This action might not be possible to undo. Are you sure you want to continue?
that the work contained in this assignment is my own, unless otherwise acknowledged. No substantial part of the work submitted here has also been submitted by me in other assessments for my degree course, and I acknowledge that if this has been done an appropriate reduction in the mark I might otherwise have received will be made Signed: ......Arjald Gordani................................................................ (for on-line submission it is only necessary to type your name in this space)
MODULE TITLE: MODULE CODE: MODULE DATE:
Supply Chain Management UKFM-SCM 10SC01 18th – 22nd October 2010
NAME/NUMBER: ...Arjald Gordani.............................................. GROUP: ...................................1...............................
THE UNIVERSITY OF WARWICK SCHOOL OF ENGINEERING MANUFACTURING GROUP MSc PROGRAMMES POST MODULE ASSIGNMENT SUPPLY CHAIN MANAGEMENT Write two study reports to further explore the two of the following three SCM areas: 1. Explore the emerging concepts of Lean Supply Management based on what can be referenced in concurrent literatures; discuss the critical imperatives of efficiency and effectiveness that the lean approach can bring about. Propose a general approach with adequate level of details for an organization to initiate, develop and sustain lean supply management. 2. Elucidate the critical importance of supplier relationship management for the supply chain competitiveness; by finding and referencing to a number of professional literatures critically review some relationship management frameworks, models and approaches; discuss how a business might decide on the most appropriate relationship portfolio and management approach. 3. Explore the definition and concept of supply chain performance and explain how that is related or contributing to business excellence; explore what constituent components of supply chain performance measures and further distinguish it from business performance measures; discuss how those measures may be used constructively to transform the business strategy and improve operations and customer services. Requirement: a. A content page and page numbering b. To complete two separate reports on two chosen topics from the three above, indicating the question number. c. Properly structure the discussion into sections and give subtitles for each section. d. Use references (normally 3-5 professional journal articles for each report) to demonstrate the extended learning e. Each topic is recommended to be around 2000 words in length. f. No lengthy case study is required, but some short (a few sentences) real world examples may be adequate.
Post Module Work which does not reach WMG by the due date will be considered to be late.warwick. After this period the work may be counted as a non-submission.uk/fac/sci/wmg/ftmsc/postmodulework/submissions/ and following the guidelines provided in your handbook BEFORE 09:00 on 06/12/10 PLEASE NOTE 1. Module Code . PMW received after 09:00 will be stamped as having arrived on the next working day. up to a maximum of 14 days late. Penalties for lateness may be applied at the rate of 3 percentage points per University working day after the due date. 2.ac.COMPLETION DATE: To be submitted electronically using the appropriate web-form available from http://www2.
Arjald Gordani Supply Chain Management 2010 Table of contents 1 Introduction Page 5 2 The lean philosophy Pages 6-7 3 Efficiency and effectiveness of lean supply Pages 7-8 4 Approaches to lean supply Pages 9-12 4.2 Stammer’s 5 steps Pages 9-11 Pages 11-12 5 Conclusion Page 12 6 Bibliography Pages 13-14 7 Appendix 1 Page 15 4|Page .1 Lammings’s lean supply model 4.
An increasing number of companies are now implementing the lean management approach to their internal operations as well as to whole supply chain Keen and Evans (2010). It is at this time that lean thinking evolved into the value stream concept. discuss the critical imperatives of efficiency and effectiveness that the lean approach can bring about. This report will continue by briefly discussing the characteristics and evolution of lean manufacturing. hence the importance of lean supply Erridge and Murray (1998). It will then conclude by analysing one of the most widely referenced lean supply models. Introduction The increase in customer demand variability. 5|Page . Suppliers are increasingly contributing more value to the final product through greater input in the product development process or even complete responsibility for engineering and design Nellore. Propose a general approach with adequate level of details for an organization to initiate.Arjald Gordani Supply Chain Management 2010 Question 1: Explore the emerging concepts of Lean Supply Management based on what can be referenced in concurrent literatures. develop and sustain lean supply management. Caniato and Spina (2004) argue that companies are increasingly focusing on inter-company processes in order to enhance efficiency and effectiveness of the whole value stream. It will then draw on the effectiveness of lean supply and the arguments for and against in concurrent literature. together with an increase in pressures from competitors and decrease in the resource base has led organisations to seek new strategies to reduce cost and improve responsiveness to customer demand Keen and Evans (2010). and it was seen to extend from the initial raw materials supplier to the end customer while using the production pull system through the whole supply chain Hines. 1. Lalwani and Butcher (2008). Cagliano. Mathias and Nick (2004). Chanaron and Soderquist (2001). The relationships between suppliers and customers along the value stream are critical to achieving leanness. An important consideration of lean is to add value in all stages of the process and activities that do not add value are removed Mangan.
