Quality

1
Resource Usage
Issues include

• What should we do ourselves and what to
  subcontract
• When to use market-based purchasing
• How to develop partnership supply

Quality
Speed
Performance objectives
Dependability
Market Competitiveness
Flexibility
Cost
Development and Organization
Process Technology
Supply Network Relationships
Capacity
Decision areas
Issues covered in this chapter
2
Supply network strategy
The concept of supply networks
Supply network relationships
Supply network behavior
The network perspective
Vertical integration
Market trading
Partnerships
Network management
Network dynamics
Co-ordination Differentiation Reconfiguration
Quantitative Qualitative
Supply network issues
3
Downstream
Upstream
Focal Level
Second-tier Suppliers
Second-tier Customers
First-tier Suppliers
First-tier Customers
Company A
Company B
Company C
x
x
x
x
x
Demand side of the network
Supply side of the network
For Company A
Internal supply network
Flow of Products/Services
Flow of Information
Immediate supply network
Total supply network
Supply networks are the interconnections of
relationships between operations
4
Second tier Suppliers
First tier Suppliers
Second tier Customers
First tier Customers
The Operation
Supply side of the network
Demand side of the network
The Total Supply Network
The Immediate Supply Network
Internal Supply Networks
Total and Immediate Supply Networks
Slide 6.4
5
Operations performance should be seen as a whole
supply chain issue
Benefits of looking at the whole supply chain
include Puts the operation into its competitive
context Helps to identify the key players Shifts
emphasis to the long term Sensitizes the
operation to macro changes Changes the nature of
the supplier-buyer relationship
6
Motor Vehicle Parts Distribution Chains
Installer
Dealer network
Local distributor
Area distributor
Vehicle manufacturer
Prime distributor
Distribution Chain of V.M.
Distribution Chain of Parts Manufacturer
Supplier
Sub-supplier
Manufacturing Chain
Stockist
Raw materials
7
COMPAQ
Corp. Market
Home Office Market
Suppliers
Retailers
Corp. Market
DELL
Home Office Market
Retailers
Suppliers
Firms in the same industry may configure their
supply networks in different ways
8
Supply chain Management The opportunities lie at
the boundaries
9
Extent of Activity (Quantitative)
Nature of Activity (Qualitative)
Structure Number of relationships
Posture Closeness of relationships
Market Relationships
Importance of activity performed in-house
Degree of activity performed in-house
Resource Scope
The market and resource dimensions of supply
networks
10
Long-term Virtual Operation
Close Few suppliers
Vertical Integration
Partnership Supply Relationships
Market Relationship
Type of inter-firm contact
Traditional Market Supply
Virtual Spot Trading
Transactional Many suppliers
Resource Scope
The character of internal operations activity
Do Everything
Do Nothing
Types of supply relationship
11
Exclusive balance between stages
Non-exclusive balance between stages
Backward Integration
Forward Integration





Focal operation
Extent of integration
Vertical integration decisions
12
Many
Market mechanisms appropriate
Leverage market uncertainty
Market Dimension
Number of supply alternatives
Leverage needs uncertainty
Market mechanisms inappropriate
Resource Dimension
Few
Low
Cost of changing suppliers
High
When is the use of pure market mechanisms
appropriate in buyer-supplier relationships?
13
Supply chain Management Partnership
relationships are seen as desirable because they
can reduce the transaction costs of doing
business
14
Trust
Sharing success
Long-term expectations
Multiple points of contact
Attitudes
Joint learning
Closeness of relationship
Joint co-ordination of activities
Few relationships
Joint problem solving
Information transparency
Dedicated assets
Elements of partnership relationships
15
Supply chain Management There are strong forces
acting against the maintenance of trust
16
The prisoners dilemma decision
Mr. Orange
Doesnt confess
Confesses
Mr. White gets 5 yrs Mr. Orange gets 5 yrs
Mr. White goes free Mr. Orange gets 10 yrs
Confesses
Mr. White
Mr. White get 10 yrs Mr. Orange goes free
Mr. White gets 3 yrs Mr. Orange gets 3 yrs
Doesnt confess
17
The prisoners dilemma decision
Assume Mr. Orange confesses
Mr. Orange
Doesnt confess
Confesses
Mr. White goes free Mr. Orange gets 10 yrs
Mr. White gets 5 yrs Mr. Orange gets 5 yrs
Confesses
Mr. White
Mr. White gets 3 yrs Mr. Orange gets 3 yrs
Mr. White get 10 yrs Mr. Orange goes free
Doesnt confess
18
The prisoners dilemma decision
Assume Mr. Orange doesnt confess
Mr. Orange
Doesnt confess
Confesses
Mr. White gets 5 yrs Mr. Orange gets 5 yrs
Mr. White goes free Mr. Orange gets 10 yrs
Confesses
Mr. White
Mr. White get 10 yrs Mr. Orange goes free
Mr. White gets 3 yrs Mr. Orange gets 3 yrs
Doesnt confess
19
Calculative trust
trusting you is likely to give me more benefits
than not trusting you...
Based on knowledge
Cognitive trust
I believe I can trust you because I think I know
you enough to be confident you will behave as I
would wish...
Cumulative positive experiences
Time
Degree of closeness
Bonding trust
I trust you because I know that you know that I
wouldnt let you down and you know that I know
that you wouldnt either......
Based on feelings
Degrees of trust
20
Market position
Economies of scale
Transaction costs
Market risks
Nature of network relationship
OPERATIONS RESOURCES
MARKET REQUIREMENTS
Learning potential
Market structure
Competitive behavior
Resource deficiencies
Some factors influencing the nature of network
relationships
21
Will Desron find someone else to single supply?
Turns down Desrons offer
Minimises investment but high vulnerability
Dedicate to Desron
Accepts Desrons offer
Retain some other customers
Increases investment in capacity but retains
safety net of other customers
Options for Aztec