Basic Supply Chain Strategies and Purchasing Techniques

1 January 2017

Explain each strategy, providing relevant examples. A supply chain strategy is frequently miss-understood with supply chain management, where supply chain actions are controlled to decrease costs, but with supply chain strategy it defines how the supply chain should function in order to compete. Supply chain strategy is an iterative method that evaluates the cost benefit trade-offs of prepared components.

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A well accomplished supply chain strategy results in value creation for the business. The basic supply chain strategies are many suppliers, few suppliers, vertical integration, keiretsu network, and virtual company. The many suppliers strategy has many sources per item, it has adversarial relationships, it is short term, little honesty, bargaining, it has high prices, it’s irregular as well as a delivery to receiving dock.

Example for many suppliers is marks and Spencer’s but with this said some companies choose to change strategy and may go into the few suppliers. The few suppliers’ strategy has 1 or few sources per item, partnerships; it is long-term, stable, On-site checks & visits, limited contracts, it has low prices but large orders. It is common, has small lots and delivery to point of use. Example for this is Xerox. (a company that sells and produces printers as well as services and supplies )

The vertical integration strategy produces goods that have been previously purchased; it works with a make-by issue, major financial commitment, but it is hard to do all things well an example of vertical integration is, iron ore which leads to steel, then to automobiles, then distribution system and finally it goes to the dealers. The Keiretsu network strategy also known as the affiliated chain is a system of mutual alliances and cross- ownership, it links the manufacturers, suppliers, distributors and lenders.

An example would be car dealerships. Virtual company strategy is a network of independent companies which are linked to each other through the internet (technology), provides services and it may be long or short term, usually until components are met. For example: eBay where suppliers sell their products through the internet to consumers nationally and internationally. what are the basic purchasing techniques, providing relevant examples.

There are 7 purchasing techniques, which are drop shipping, blanket orders, invoice-less purchasing, electronic ordering and funds transfer, electronic data interchange (EDI), stockless purchasing and outsourcing. Drop shipping is a retail method in which merchandise are shipped directly to the customer from the warehouse or from the supplier instead of getting the products from the retailer. When a product is sold, the retailer passes along the customers’ order details to the wholesaler or supplier who then packages and ships the product.

Some examples of drop shipping companies: – World Wide Brands and e-Bay, where the product is only made once there has been a purchase and payment for the specific item. blanket orders is Also known as a blanket purchase order, the blanket order is a business paper that permits a seller to supply goods and services to a customer on an continuing basis. The conditions of such an agreement usually identify elements of the arrangement such as the type of goods and services that will be provided and the unit price that the customer will pay for each delivered item.

Blanket orders also usually offer detail on how long the agreement is to remain in place, and any other terms and conditions that may be appropriate to the nature of the working relationship between the supplier and the client. Some examples of blanket orders are Sippel’s True Value which is a maintenance department hardware supplier and services pro which is a periodic degreaser service. Invoice-less purchasing is suitable where considerable trust exists between the purchaser and supplier and deliveries are made on a regular basis and re easily verifiable.

Electronic ordering you place orders via the Internet or by using a more prearranged order system such as Electronic Data Interchange (EDI). For example buying or ordering something you want that you cannot find it in local stores off the internet. Funds transfer goes with electronic ordering because it is when money is taken from your account (with your consent) and placed into someone else’s account and vice versa you may be receiving money or transferring money to someone else’s bank account.

For example you purchase an item of clothing off the internet and in order for the company who has the item of clothing to send it to you, you have to pay for the item first so you wound then proceed to means of payment where you will pay the amount asked for the item with shipping fees if any. Then the money needed for this item will be transferred from your account to the sellers account. PayPal is a company that most internet websites use. Both electronic orders and funds transters.

Reduces cost by reducing paperwork; also increases the speed of ordering. lectronic data interchange Is the controlled transmission of data between organizations by electronic means. It is used by companies to exchange information and to transfer electronic documents and files or business data from one computer system to another computer system, for example from one trading partner to another trading partner without human involvement. EDI has replaced the fax machine and mailing list when it comes to information sharing. Using EDI, sharing of data is much quicker and cost effective.

Stockless purchasing is an Arrangement in which a supplier holds the items ordered by the customer in its own warehouse, and releases them as and when required by the customer. for example if I own a bakery and I know I need yeast every second week delivered to me, instead of contacting the company every second week placing an order I make an agreement with them that every second week on a specific date I want X amount of yeast delivered to me. Outsourcing is the act of one company contracting with another company to offer services that might otherwise be performed by in-house employees.

Often the tasks that are outsourced could be performed by the company itself, but in many cases there are financial advantages that come from outsourcing. Many large companies now outsource jobs such ascall center services, e-mail services, and payroll. These jobs are handled by separate companies that specialize in each service, and are often located overseas. Most companies use this means because it usually saves money. Many of the companies that offer outsourcing services are able to do the work for allot less money because they do not have to offer benefits to their employees and have less overhead expenses to worry about.

Depending on the location, it could also be more affordable to outsource to companies which are located in different countries. Some good examples of outsourcing are: If you call the customer service line of a big important business or corporation , there is a good chance you will end up talking to someone thousands of miles away or to a computer, which is a good option if trying to cut costs. also if you go shopping for new clothes, it is probable that some of the clothing you try on were made by people who are also thousands of miles away, in shops far less glamorous than the ones in which the finished products are sold in.

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