Supply Chain Relationships Chapter 15

Systems Approach to Supply Chain Supplier Manufacturer Distributor RetailerCustomer Upstream Downstream Information technology has been a driving force behind the ability to coordinate these interrelated activities

Impact of Supply Chain Management Without Supply chain Management With Supply Cain Management 1. Vertical channel integration 1. Virtual channel integration 2. Channel relationships were independent and competitive 2. Channel relationships are interdependent 3. Little or no product-tracking information 3. Extensive product tracking information, advance shipping notices 4. Reactive demand management 4. Proactive management to remove volatility 5. High inventory levels to buffer against uncertainty 5. Low inventory due to interrelationships in chain 6. Strong emphasis on promotional pricing 6. Greater emphasis on fixed everyday low pricing

Managing the Supply Chain for Services Since services cannot be inventoried, they have difficulty buffering themselves from changes in demand To deal with this problem: Reservation systems Optimizing time between service appointments for mobile workers Managing idle capacity of service workers Outsourcing

Reasons for outsourcing Allows the firm to focus on its core competencies Service may be cheaper to purchase from an outside source than to perform in-house Provides access to the latest technology without the investment Leverages benefits from a supplier who has economies of scale

Outsourcing Cautionary considerations: Loss of direct control over quality Jeopardizes employee loyalty because of fear of job loss Expose to data security and customer privacy issues

Outsourcing Cautionary considerations: Dependence on one supplier compromises future negotiation leverage Additional coordination expense and delays Atrophy of in-house capability to perform outsourced service

Examples of Outsourcing