Chapter 11 - Supply Chain Managmenet

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Keiretsu

A Japanese term that describes suppliers who become part of a company coalition

Make-or-buy decision

A choice between producing a component or service in-house or purchasing it from an outside source

Supply chain

A firm needs to determine strategically how to design the _____ ________

Many Suppliers strategy

A supplier responds to the demands and specifications of a "request for quotation," with the order usually going to the low bidder; low cost

Excess capacity

Another option is to create _____ _____that can be used in response to problems in the supply chains

Virtual companies

Apparel business

Vertical integration

Appears to work best when the organization has a large market share and the management talent to operate an acquired vendor successfully

Cooperate

As in all other such collaborations, the trick is to _________ without diluting the brand or conceding a competitive advantage

Shipping; logistics; tariffs and quotas

As organizations go global, ______ time may increase, ________ may be less reliable, and ______ and ______ may block companies from doing business

Vertical integration

Because ________ _________ is so dangerous, firms may opt for some form of formal collaboration (JT)

Few Suppliers strategy

Better off forming a long-term relationship with a few dedicated suppliers

Information loss or distortion

Boeing

Supply; Reduce

But firms also engage in collaboration to secure ________ or ______ costs (JT)

Supply chain

But the new model of a tight, fast, low inventory ____ ____, operating across political and cultural boundaries, adds a new dimension to risk

Vertical integration

Can offer a strategic opportunity for the operations manager

Vertical integration

Can take the form of forward or backward integration

Primary supplier selection criteria

Capacity, Speed, and Flexibly (Response strategy)

Distribution

Careful selection, monitoring, and effective contracts with penalties

Supplier quality failures

Careful supplier selection, training, certification, and monitoring

Many Suppliers strategy

Common strategy when products are commodities

Reducing potential disruptions; Inevitable negative events

Companies need to focus not only on ______ _______ ______ but also on how to prepare for response to ______ ________ ________

Primary supplier selection criteria

Cost (Low cost strategy)

Few Suppliers strategy

Create value by allowing suppliers to have economies of scale and a learning curve that yields both lower transaction costs and lower production costs

Supplier quality failures

Darden Restaurants

Virtual companies

Designers of clothes license the manufacture

Vertical integration

Developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor

Theft, vandalism, and terrorism

Domestic Port Radiation Intiviatve

Few Suppliers strategy

Encourages those suppliers to provide design innovations and technological expertise and particiapte in JIT programs

Distribution network

Fast transporation, provide premium customer service (Response startegy)

Collaboration

Firms may engage in collaboration to enhance their new product prowess or technological skills (JT)

Vertical integration

For firms with the capital, managerial talent, and required demand _____ _____ may provide substantial opportunities for cost reduction, higher quality, timely delivery, and inventory reduction

Distribution network

Gather and communicate market research data, knowledgeable sales staff (Differentiation Strategy)

Political

Hard Rock Cafe

Fewer suppliers

Having _______ _______ makes the supplier and customer more dependent on each other, increasing risk for both

6

Having decided what to outsource, managers have _______ strategies to consider

Economic

Heading to combat exchange rate risk; purchasing contracts that address price fluctuations

Many Suppliers strategy

Holds the supplier responsible for maintaining the necessary technology, expertise, and forecasting abilities, as well as cost, quality, and delivery competencies

Economic

Honda and Nissan

Supply chain

In any _______ ______, vendor reliability and quality may be challegning

Making less and buying more

Increasing specialization, low communication costs, and fast transportation, companies are ______

Vertical integration

Increasingly difficult

Distribution network

Inexpensive transportation, selling through discount distributors/retailers (Low-cost strategy)

Natural catastrophes

Insurance, alternate sourcing, cross-country diversification

Theft, vandalism and terrorism

Insurance, patent protection, security measures including RFID and GPS, diversification

Many Suppliers strategy

Long term "partnering" relationships are not the goal

Few Suppliers strategy

Long-term suppliers are more likely to understand the broad objectives of the procuring firm and the end customer

Product design characteristics

Low setup time, rapid production ramp up (Response strategy)

Supply chains

Managing integreated _______ _____ is a strategic challenge

Japanese

Many large ______ manufacturers have found another strategy: it is part collaboration, part purchasing from few suppliers, and part vertical integration