even production. Lalwani and Butcher (2008:39) Lean manufacturing can be traced back to the Toyota production system. just in time (JIT) 6|Page . Lean producers employ teams of very skilled workers at all levels of the organisation and use highly flexible. This can be outlined in figure 1 below. Over time.Arjald Gordani Supply Chain Management 2010 2. Figure 1. Lalwani and Butcher (2008). cellular manufacturing. The lean philosophy To further analyse the concept of lean supply management. different models of manufacturing have evolved through two key output criteria. it is first necessary to discussing the main characteristic behind lean manufacturing. low levels of inventory. quick machines turnover. exclusion of „muda‟. automated machines to produce volumes of products in enormous variety Womack. the two output criteria have been realised at the same time. namely output volume and output variety Mangan. Womack found a 2:1 difference in productivity with Japanese companies that showed 50 percent superiority on defects per car compared to the American mass producers McIvor (2001). Lean production uses a wide range of management practices in a multidimensional approach such as. Jones and Ross (2007). Sourced from Mangan. where the emphasis was on total flow through the system. faster total process time and total quality management (TQM) Mangan. Lalwani and Butcher (2008) and only recently. The lean concept was first introduced in the book „The Machine That Changed The World‟ Gottorna (2006).
the parts would normally be designed by the assembler who would then select a supplier according to the lower price Lamming (1993). These approaches are integrated to create high quality products in line with customer demand with little or no waste Shah and ward (2003). 3.Arjald Gordani Supply Chain Management 2010 purchasing. Problems are solved by tracing every error to its cause and fixing the issue so that it would not happen in the future. quality systems. errors would be passed on to keep the assembly lines running. In this way. For example. In mass production. sourcing in lean supply is for the long term. As a consequence manufacturers like Toyota have no rework areas compared to 20% of the total plant area in a mass production environment Womack. so that margins are kept or improved by reducing cost Keen and Evans (2010). Rich and Esain (2004). the companies would grow together in what Lamming (1993) referred to as „shared destiny‟. This resulted in a multiplication of errors through each stage down the line. 5S and supplier relationship management Adamides et al (2007). Toyota would always buy from Nippondusso where it would also hold a minority stake Womack. However.Efficiency and effectiveness of lean supply Manrodt (2005:7) defines lean supply as “A set of organisations that collaboratively work to reduce cost and waste by efficiently and effectively pulling what is needed to meet the needs of individual customer” In mass production. Jones and Ross (2007). To quote Adamides et al (2007:35) “lean supply involves designing. Lean supply chains are established and managed through proactive and collaborative relationship between all the suppliers and customers that add value to the chain. Jones and Ross (2007). working in a team culture producing small batches made it possible to recognise errors straight away. 7|Page . Lean uses less to create the same but at higher variety and better quality compared to mass production Hines. this may not necessarily reduce price but it can lead to cost reduction efforts. work teams. Where as in the case of lean.
Arjald Gordani Supply Chain Management 2010 planning and executing across multiple partners to deliver products of the right design and features. at the right time”. with many firms only concentrating implementation in the shop floor by looking just at the first tier suppliers Hines. However. 8|Page . lean supply uses rate based planning and execution to even deliveries and production along the value stream through effective capacity planning Adamides et al (2007). Mathias and Nick (2004). The assemblers gain benefits by rationalising the supply base Lamming (1993). there is a need for collaborative decision making between partners in order to create a win-win scenario with a culture of trust and agreements. It reduces or removes the bullwhip effect through information enrichment Sucky (2009). the assembler can concentrate to excel in its specialised area or its core abilities. Companies have to be aligned with the supplier‟s suppliers and with the customer‟s customers or even with the competitors in order to make operations more efficient Jain et al (2008). Through rationalisation. knowledge exchange can be quite difficult when dealing with global supply chains Shi and Gregory (2005). For example JCI and Lear who are first tier suppliers for Volve share each other‟s production capacity Choi and Wu (2009). In addition to lean manufacturing principles outlined above. in the right place. it needs to be viewed as a realistic and practical solution with a focus on constant improvement. For example. However. The supplier will gain benefits through higher responsibility and greater contribution in the value adding activity. However. Lean supply decreases dependency on inventory and firms can benefit from higher inventory turns and lower inventory day sales Manrodt (2005). This can be in terms of lower administration costs and higher negotiation power. lean supply management is still at an early stage of its application in practical terms. Such processes require rich knowledge exchanges that can be done through face to face interaction. in the right quantity. Lamming (1993) suggests that in order for lean supply to have an important role in strategy planning and development. Wall Mart sends point-of-sale date to Procter and Gamble every two hours Manrodt (2005).
