Supply chain strategy describes in what manner a supply chain should operate to contend in day-to-day undertakings. Supply chain strategy is considered as an iterative procedure that assesses the cost-benefit interchanges of operational elements. The supply chain’s strategic approach is critical in advancing the outcome of any entity and directly affects cost savings. A growing percentage of a company’s cost is established by procuring and relations with suppliers that are gradually incorporated and long-standing. According to Heizer Render & Munson (2016), a company can incorporate six supplier strategies. They include many suppliers, few suppliers, vertical integration, joint ventures, Keiretsu networks, and virtual companies. Each business ought to consider every technique and comprehend the suitable strategy for the business.
The many supplier’s approach is a prevalent and extensively integrated mode of procurement. This technique is commonly integrated into commodity merchandise. Numerous contractors are kept, so every duration an order is made, the procuring may be done founded on the rate. As a result, the contractors contend with each other to retain the lowest rate at all times. With this supplier strategy, one particular disadvantage entails minimal trust between the firm and the contractors. That is attributed to the absence of an assured relationship, and there is a likelihood of exploring contractors globally to procure all purchases at low-priced prices. An example of a business that integrates the many supplier strategy is 7-Eleven. It is a corporation with many stores in the United States. Every location is independently possessed, and every site contains numerous contractors. There are 1,200-1,500 contractors linked to 7-Eleven.
Based on the few supplier mechanisms, there exists more relations cultivated with the contractors. The cultivated relationships can yield alliances and consistency. When exchanging contractors, it may be a grave challenge. Typically pacts are obtained during a selection of contractors, so there is almost expected a cost to terminate the deal and initiate a new contract. One significant benefit of this structure and the affiliation is that the contractor is accessible on short notice when placing emergency orders. They are so readily available for purchases because of the guarantee that they will be the supplier used. According to Heizer Render & Munson (2016), Life is modest with fewer business contractors. Smaller corporations have a low number of contractors. Integrating this approach leads to building relations with contractors and signing consistent pacts. An ideal example of a business that maintains fewer contractors would be Olga’s Cup & Saucer, a local eatery that prides itself on renowned local elements.
In this approach, corporations can take earlier procured goods or services, or in some instances, acquire a contractor or distributor and turn the products into their merchandise to retail. The approach contains various advantages. They include Inventory reduction, reduced costs, superior products, and fast delivery (Heizer, Render, & Munson, 2016). The cons include backward integration prices and inventions that may be challenging to maintain. R & D expenses are similarly very high and maybe challenging for companies to sustain the rapid alterations.
Vertical integration is typically the best choice for a corporation that may operate a collected distributor. To guarantee effectiveness, the corporation would seek to attain a significant market share. Corporations such as Coca-Cola have demonstrated this technique to be very efficient. With packaging areas and distribution plants, Coca-Cola can secure a significant market share while maintaining internal operations rather than detached bottling and distribution corporations.
Companies utilize joint ventures when further formal collaboration is needed. Corporations tend to use joint ventures to cut prices and guard supply. The approach consists of various advantages such as supply and cost control (Famous Joint Venture Companies, 2015). The cons include diluting a brand. This may also be against the firm’s aggressive benefits. The approach is applicable in the automobile industry. Jaguar/Land Rover collaborated with a Chinese automaker, Chery Automobiles, to set up Chery Jaguar Land Rover Automotive Company (Chen Hsieh & Wee, 2016). The companies’ joint venture consists of the inauguration of a new manufacturing area near Shanghai.
This method is prevalent for Japanese producers. This technique is a combination of vertical integration, collaboration, and purchasing from limited contractors. These industrialists, through proprietorship or loans, frequently financially back contractors. This places the specific supplier into a firm alliance, the keiretsu. The approach consists of various pros such as a robust network of contractors and long-term relations and associations branching out to second and third rank contractors (Keiretsu, 2017). Virgin UK brands are considered to be a Keiretsu network. It was illustrated that Virgin was a robust system of the universe’s large media, entertainment, and software giants. Currently, the corporation varies from that unique network.
The virtual Companies approach allows for much variability in the relations between contractors and consumers and expands the goods and services that a particular corporation can offer (Swierczek & Kisperska-Moron, 2016). Relations may be short or long-term and may comprise subcontractors, partners, and co-workers. The advantages of the virtual companies approach include flexibility, speed, minimal capital investments, and dedicated management proficiency. This results in the effectiveness of the company’s operations. The system consists of various disadvantages such as fluctuation in relations that could be detrimental to the general manufacture and rendering of services. This may likewise be damaging in obtaining new contractors on a recurrent basis. Consistency is also inconstant in this approach. An ideal example of a virtual company is Workday. They distribute payroll, programming, and a host of other technical services to a wide range of corporations. The workday structure is harmonious with typically whatsoever the business has on hand. Workday is capable of capitalizing on using their program on an already designed and manufactured device.
Chen, A., Hsieh, C. Y., & Wee, H. M. (2016). A resilient global supplier selection strategy—a case study of an automotive company. The International Journal of Advanced Manufacturing Technology, 87(5), 1475-1490.
Famous Joint Venture Companies. (2015, September 22). Retrieved from http://infomory.com/famous/famous-joint-venture-companies/
Heizer, J., Render, B., & Munson, C. (2016). Principles of Operations Management Sustainability and Supply Chain Management, Student Value Edition. Pearson College Div.
Keiretsu. (2017, October 16). Retrieved from http://www.economist.com/node/14299720
Swierczek, A., & Kisperska-Moron, D. (2016). The role and attributes of manufacturing companies in virtual supply chains. The International Journal of Logistics Management.