OM 300 1nd Edition Lecture 14 Outline of Last Lecture I Process Capability a Process Capability Ratio b Process Capability Index II Acceptance Sampling Outline of Current Lecture I Supply Chain Management II Sourcing Issues III Six Sourcing Strategies a Many Suppliers b Few Suppliers c Vertical Integration d Joint Ventures e Keiretsu networks f Virtual companies Current Lecture Darden Video Quality Supply Chain Largest publicly traded casual dining company in the world Serves over 400 million meals Sources food from 5 continents and thousands of suppliers 4 distinct supply chains Competitive advantage achieved through superior supply chain Supply Chain Management the objective is to coordinate activities within the supply chain to maximize the supply chain s competitive advantage and benefits to the ultimate consumer The Supply Chain s Strategic Importance The coordination of all supply chain activities starting with raw materials and ending with a satisfied customer Includes suppliers manufacturers and or service providers distributors wholesalers retailers and final customer Large portion of sales dollars spent on purchases Supplier relationships increasingly integrated and long term o Improve innovation speed design reduce costs A Basic Supply Chain These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute Sourcing Issues Make or buy vs outsourcing o Choosing between obtaining products and services externally as opposed to producing them internally Outsourcing o Transfer traditional internal activities and resources to outside vendors o Efficiency in specialization o Focus on core competencies Six Sourcing Strategies 1 Many suppliers a Commonly used for commodity products b Purchasing is typically based on price c Suppliers compete with one another d Supplier is responsible for technology expertise forecasting cost quality and delivery 2 Few suppliers a Buyer forms longer term relationships with fewer suppliers b Create value through economies of scale and learning curve improvements c Suppliers more willing to participate in JIT programs and contribute design and technological expertise d Cost of changing suppliers is huge e Trade secrets and other alliances 3 Vertical integration a Developing the ability to produce goods or service previously purchased b Integration may be forward towards the customer or backward towards suppliers c Can improve cost quality and inventory but requires capital managerial skills and demand d Risky in industries with rapid technological change 4 Joint ventures a Formal collaboration i Enhance skills ii Secure supply iii Reduce costs b Cooperation without diluting brand or conceding competitive advantage 5 Keiretsu networks a A middle ground between few suppliers and vertical integration b Supplier becomes part of the company coalition c Often provide financial support for suppliers through ownership or loans d Members expect long term relationships and provide technical expertise and stable deliveries e May extend through several levels of the supply chain 6 Virtual companies a Rely on a variety of supplier relationships to provide services on demand b Fluid organizational boundaries that allow the creation of unique enterprises to meet changing market demands c Relationships may be short or long term d Exceptionally lean performance low capital investment flexibility and speed
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