Stammer‟s five steps were chosen because they are believed to be highly comprehensive and easy to implement. Approaches to lean supply There have been two main models to the implementation of lean and lean supply which have been widely referenced in the academic literature. However. This model will be considered together with a framework provided by Stammer (2009). (1996). namely Lamming (1993) and Womack and Jones. Figure 2: Lean supply model of customer supplier relationship Sourced from Lamming (1993:194) 9|Page . A table representing the Womack and Jonson‟s model is shown in Appendix 1. the model provided by Lamming (1993) will be discussed due to its greater focus on the supply chain and not just the firm itself.Arjald Gordani Supply Chain Management 2010 4.
Data According to Lamming (1993). possibly through a use of value analysis and target costing. However.1. Capacity Lamming argues that it is not necessary to have geographical closeness between the supplier and the customer in order to implement and achieve JIT through kanban systems. Lean supply includes collaboration with competition as well as between customers and suppliers.1. Marginal price increases can be smoothed out by marginally reducing costs though collaboration.1. the supplier must relate its own business operations to the final market using the concept of “heijuka” and not the batch production smoothing.1.2.1. For example. 10 | P a g e . Lean supply requires knowledge of the cost of the value-added in each stage. Price changes and Costs There is a need for open books so that each party can be made aware of the relevant costs structures of the other party and the implications resulting from change. 4. There should be joint planning on capacity and it might even be necessary to agree to comparable rates of return on assets employed. The supplier must be able to work in confidence with more than one assembler and not share information with other customers. Lamming‟s lean supply model 4.Arjald Gordani Supply Chain Management 2010 4. Sourcing and nature of competition Sourcing is for the long term to provide a more stable basis for planning with an emphasis on developed working relationships. 4. to have your component supplier located close to your plant does have its advantages. 4.1. The supplier should develop strategies and technologies for global cover independently from those requested by the customer. Johnson controls invested £8 million to locate a plant within 10 miles of the Toyota assembly plant.3.1.
Risk and R&D Risk is reduced for the assembler when it comes to moving into new technology because the supplier will help develop the idea and invest in assets outside contract terms.1.Arjald Gordani Supply Chain Management 2010 4. However. Hines. 4. there is a lack of empirical evidence of the implementation of Lamming‟s lean supply model which questions whether the benefits can actually be achieved McIvor (2001).1.2. 11 | P a g e . In a study carried out by McIvor (2001) in the electronics industry. Mercedes Benz and Bosch shared resources to create the anti-lock breaking system. Critique However. there can arguably be more integration in the future. Step 3: Running parallel MRP processes through make-to-order systems and changing the point of postponement over time by constantly analysing demand and inventory turns. 4. As soon as this is achieved. 4.5. Collaboration and innovation between customer and supplier by making inventions practicable through shared research and development. Step 2: Use supplier portals to extend this efficiency with the supplier and eliminate administrative and manual work.6. the relationship continues in the assumption that the quality level will be constantly improved. The supplier will also incur benefits when it comes to planning accordingly. Price changes were dealt by eating away the margins from the supplier and not by finding ways to reduce cost.1. For example. Quality Product quality is measured at defects levels in parts per million using the six sigma approach. Rich and Esain (2004) suggest that lean approaches such as kanban or level scheduling are difficult to be integrated in a chaotic and volatile market.4. it was found that there is no evidence of true cost transparency. Stammer‟s 5 Steps Stammer (2009) argues that there are five ways to implement lean supply: Step 1: Balance manufacturing efficiency with customer needs by producing smaller batches.
