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Supply Chain Management

Essay by   •  July 10, 2012  •  Essay  •  414 Words (2 Pages)  •  1,078 Views

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In today's competitive SCM market, it's not so much about having the best company anymore, but more importantly who has the supply chain, and who can get the product out to meet standards of the customer? Supply chain managers are continuously faced with this major challenge from the top of their supply chain operations to the bottom. Effective supply chain management of an enterprise reduces costs, lead times, and inventories throughout the entire supply chain. Customers want the 'perfect orders' and expectations to reduce manufacturing costs put corporate supply chains under immense pressure. As a result, supply-chain management and infrastructure plays a significant role in organizational strategy and how a facility chooses to set up their operation.

A. Analyze whether a Keiretsu network (Keiretsu: a Japanese term that describes suppliers who become part of a company coalition), a virtual company, a vertical integration, or a different supply chain strategy should be adopted.

A virtual company strategy would not work for this type of operation because "vertical integration is counter to the benefits of specialization" (Heizer and Render, 2010). In this model of supply chain, the demands of more specialized products exist and there is more flexibility to waiver from centralized suppliers than Keiretsu or vertical integration offers. Much of This "fluidity" may allow for too much variability within and there is no sustainability as contracts can be short lived. Most of the transactions are done electronically and today's customers, although many purchase online, still like to touch, feel and smell their products - especially hand tools. In addition, virtual companies employ suppliers who may have to perform all facets of the company's operation from administrative and HR related to designing products and conducting in house test. While utilizing suppliers as employees may save money and resources in the long run, it takes the off the central focus off running an effect supply chain operation. Having that flexibility can weaken the causing disorganization within the system.

Vertical Integration by itself is also not the most effective strategy for the hand tools company either. It employs a top-down management process of merging separate businesses within its supply chain to manage the entire process. ExxonMobil is a vertically integrated oil company. Its supply chain consists of drillers, refineries and the truckers who deliver fuel to the gas station. The whole process "can improve cost, quality, and inventory but requires capital, managerial skills, and demand" (Heizer and Render, 2010).

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