Chapter 6. Strategic Alliances

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Chapter 6. Strategic Alliances

• Park Eun-Jung
• May.17.2007

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Contents

1. Casegt How Kimberly-Clark Keeps Client Costco in
   Diapers
2. Introduction
3. Framework for strategic alliances
4. Third-party Logistics
5. Retailer-supplier Partnerships
6. Distributor Integration

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Strategies for SCM

• all of the advanced strategies, techniques, and
  approaches for Supply Chain Management focus on
• ? Global Optimization
• ? Managing Uncertainty

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Dealing with Uncertainty

• Pull systems
• Risk Pooling
• Centralization
• Postponement
• Strategic Alliances
• Collaborative Forecasting

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Casegt How Kimberly-Clark Keeps
Client Costco in Diapers

• Kimberly-Clark manufacturer
• Costco retailer
• Kimberly-Clark replenished stock of Costco in
  diapers ? Costco didnt need to manage the stock.
  
• Shared information about individual stores sales
• Kimberly-Clark used the computer link and
  employed data analyst

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Casegt How Kimberly-Clark Keeps
Client Costco in Diapers

• Kimberly-Clark and Costco used VMI(Vender-Managed
  Inventory)
• Effect Reduce inventory levels of Costco,
  Saving costs, increase sales of Kimberly-Clark,
  improve service levels

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6.1 Introduction

• Internal activities? A firm can perform the
  activity using internal resources and expertise
• Acquisitions? Acquire a firm which have the
  expertise or specialized resources
• Arms-length transactions
• Strategic alliances

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6.2 Framework for Strategic Alliances

• To determine whether a particular strategic
  alliance is appropriate for your firm, consider
  following issues
• Adding value to products
• Improving market access
• Strengthening operations
• Adding technological strength
• Enhancing strategic growth
• Enhancing organizational skills
• Building financial strength

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6.3 Third-Party Logistics

• What is 3PL?? Take over some for all of
  companys logistics responsibilities? Outside
  company to perform all or part of the firms
  materials management and product distribution
  functions

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6.3 Third-Party Logistics

• Advantages and Disadvantages of 3PL
• Advantages
• 3PL allows a company to focus on its core
  competencies
• 3PL provider constantly update their information
  technology and equipment
• Flexibility in geographic locations, service,
  resource and workforce
• Disadvantages
• Loss of control

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6.3 Third-Party Logistics

• 3PL Issues and Requirements- Consider following
  issues when a firm contract with 3PL provider
• Know firms own cost
• Customer orientation of the 3PL
• Specialization of the 3PL
• Asset-owning versus non-asset-owning 3PL

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6.4 Retailer-Supplier Partnerships

• Types of RSP
• Quick Response Strategy- Supplier receives POS
  data from retailer and uses this information-
  Improve forecasting and scheduling and reduce
  lead timeEx 6-6) Milliken and Company uses POS
  data ? synchronize their ordering and
  manufacturing plans ? reduce the lead time
• Continuous Replenishment Strategy- POS data are
  used to prepare shipments- Maintain specific
  levels of inventory

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6.4 Retailer-Supplier Partnerships

• Advanced Continuous Replenishment Strategy-
  Improve the inventory levels continuously-
  Inventory levels change the appropriate level
• Vendor-Managed Inventory(VMI) System- The Goal
  is to eliminate retailer oversight on specific
  orders- Inventory turnover of Wal-Mart was
  increased through the VMI system- PG deliveries
  improved dramatically

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6.4 Retailer-Supplier Partnerships
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6.4 Retailer-Supplier Partnerships

• Requirements for RSP
• Advanced Information System- EDI(Electronic Data
  Interchange) and POS - Bar Coding and Scanning
• Top Management Commitment
• Partners to develop a certain level of trust

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6.4 Retailer-Supplier Partnerships

• Inventory Ownership in RSP- Inventory ownership
  must be cleared to the success of this kind of
  strategic alliance effort- In VMI system,
  supplier owns the goods until they are sold ?
  retailer reduce inventory cost, supplier manage
  inventory effectively

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6.4 Retailer-Supplier Partnerships

• Steps in RSP Implementation
• The contractual terms of the agreement must be
  negotiated- decisions concerning ownership,
  credit terms, ordering responsibilities,
  performance measures
• Developing the integrated information system,
  effective forecasting technique and a tactical
  decision support tool

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6.4 Retailer-Supplier Partnerships

• Advantages and Disadvantages of RSP
• Advantages- Supplier controls the bullwhip
  effect- Reduce overall system cost and improve
  overall system service levels- Reduce forecast
  uncertainties- Reduce safety stocks, storage
  costs and delivery costs
• Disadvantages- Employ advanced technology-
  Develop trust- Supplier has much more
  responsibility in strategic partnership-
  Increase suppliers managerial responsibilities
  and inventory costs

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6.4 Retailer-Supplier Partnerships

• Successes and Failures
• Successes- VMI program of between Wal-Mart and
  Mead-Johnson increased inventory turns - Scott
  Paper Companys VMI program improved inventory
  turns
• Failures- Schering-Plough Healthcare Products
  and Kmarts Partnership didnt improve sales or
  profits, but decreased stockouts at Kmart-
  Spartan Stores lead time was not decrease and
  didnt trust supplier

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6.5 Distributor Integration

• Use the expertise and inventory at the others
• Types of Distributor Integration
• Inventory-related- a large pool of inventory ,
  lowering total inventory costs, raising service
  levels
• Service-related- Meet a customers specialized
  technical service requests

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6.5 Distributor Integration

• Issues in Distributor Integration
• Distributor may be skeptical of the rewards of
  participating in such as a system
• Distributor might be nervous about losing these
  skills and abilities
• A large commitment of resources and effort on the
  part of the manufacturing company