12 | P a g e . However. It was said that the application of lean can result in efficiency gains by both the assembler and the supplier. even within the automobile industry which is the mother of lean. Conclusion The report looked at the emerging concept of lean supply by referring to concurrent academic and non academic literature. Step 5: The enterprise application used must support and integrate lean efforts with a system recording performance and quality in every batch. It was found that lean supply is an extension of the lean manufacturing concept with a focus on eliminating non value adding activities throughout the chain in order to reduce costs and increase customer service. it can be argued that there is no best practice approach that can be highly effective because it will depend on the industry the firm is in and whether the firm is a manufacturing or service organisation. Also the understanding of lean supply still remains unclear. this report concluded by analysing one of the most widely referenced lean supply models in academic literature. the implementation of lean is still in an infant stage with many companies focusing on the shop floor. However.Arjald Gordani Supply Chain Management 2010 Step 4: Improve forecasting accuracy to reduce inventory and increase levels of service by assigning the forecasting role to an independent party within a company and not to individual departments. Finally. 5.
4. London: Prentice-Hall Mangan. and Evans C.. G. No. No. 6649-6677 Keen M. Management Services. 78-93 Cagliano R. European Journal of Purchasing and Supply Management.. and Spina G. E. (2010) „Lean in the supply chain: friend or foe?‟. (2004) „Learning to evolve: A review of contemporary lean thinking‟. No. Vol. 10. B. D.. 4.. pp. and Nick R.. No. and Deshmukh S.. Pylarinou H. 207-221 Gattorna.. (2009) „The impact of supply chain complexity on manufacturing performance‟. 4. (1993) Beyond partnership: strategies for innovation and lean supply. C... pp. 1.Arjald Gordani Supply Chain Management 2010 Bibliography Adamides E. J.. Journal of operations management. D. International Journal of Production Research. Vol. International Journal of Operations & Production Management. New Jersey: John Wiley & Sons 13 | P a g e . (2004) „Creating a lean supplier network: a distribution industry case‟.. 54. No. (2009) „Taking the leap from Dyads to triads: Buyersupplier relationships in supply networks‟. pp. Vol.. No. and Flynn J. 16-20 Lamming. 10. (2008) Global logistics and supply chain management. 4. 994-1011 Hines P. Flynn B. No. Rich N. 161-164 Choi Y. T. pp. (2006) Living supply chains: how to mobilise the enterprise around delivereing what the customer wants. Journal of Purchasing and Supply Management. Vol. Vol.. pp. agile and traditional supply: how do they impact manufacturing performance?‟. Karacapilidis N. (2004) „Lean. (1998) „The application of lean supply in local government: the Belfast experiments‟.. Warsing P. No. 3. Vol.. and Murray G. pp.. C. No. T. Vol.. New York: Financial Times/Prentice hall Hines P. Caniato F. 235-246 Jain V. 46. J. and Wu Z. 4. 19. pp. 15. and Butcher. Matthias H. and Koumanakos D. Vol. 4-5. Journal of Purchasing and Supply Management. pp. pp... 1. (2007) „Supporting collaboration in the development and management of lean supply networks‟. and Esain A. (2008) „What‟s the buzz about moving from „lean‟ to „agile‟ integrated supply chains? A fuzzy intelligent agentbased approach‟. 27. 263-266 Erridge A. Hobeken. 23. Lalwani. 24. Vol. Production Planning and Control. 35-52 Bozarth C. European Journal of Purchasing and Supply Management. R. Benyoucef L.
and Ross. No. K. 2. pp. Jones. manufacturers monthly. 7. pp. 1. and Gregory M.edu/centers/lit/oracle_WP_supply_chain_r6. K. pp. (2003) „Lean manufacturing: context. (2001) „Lean supply and priced based global sourcing: the interconnection‟. Production Planning and Control. 621-631 Stummer R. International Journal of Production Economics. D. Vol. 7. pp. European Journal of Purchasing & Supply Management. (2005) Understanding the lean supply chain: beginning the journey [On-Line]: UK: Available http://coba... and Soderquist E. No. 18-18 Sucky E. 4. Chanaron J. 21. pp.. Journal of Operations Management. P. European Journal of Purchasing & Supply Management. (2001) „Lean supply: the design and cost reduction dimensions‟. D. T. Vol. 227242 Nellore R. P. London: Simon & Schuste 14 | P a g e .. pp. practice bundles and performance‟.. (2009) „The bullwhip effect in supply chains . Vol. Accessed: 12 November 2010 McIvor R. 16. J. and Ward T. 2.pdf. 118.An overestimated problem‟. (2009) „Top five ways to lean your supply chain‟.. Vol. (2007) The machine that changed the world..georgiasouthern. (2005) „Emergence of global manufacturing virtual networks and establishment of new manufacturing infrastructure for faster innovation and firm growth‟. No. No. Vol. 6. 311-322 Womack. 129149 Shi Y.Arjald Gordani Supply Chain Management 2010 Manrodt B. No. 101-110 Shah R.
