Chapter 11 - Supply Chain Managmenet
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
