STRATEGIES

Supply chain strategies

Diagram 15 shows six strategies of SCM

    1. Negotiating with many suppliers

• Commonly used for commodity products.
• Purchasing is typically based on prices.
• Suppliers compete with one another.
• Supplier is responsible for technology, expertise, forecasting, cost, quality, and                   deliver.

               2.  Long-term partnering with few suppliers

•        Buyer forms longer term relationships with fewer suppliers.
•      Create value through economies of scale and learning curve improvements.
•      Suppliers more willing to participate in JIT programs and contribute design and                   technological expertise.
•      Cost of changing suppliers is huge.

3. Vertical integration

•       Developing the ability to produce goods or service previously purchased.
•       Integration may be forward, towards the customer, or backward, towards suppliers
•       Can improve cost, quality, and inventory but requires capital, managerial skills, and            demand.
•       Risky in industries with rapid technological change.

4. Joint ventures
--> Cooperation without diluting brand or conceding competitive advantage.

-              ---->   Formal collaboration:

•     Enhance skills
•     Secure supply
•     Reduce costs

5. Keiretsu

•    A middle ground between few suppliers and vertical integration.
•    Supplier becomes part of the company coalition.
•    Often provide financial support for suppliers through ownership or loans.
•    Members expect long-term relationships and provide technical expertise and stable          deliveries.
•    May extend through several levels of the supply chain.

6. Virtual companies that use suppliers on an as needed basis

•    Rely on a variety of supplier relationships to provide services on demand.
•    Fluid organizational boundaries that allow the creation of unique enterprises to                    meet changing market demands.
•    Exceptionally lean performance, low capital investment, flexibility, and speed.

Diagram 16 shows strategic supply chain management model

Diagram 17 show other strategies of SCM

Diagram 18 shows four Keys to effective SCM

Creating an effective supply chain

--> Develop strategic objectives and tactics.

--> Integrate and coordinate activities in the internal portion of the supply chain.

--> Coordinate activities with suppliers and customers.

--> Coordinate planning and execution across the supply chain.

--> Consider forming strategic partnerships.