governments, diplomatic relations

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local vs global sourcing

1.local sourcing- high holding cost and high demand uncertainty 2.global sourcing - low holding cost and low demand uncertainty

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supply chain alliances take the buyer-supplier relationship and make it even closer by

1.sharing confidential information (costs, demand data) 2.investing assets in joint projects – new product development, mfg., etc. 3.pursuing joint improvement projects and sharing the resulting benefits

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selecting alliance partners

1.benefits both parties resulting in win-win scenario 2.adds to the stability of the firm

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supply chain alliances take the buyer-supplier and make it even closer by

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supply alliance partners benefit both parties to result in win-win scenario

1.access to partner’s capabilities, technologies, distribution channels 2. improved efficiency and effectiveness through coordination 3.jointly optimizing the system, rather than individually optimizing facilities (more profit to be shared)

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considerations for selecting alliance partners

1.stability of the firm 2.history of market success 3.low rate of management turnover 4.steady management-employee relations 5. stable financial position 6.commitment to continuous improvement

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developing trust with alliance partners

1.be reliable – follow through on commitments; act in a predictable manner 2.be loyal – show responsiveness to partner’s needs; be willing to “go out on a limb” 3.ease feelings of vulnerability – share information; take actions that benefit both parties

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key technologies in supply chain information management

1.bar coding 2.internet 3.enterprise resource planning (ERP) software 4. radio frequency identification (RFID)

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current IT-driven supply chain initiatives

→ all are focused on integrating decision-making in order to improve performance 1.efficient consumer response 2.customer relationship management 3.vendor-managed inventories 4.collaborative forecasting, planning, and replenishment (CPFR)

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Created by: rainesv