Product design characteristics

Maximize performance, minimize costs (Low-cost strategy)

Backward integration

May be particularly dangerous for firms in industries undergoing technological change if management cannot keep abreast of those changes or invest the financial resources necessary for the next wave of technology

Supplier failure to deliver

McDonalds

Central feature of successful supply chains

Members acting in ways that benefit the team (the supply chain)

Keiretsu

Members of the ________ can also have second and even third-tier suppliers as part of the coalition

Keiretsu

Members of the _________ are assured long-term relationships and are therefore expected to collaborate as partners, providing technical expertise and stable quality production to the manufacturer

Supply chain inventory

Minimize inventory to avoid product obsolescence (Differentiation strategy)

Supply chain inventory

Minimize inventory to hold down costs (Low-cost strategy)

Product design characteristics

Modular design to aid product differnation (Differentiaon strategy)

Supply chains

More reliance on ______ ____ = more risk

Speciality and leveraging

Most organizations are better served concentrating on their own _______ and ________ suppliers' contributions

Logistics delays or damage

Multiple/redundant transportation modes and warehouses; secure packaging; effective contracts with penalties

Outsourcing

Part of the continuing trend toward using the efficiency that comes with specialization

Many Suppliers strategy

Plays one supplier against another and places the burden of meeting the buyer's demands on the supplier

Political

Political risk insurance, cross-country diversification, franchising and licensing

Few Suppliers strategy

Poor supplier performance is only one risk the purchaser faces

"Make-or-buy" and outsourcing

Prior to embarking on supply chain design, operations managers must first consider the ______ _____ and ________ _________

Primary supplier selection criteria

Product development skills, willing to share information, and jointly and rapidly develop products (Differentiation strategy)

Inforamtion loss or distortion

Redundance databases, secure IT systems, training of supply chain partners on the proper interpretations and uses of information

Virtual companies

Rely on a variety of good, stable supplier relationships to provide services on demand

Virtual companies

Specialized management expertise, low capital investment, flexibility and speed

Backward integration

Suggests a firm purchase its suppliers

Many Suppliers strategy

Suppliers aggressively compete with one antoher

Virtual companies

Suppliers may provide a variety of services that include doing the payroll, hiring personnel, designing products, providing consulting services, manufacturing components, conducting tests, or distributing products

A supply chain includes

Suppliers, manufacturers, and/or service providers, distributors, wholesalers, and/or retailers, and final customer

Supply chain managment

The coordination of all supply chain activities involved in enhancing customer value; starting with raw materials and ending with a satisfied customer

Few Suppliers startegy

The cost of changing partners is huge, so both buyer and supplier run the risk of becoming captives of the other

Strategic plan

The development of a successful ____ ____ for supply chain management requires careful research, a throughout assessment of the risks involved, and innovative planning

Core competencies

The outsourcing firm focuses on its key success factors and its _______ _________

Few Suppliers strategy

The purchaser must also be concerned about trade secrets and suppliers that make other alliances or venture out on their own

Virtual companies

The relationships may be short or long term and may include true partners, collaborators, or simply able suppliers and subcontractors

Financial supporters

These manufactueres are often ______ ________ of suppliers through ownership or loans

Supplier base

They may also choose to diversify their supplier base by using multiple sources for critical components

Globalization and Logistical complexitiy

This risk is compounded by ______ and ______ _____

Objective of supply chain managment

To coordinate activities within the supply chain to maximize the supply chain's competitive advantage and benefits to the ultimate consumer

Distribution

Toyota

Natural catastrohpes

Toyota

Outsourcing

Transferring a firm's activities that have traditionally been internal to external suppliers

Supply chain inventory

Use buffer stocks to ensure speedy supply (Response strategy)

Supplier failure to deliver

Use multiple suppliers; effective contracts with penalties; subcontractors on retainer, pre-planning

Cross sourcing

Using one supplier for a component and a second supplier for another component, where each supplier acts as a backup for the other

Logistics delays or damage

Walmart

International supply chains

_______ _________ _________ complicate information flows and increase political and currency risks

Flexible, secure supply chains and sufficient insurance

_______, ________ , and ______ ______ against a variety of disruptions are a start

Research and development

____and___ costs are too high and technology changes too rapid for one company to sustain leadership in every competent


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