Supply-chain management is the integration of the activities that procure materials and services transform them into intermediate goods and final products, and deliver them to customers. These activities include purchasing and outsourcing activities, plus many other functions that are important to relationship with suppliers and distributors. Supply-chain management is the management of activities that procure materials and services, transforming them into intermediate goods and final products, and delivering the products through the distribution system.
In a keiretsu, suppliers become part of a company coalition. Finally, fifth strategy is to develop virtual companies that use suppliers on an as-needed basis. 6. 1. Many Suppliers With the many-supplier strategy, the supplier responds to the demands and specifications of a “request for quotation”, with the order usually going to the low bidder. This is a common strategy when products are commodities. This strategy plays one supplier against another and places the burden of meeting the buyer’s demands on the suppliers. Suppliers aggressively compete with one another.
Supply-Chain Management Essay Example
Although many approaches to negotiations can be used with this strategy, long-term, “partnering” relationships are not the goal. This approach holds the supplier responsible for maintaining the necessary technology, expertise, and forecasting abilities, as well as cost, quality, and delivery competencies. 6. 2. Few Suppliers A strategy of few suppliers implies that rather that looking for short-term attributes, such as low cost, a buyer is better off forming a long-term relationship with a few dedicated suppliers. Long-term are more likely to understand the broad objectives of the procuring firm and the end customer.
Using few suppliers can create value by allowing suppliers to have economies of scale and learning curve that yields both lower transaction costs and lower production costs. 6. 3. Vertical Integration Purchasing can be extended to take the form of vertical integration. By vertical integration, we mean developing the ability to produce goods or services previously purchased or actually buying a supplier or a distributor. Vertical integration can take the form of forward or backward integration. Backward integration suggests a firm purchase its suppliers, as in the case of Ford Motor Company deciding to manufacture its own car radios.
Forward integration; on the other hand, suggest that a manufacturer of components make the finished product. An example is Texas Instruments, a manufacturer of integrated circuits that also makes calculators and computers containing integral circuits. 6. 4. Keiretsu Networks Many large Japanese manufacturers have found a middle ground between purchasing from few suppliers and vertical integration. These manufacturers are often financial supporters of suppliers through ownership or loans. The supplier then becomes part of company coalition known as keiretsu.
Members of the keiretsu are assured long-term relationships and are therefore expected to function as partners, providing technical expertise and stable quality production to the manufacturer. Members of the keiretsu can also have suppliers further down the chain, making second-and even third-tier supplier’s part of the coalition. 6. 5. Virtual Companies Companies rely on a variety of supplier relationships to provide services on demand. Also known as hallow corporations or network companies. Virtual companies have fluid, moving organizational boundaries that allow them to create a unique enterprise to meet changing markets demands.