Supply chains manage the movement of products from the acquisition of raw materials through production and finally distribution to the end user. A properly designed supply chain can create many opportunities to drive down cost and increase revenue opportunities. In order to create a supply chain that is sustainable and flexible it is necessary to identify and align company goals and initiatives with the manufacturing and distribution of products.
In the following sections I will propose a supply chain strategy which will align company goals and initiatives increasing efficiency and driving down cost thereby creating a sustainable competitive advantage through the implementation of a synergistic supply chain strategy.
Supply Chain Strategy
There are a number of different supply chain strategies offering companies an opportunity to choose a strategy which fits their goals and objectives. Amongst these types of strategies are a Keiretsu Network, Virtual Corporation, and many other options. The aforementioned strategies require close relationships with vendor firms relying on them to supply services and components throughout the manufacturing process to get the product to the end user. For many different industries it may be better to outsource parts of the process to firms which specialize in that technology. However, for the power tool industry it may be better to handle the supply chain internally. Throughout the remainder of this section I will propose that the supply chain strategy used for the company be a vertical integration strategy.
Vertical integration will give this company an opportunity to control every aspect of the supply chain. Implementing this strategy into their business model will allow the company to control manufacturing, material acquisition, distribution and everything in between. By controlling these facets the company will be able to find profit in the supply chain having the capability to stream line operations, finding efficiencies where possible, controlling inputs and influencing downstream activities such as distribution (Wei, 2012).
Vertical integration will give the manufacturer of power tools an ability to control their components and create a brand which will have the flexibility to meet the demands of its consumers. In other forms of supply chain management companies have to create contracts with outside suppliers relying on them to manufacture and deliver parts. These supply chain models take the control of manufacturing cost, quality and timing out of the hands of the receiving firm. By implementing a Vertical Integration the company will have the flexibility to identify opportunities within the supply chain allowing them to create efficiencies thereby driving down the cost of manufacturing and increasing profit opportunities.
Other supply chain strategies, such as a virtual corporation or a keiretsu network, require that many companies be involved in the total process of manufacturing. This creates a situation in which there are many different firms with different corporate strategies and goals. When manufacturing goods such as power tools it is beneficial to have the ability to identify opportunities in the supply chain and act quickly to capitalize on these opportunities. In other forms of supply chain strategies changing the process of manufacturing and distribution require that many companies agree on the change and implement the agreed upon change. Implementing Vertical Integration will make the firm more flexible allowing them to identify opportunity and act upon it quickly.
In order to take full advantage of Vertical Integration it is important to identify and implement performance metrics. Performance metrics are a set of measurements which assess a firms overall performance creating an opportunity to align corporate goals with production and distribution chains (Lambert 2001). Implementing these...
References: Guan, W. (2012). Supply chain management. 17(2), 187.
Lambert, D. (2001). Supply chain metrics. . International Journal of Logistics Management, 12(1), 1-19.
Vermorel, J. (2011, 12). Lead time, definition and formula. Retrieved from http://www.lokad.com/lead-time-definition-and-formula
Heizer, R. (2010). Operations management. (10 ed.). Prentice Hall. Retrieved from http://wpscms.pearsoncmg.com/wps/media/objects/9447/9673736/heizer10_flash_main.html?page=27
Please join StudyMode to read the full document