Discuss, Using Examples, How the Relationship Between Operations in a Supply Chain Can Affect Way the Chain Works.

Topics: Supply chain management, Supply chain, Demand chain management Pages: 7 (2990 words) Published: April 24, 2012
Discuss, using examples, how the relationship between operations in a supply chain can affect way the chain works.

Supply chains are an important factor in the running of a company. A lot of business decisions can be based on how well the supply chain is flowing. The relationship between different operations within a supply chain can have a huge impact on the way the chain works, depending on how well these relationships are managed. This is why companies try to practice good supply chain management. This essay is going to be looking at supply chains and analysing the way in which the relationship between the different operations can affect the way they work. Supply chains are a system of organisations, people, technology, activities, information and resources involved in moving a product or service, through many stages of operation, to the customers. ‘All operations rely on the efficient movement of people, information and materials.’ (Waters, 1999 p. 186). Each link in the supply chain is closely connected. Slack (Chambers and Johnston, 2007, p. 706) describes a supply chain as ‘a linkage or strand of operations that provides goods and services through to end consumers.’ A supply chain can start from a point as simple as an electrical component supplier. This is known as a first level supplier. The electrical component supplier will have a relationship for instance with a circuit board maker, which would be a second level supplier. The circuit board maker will could have a purchasing relationship with several different first-level suppliers that they will need to purchase all the parts in order to make the circuit board. A computer company could then have a close relationship with the circuit board maker and other suppliers of the components needed in order to make build their computers. The supply chain finally ends when you get to the consumer who is purchasing the product from the stores. It is important that all these links between the connections in the chain run smoothly. One disruption in the chain can have a massive affect on the end product. For instance if the circuit board suppliers were late delivering to the computer manufacturer, this would delay them supplying goods to retail stores and intern could mean that the consumer is waiting longer for the product. This is known as the bullwhip affect were something small at the beginning of the chain can end up having a huge affect on someone at the end of it. ‘The bullwhip effect - the tendency of supply chains to amplify relatively small changes at the demand side of a supply chain such that the disruption at the end of the chain is much greater’ Slack (Chambers and Johnston, 2007, p. 421). This is why some companies take it upon themselves to adopt vertical integration. ‘Vertical integration in the operations network is the combination under a single ownership of two or more stages of production and/or distribution in the supply chain of entities that are normally separate.’ (Waller, 1999, p.171) This means that a company will own the more than one of the operations in the different stages of production so they can monitor everything that is going on. Companies often do this because they order in such large quantities and they feel it can be more reliable and perhaps more efficient to have control over their suppliers and distributors. An example of vertical integration could be a car manufacturing company. Magna is a car parts manufacturing company based in Canada. They make front parts for cars, things such as bumpers and grills. They also make sub assemblies for the likes of Honda and general motors, Instrument panels for the Jaguar XK8 and metal body exteriors for the BMW Z3. Magna in recent years has had a greater influx of work. ‘Cost pressures have forced car makers to let their suppliers take more responsibility for engineering and pre-assembly. This also means them working with fewer suppliers.’ Slack (Chambers and Johnston, 2007, p. 152). This...
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