Mathias and Nick (2004:1004) 15 | P a g e .Arjald Gordani Supply Chain Management 2010 Appendix 1: Stages of implementing lean thinking Sourced from Hines.
5 Just-in-Time ll 10 Relationship portfolio and management approach Pages 23-24 11 Conclusion Page 25 12 Bibliography Pages 27-28 16 | P a g e .1 Kraljic’s purchasing matrix 9.3 Partnerships 9.2 Bensaou’s contextual factors 9.4 Just-in-time purchasing 9. approaches and frameworks Pages 18-20 Pages 20-21 Pages 21-22 Pages 22 Pages 23 Pages 18-23 9.Arjald Gordani Supply Chain Management 2010 Table of Contents 8 Introduction to supplier relationship Pages 17-18 9 Models.
17 | P a g e . by finding and referencing to a number of professional literatures critically review some relationship management frameworks. This view is also shared by Olsen and Ellram (1997) suggesting that companies should manage the entire portfolio of supplier relationships. Supplier relationship management (SRM) is a new element in the Supply Chain (SC) prescriptive. Introduction to Supplier Relationship Management The Industrial Marketing and Purchasing group (IMP) carried out one of the first studies that looked at the relationship between buyers and sellers in 1982 Lamming (1993). Turnbull and Naude (2003). Choy.Arjald Gordani Supply Chain Management 2010 Question 2: Elucidate the critical importance of supplier relationship management for the supply chain competitiveness. Since this early stage. Supplier relationship is increasingly becoming more important as the global competition intensifies requiring coordination and fast response in the value chain Choy. Romaro and Giannakis (2000) state that organisations should not strive to gain cost reductions and improve profitability by draining margins from their partners. there has been an increase of interest from both professionals and academics on the importance and influence of intercompany relationships to the competitive success of the supply chain Leek. Lee and Lo (2003:88) “SRM is about maximising the value of the supply base by providing an integrated set of management tools focused on the interaction of the manufacturer with its suppliers”. leading to improved supplier performance. instead they should seek to make the whole supply chain more competitive through collaboration with supply partners. discuss how a business might decide on the most appropriate relationship portfolio and management approach. Day (2006) suggested a strategic view of SRM defining it as a cross-company structured process that improves the value obtained between customer and supplier. models and approaches. Croom. 1. Lee and Lo (2003). Reichheld Sasser (1990) argued that forming successful relationships with buyers can lead to increased satisfaction and loyalty. Choi and Wu (2009) called for a move away from current dyadic and transaction cost models introduced by the IMP group to the networked view of the SC relationship in a triadic consideration.
Metty.Arjald Gordani Supply Chain Management 2010 By integrating SRM with customer relationship management (CRM) through the same Enterprise Resource Planning (ERP) system. the purchasing function needs careful consideration. important benefits can be gained such as faster cycle times. This increase in importance is highly correlated to the increase of the purchasing and outsourcing costs as a percentage of total revenue Park et al (2010). However. Models. quicker and flexible response to changing demand and cost saving through quality improvements. Purchasing strategy in the past twenty years has been incorporated in the term Supply chain management (SCM) Krause et al (2009). Park et al (2010) suggest that systematic SRM efforts can reduce risk and uncertainty and optimize inventory levels. Harlan and Samelson (2005) stated that Motorola has become stronger. According to Lee and Drake (2010) and Kraljic (1983) many manufacturing firms use 50-70 percent of their sales revenue on purchasing costs. and percentage of purchase 18 | P a g e . A recent study has shown companies can achieve a 23 percent increase of value when concentrating on supplier relationship. SRM has often been implemented without cross functional alignment and poor efforts on building trust and mutual commitment which are essential to exploit opportunities on value creation Hughes (2008). Profit impact is defined in terms of volume purchased. Kraljic‟s Purchasing Matrix Kraljic (1983) introduced a purchasing portfolio model in which purchased items are classified on the basis of two dimensions. Therefore. leaner and more profitable from strategically managing purchasing and supplier relationships through their strategic sourcing platform. which is on average $1 billion of cost reductions for each respondent Day (2006). impact on quality. approaches and frameworks 2. profit impact and supply risk. 2. Each dimension has two possible values: high or low table 1. it can be argued that to ensure a successful performance for SCM. Another example of such benefits was given by Andrews (2010) stating that Unilever has achieved higher on-shelf availability and 4 percent in cost reduction through better SC relationships.1.
