BUSSPP 0200 1st Edition Lecture 17 Outline of Last Lecture I Introduction to supply chain management II The Basic Supply Chain Model III Having Estimated Demand IV Manufacturer to End User Outline of Current Lecture I Supply Chain Layout in Depth II What Holds the Chain Together III Markets Experience Instability IV Responses to Instability Current Lecture I Recall general supply chain layout A Potentially multiple players at each level B Ford s assembly line method 1 This is how all cars are made now 2 Most parts are purchased as Intermediate Goods a Ex Sound systems build by INTERMEDIATE GOODS b Long chain of production from intermediate goods 3 3 Tiers of IG in the car manufacturing industry a THIS A REMARKABLY COMPLEX SUPPLY CHAIN II So what holds the supply chain together A Transactions go waaay back to chapter two What kinds 1 Market transactions between a firm and some other entity within its environment alternative being transfer a Assume from now on that all entities of the supply chain are separate entities b Stable markets the goal price attributes availability i So assume whenever you need something it s available with reliable attributes at an assumed expected price ii If this is true most of these transactions will be SPOT super 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 high probablility NOT CERTAINTY THOUGH iii If this is true most of these transactions will be PURCHASE super high probablility NOT CERTAINTY THOUGH III Except these markets go through instability A These markets are typically cyclical seasonal 1 Market behaves may behave in small segments that are stable but not overall 2 Random effects weather laborer issues B So how does this affect supply chain mgmt 1 Instability at the top of the chain is much more catastrophic than lower in the chain IV Responses to Instability A ex supply chain of Intermediate Goods Manufacturer Retailer 1 IG quality price or availability is starting to get a little wonky B Solution Change vendors pretty obvious 1 Solution Change customers less obvious C Transaction Cost how much does it cost to maintain a stable market 1 Also includes the idea of searching time and money D Spot vs Future transaction markets 1 Spot if possible 2 Assume something catastrophic happens company may want to begin future transactions to lock in price availability a Futures transactions help manage risk but are inherently risky 3 Special relationships manufacturer of cookies needs flour a 10K Tons of flour week i May be buying from 1 vendors ii Vendor with the best reputation can only supply 5 tons a week enter long term agreement with this vendor as long as quality and service remain constant more leeway with price iii Vendor can now reduce many costs marketing delivery b Manufacturer eliminates search costs i Increasing trust between manufacturer and vendor c Issues the purchaser is vulnerable because half of your flour comes from one vendor vendor is vulnerable if the manufacturer suddenly drops them 4 Captured supplier relationship a sole source b Limited distribution retailer is good at what they do selling i Exclusive selling through one entity ii Has emerged from luxury goods to more common goods 6 Franchise Relationship operating under a well known name to reduce risk of failure a Parent company receives i Franchise fee ii Royalty pay iii Supply pay iv Reduced risk E Maybe vertical integration is less costly and will produce better results 1 Hierarchical costs acquiring starting and operating the up stream downstream unit
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