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Supply Chain Management

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Management Practice Supply Chain Management Summary This report documents an investigation into best current practice of Supply Chain Management. Various methods of materials procurement are outlined in addition to their relevance to examples in modern industry. The report discusses the ideal characteristics of a successful supply chain. From a traditional perspective, this has proven to be based around the development of strong inter-firm relationships among the participating organisations that make up the supply chain. Additionally, a detailed strategy of materials management is proposed for a manufacturer of earth moving equipment; JCB, and a digital camera manufacturer; Sony. Management Practice Supply Chain Management Materials procurement from the 60s to the 90s Although developed prior to this period, Henry Ford introduced a strong foundation for businesses of the 1960s with Vertical Integration. Ford attempted to control all of the operations in his business by buying other companies in the distribution channel. The Ford Motor Company owned the suppliers up the channel in backward integration and down the channel in forward integration, thereby gaining total control of all stages of the process from raw material extraction to finished car showrooms. Organisations of the 1960s maintained this Vertical Integration structure, in addition to somewhat adversarial inter-firm relationships that were a prevalent characteristic among 1960s businesses. Buyers and sellers typically operated at arm's-length, independent relationships, competing for resources rather than collaborating. The primary benefits associated with the arm's length philosophy were concerned with cost effectiveness when managing external sources. This arm's length approach to merchant and customer relations was balanced with the vertically integrated structure, as primary functions of the organisation were mostly under the firm's control. Before long, this vertically integrated organisational structure began to flatten, which gave rise to the supply chain organisation. Many organisations began to sell their units acquired by vertical integration and chose to partner with other companies that provided these services. Consequently, the concept of supply chain management developed, as organisations were attempting to achieve the cost management benefits of vertical integration without the problems of actually owning the operation. ...read more.


Parallel Sourcing - This combines single and multiple sourcing in order to achieve the advantages of both. This can, however be time consuming and should be considered as a long term solution. Backward Vertical Integration - It may be possible to acquire the source itself in order to increase control over the process as a whole. Make In - When vertical integration has been established, this strategy becomes the company's decision to supply the material itself. Additionally, circumstances may dictate that the company is forced to buy from one supplier as a result of market factors such as location, customer specifications, or exclusive design rights. This is called Sole Sourcing. The selection of suppliers and the determination of order quantities to be placed with them are very important decisions that impact the organisation's performance significantly. Selecting vendors from a large number of possible suppliers with various pros and cons is a difficult and time consuming task that is often influenced by a variety of factors. Prompt delivery of material is a very important factor, particularly where the business employs a JIT approach. Poor delivery performance disrupts production operations and results in lost sales. As a result, many organisations closely monitor their suppliers' on-time delivery performance. Material and product quality is another very important consideration when selecting a supplier. Many modern businesses opt to purchase entire subassemblies or even finished products from suppliers in order to save time. This option ultimately means that the supplier will have a much greater influence on the quality of the final product. This further demonstrates the importance of selecting the right supplier. Supply capacity may also be important in situations where purchases are made in large quantities. The organisation may do business with multiple suppliers in order to allow for shortages for critical items. Another reason would be that one supplier may impose maximum order quantity constraints. In these situations it would be worthwhile to have a backup supplier. ...read more.


Sony's products were at one time all manufactured in Japan. However quality is said to be suffering somewhat since their production moved to Indonesia. This is intended to cut costs and is often a successful measure. However, the cost in terms of the company's long established reputation for quality could be greater. It is hoped that the specialist features such as Carl Zeiss lenses, increasing resolution and storage capacity are enough to improve the quality as perceived by the customer. For specialist items such as lenses, the choice of supplier is Sole Sourcing, as it is not a choice at all. This item can only be obtained from one supplier, as there can be no compromise in quality from a generic lens supplier. This imposes constraints on the whole supply chain by increasing the possibility of disruption to the flow of materials. For a supplier such as Carl Zeiss, Sony must be satisfied with the maximum order quantity. They must be able to achieve economies of scale, however, the need for immediate delivery in emergency is not a problem on the same scale as JCB, as Sony's digital cameras are luxury items and their contract work is negligible. Electronics organisations such as Sony are required to excel in increasingly difficult global competition. This compels them to carefully consider their approach to supply chain management. International procurement is becoming increasingly popular in order to take advantage of the benefits that overseas suppliers can provide. Consequently, it is important to evaluate suppliers according to the international aspect of the sourcing decision. Conclusions A successful purchasing programme cannot be accomplished unless cooperative supplier relationships are maintained. It is often the case that the supplier is blamed for not meeting the expectations of the purchasing organisation. However, in certain cases some of the responsibility for this can be due to a lack of motivation of the organisation in ensuring the success of the relationship with the supplier. It is anticipated that this work has demonstrated the importance of the role of the supply chain manager in establishing strong relationships with suppliers. ...read more.

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