Both of these approaches will be considered in the next paragraphs. The purchasing strategy here is to maintain a strategic partnership. Table 1: Kraljic‟s model Applied from Kraljic (1982:112) 2.Arjald Gordani Supply Chain Management 2010 cost. Factors such as number of suppliers or make-or-buy decision can influence supply risk Kraljic (1983). 19 | P a g e . Strategic Strategic items are critical to success and require close interaction between the buyer and the supplier. exploit: if the buyer is dominant and balance: if the relationship is balanced. regular information exchange and long term relationships to increase coordination intensity.1. He examines three purchasing strategies which depend on the power balance in the relationship. Kraljic (1983) also introduced a second approach where he identifies the relative power position of the organisation in the supply market. The purchased items are than classified into one of the four quadrants of the portfolio model Lee and Drake (2010). diversify: if the supplier has dominant power. namely. There is arguably a balance of power with high mutual dependency Caniels and Gelderman (2005).1.
There have been recent refinements of Kraljic‟s model such as Olsen and Ellram (1997). 2.3. have back up plans. 2. Bottleneck Bottleneck items are challenging to manage but have low financial impact.1. or due to power imbalance. Leverage Leverage items are easy to manage but have high strategic importance due to their large share of cost. Bensau‟s contextual profiles The model given by Kraljic can help buyers optimise capabilities for different suppliers and effectively manage relationships. They can be obtained from different sources and the buyer is encouraged to exploit the purchasing power by selecting suppliers who will be subject to a bidding war.Arjald Gordani Supply Chain Management 2010 2. Non Critical Non critical items have low strategic importance and should be dealt through simple market analysis. They can cause production problems due to scarcity of supply. 20 | P a g e . and the identification of a unique strategy for each relationship. Bensaou developed a model using two dimensions namely: buyers‟ and suppliers‟ tangible and intangible investments Figure 1. Caniels and Gelderman (2005) or Bensaou (1999). 2.2. The relationship is characterised by mutual dependency and a balance of powers.4. with suppliers dictating high prices.1. Vendor and value analysis together with price forecasting should be implemented. These authors have filled gaps not covered by Kraljic though a strategic focus on all quadrants.2. Suppliers of non critical items can be reduced to increase the power of buyers. control suppliers and keep safety stock. The purchasing strategy should reduce transaction cost through product standardisation and optimisation of inventory. Therefore the buyer can diversify.1.
reduced their total number of direct suppliers and moved towards publicly declared strategic partnerships Ploetner and Ehret (2006). most car manufacturers have decreased their vertical integration.3. 21 | P a g e . and technical ties over time. with the intent of lowering total costs and for increasing value. Partnerships can be placed in the strategic quadrant of Kraljic‟s model Caniels and Gelderman (2007). each side is not only committed to the other but also change their behaviour in order to meet the other partner‟s needs Ryu. not all relationships can be a strategic partnership. Some of the main advantages are shown on Figure 2. Partnerships Recently. Partnership can also be in between competitors for example: JCI and Lear both supply seats to Volvo however they collaborate and share production capacity with each other Choi and Wu (2009). Ploetner and Ehret (2006) argue that partnership can result in conflicts when bargaining and buyers may use the open book system to gain higher profits by extracting more margins from their suppliers. Bensaou (1999). In true partnerships. Day (2006) argues that really strategic suppliers can be five-fifty depending on the organisation‟s size. scale and sophistication. thereby achieving mutual benefit”. Anderson and Narus (1990:96) define partnerships as: “A process where a customer firm and a supplier firm form strong and extensive social. However. economical. service. However. So and Koo (2009).Arjald Gordani Supply Chain Management 2010 Figure 1: Bensau‟s model Sourced from Bensaou (1999:36) 2.
lower inventory and the elimination of waste through improved quality of incoming items. The suppliers have to improve their performance through higher quality. offer technical assistance or financial support to the supplier and share production and operational related information.Arjald Gordani Supply Chain Management 2010 Figure 2: Partnership Advantages Sourced from Gelinas. In a JIT environment. Gunasekaran (1999). There is a wide agreement on the benefits achieved through JIT Hong and Hayya (1992). Gilbert. Young and O‟Neal (1994). Jacob and Drolet (1996). higher flexibility and lower prices Gilbert. there are some drawbacks associated with JIT: high costs and difficulties in changing suppliers (buyer prospective) and high costs if the buyer does not fulfil its commitment (supplier prospective). Young and O‟Neal (1994) argue that the JIT philosophy requires long term partnership commitment and constant communication. Gilbert. JIT purchasing is characterised by the frequent delivery of high quality items in small quantities. the buyer must commit through long term agreements. Jacob and Drolet(1996:43) 2. Just-in-Time purchasing The purchasing function is highly important to one form of partnership such as Just in Time (JIT) purchasing Gelinas.4. Young and O‟neil(1994). However. just when they are needed through a small supplier base Gunasekaran (1999). These benefits include reductions in lead time. 22 | P a g e .
increase in dollar value of business. reduced paper work and real time data. Just-in-Time ll The JIT ll concept was introduced by BOSE Corporation as an approach that minimises purchasing cost as sales increase Green. the company should employ a „Market Exchange‟ relationship. Firms should consider market characteristics. Buyers hold most power and are encouraged to leverage economies of scale 23 | P a g e .5.1. product characteristics and supplier characteristics when deciding on a relationship portfolio and management approach. The previous 4 stage communication system is replaced by a 2 stage system figure 3. and are not subject to major technological innovation or design changes.Arjald Gordani Supply Chain Management 2010 2. a supplier‟s employee sits in the purchasing office of the customer replacing the buyer and the sales person Dixon (1999). The model used in this discussion will be the portfolio analysis provided by Bensaou (1999). In a Jit ll environment. Market Exchange If a firm purchases standardised items that require little engineering from suppliers. Some of the advantages described by Dixon (1999) include: immediate and ongoing material cost reduction. Figure 3: Traditional 4-stage system and 2-stage JIT ll system Applied from Dixon (1999:16) 3. Inman and Brown (2008). Relationship portfolio and management approach The final part of the report will discuss the most appropriate relationship portfolio and management approaches available to organisations on different circumstances. The employee has full access to customer facilities and data and is empowered to use the customer purchase orders and place orders on himself/herself. This relationship requires little capital investment and many suppliers can be sourced. 3.
2. The buyer should keep three to four suppliers for each component part and shift each time that there is quality. The relationship is based on a low level of information exchange.3. 3. The exchange of information is done electronically and face to face through the use of electronic data interchange. CAD/CAM systems and three dimensional quality and production control.Strategic Partnership A firm should consider entering a „Strategic Partnership‟ if it operates in fast changing environment. the considered relationship is „Captive Suppliers‟. There is a need for detailed information sharing on a regular basis between all functions in both firms. Shifting to a different supply is costly and difficult due to investments made by the buyer and therefore some in-house manufacturing capability is recommended. a „Captive Buyer‟ relationship can be implemented. 3. 3. Suppliers should be selected according to price and official meetings are very rare. The supply market is very concentrated with few well established players who hold great power. There is high mutual trust with a focus on coordinating complex tasks rather than control. resulting from proprietary technology. 24 | P a g e . Delivery. from the design stage to the final delivery of items through a just in time approach.Arjald Gordani Supply Chain Management 2010 from large orders.4. Captive Buyer When a customer operates in a stable market with little technological change and purchases complex components that require some form of customisation. and if it requires highly customised components. The supplier has low power and carries out high capital investments to stay in the market. quality control and inventory are coordinated through established routines. delivery or other operational problems. The relationship requires mutual contribution and joint investments in R&D.Captive Supplier When customers require highly complex components that are often developed or owned by suppliers.
Arjald Gordani Supply Chain Management 2010 4. The partnership approach was next discussed by referring to Just-in-Time purchasing and Just-in-Time ll.Conclusion The report discussed briefly the importance and influence of supplier relationship management on the supply chain competitiveness by giving real case examples. In the last part of the report. Bensau‟s (1999) portfolio model was implemented. Purchasing strategy was found to be of high importance in the supply chain management perspective. This model served as a guide on the specific relationship portfolio and the corresponding management approach that a firm should take depending on three characteristics. It was argued that SRM can bring many advantages to the partners in the SC and increase the SC competitiveness through higher value added and significant cost reductions. Advantages and disadvantages of these approaches were identified. Two highly cited portfolio models were analysed to identify specific purchasing strategies that firms can implement according to their purchase requirements and the supply market characteristics. product and supplier characteristics. 25 | P a g e . namely market.
and Giannakis M. No. 25. 40.. No. C. Journal of Purchasing and Supply Management. 20. and Brown G. No. Industrial Marketing Management. pp. 111-120 Green K. 3. 77-84 26 | P a g e . 1. pp. (1999) „Portfolios of buyer-supplier relationships‟.. 15. No. 13.. 67-83 Dixon L.Arjald Gordani Supply Chain Management 2010 Bibliography Anderson C. Gelderman J. Warwick University.. Vol. Vol. 2. M. Vol. Vol. 4. European journal of Purchasing & Supply Management. No. Young A. Journal of Business Research. and Lo V. 29.. 33. pp. European Journal of Purchasing & Supply Management. Industrial Marketing Management. (2009) „Taking the leap from dyads to triads: Buyersupplier relationships in supply networks‟. and Wu Z. Vol.. pp. C. Vol. Hospital Material Management Quarterly. No. (2003) „Design of a case based intelligent supplier relationship management system: the integration of supplier rating system and product coding system‟. 131-142 Gunasekaran A. 1. Vol.. 2. 37.. 3. California Management Review. No. 87-100 Croom S. F. T. Vol. No. J. pp. No. W.. pp. (1991) „Partnering as a focused market strategy‟. International Journal of Production Economics. 36. Inman R. O‟Neal R. 14-21 Gelinas R. and Drolet J. 6.. (1999) „JIT ll: The ultimate customer-supplier partnership‟. No. (2008) „Just-in-Time selling constrict: definition and measurement‟. C. A. 35-44 Caniels J. Jacob R. MIT Sloan Management Review. 1. Vol. Lee B. J. J. 263-266 Choy L. (1994) „Buyer-seller relationships in just-in-time purchasing environments‟.. [Presentation]. 4. K. (1996) „Just-in-time purchasing and the partnership strategy‟. 95-113 Andrews C. Romano P. Vol. 59.. pp. (2000) „Supply chain management: an analytical framework for critical literature review‟. Vol. pp. 2. 2. No. 219-229 Choi Y. Expert Systems with Applications.. International Manufacturing Centre Bensaou M. pp. and Narus A. (2010) Unilever careers presentation. W. (1999) „Just-in-time purchasing: An investigation for research and applications‟. pp 39-45 Gilbert W.. (2007) „Power and interdependence in buyer supplier relationships: A purchasing portfolio approach‟. pp.
pp. Industrial Marketing Management. F.6651-6682 Leek S. and Ehret M. No. 7-23 Olsen R. 3. J. No. 110. 4. 241-249 Metty T. 27. and Sasser Jr.. and Park J. Industrial Marketing Management. Interfaces. W. Harvard Business Review. 4. 68. 109-117 Krause D. (1983) „Purchasing must become supply management‟. Vol. 105-111 Ryu L... Shin K. Vachon S. M.. (2009) „The role of partnership in supply chain performance‟. 4-9 Reichheld F. 1. pp. 5.. pp.. and Koo C. pp. (1997) „A portfolio approach to supplier relationships‟. 27. pp. and Naude P. pp. Vol. Vol. No. pp. Vol. Industrial Marketing Management. (1992) „Just-in-Time purchasing: single or multiple sourcing?‟. 18-25 Lamming. 61.. R. P. 496-514 27 | P a g e . Vol. (2010) „An integrative framework for supplier relationship management‟.Arjald Gordani Supply Chain Management 2010 Hong J. No.. Industrial Management & data Systems. 5. Turnbull W. (2009) „Zero defections: quality comes to services‟. 101-113 Park J. No. 495-515 Ploetner O. (1993) Beyond partnership: strategies for innovation and lean supply. R. pp. and Klassen R. pp. Harvard Business Review. Journal of Supply Chain Management. Industrial Management and Data systems.. E. 3. 2. Vol.. No. 175-181 Hughes J. pp. 45. 1. International journal of Production research. and Drake P. and Ellram L. 2. Vol. Vol. International Journal of production Economics. 21-37 Kraljic P. M. 35. R. No. and Samelson Q. 35. No. Vol.. 33... No. (2010) „A portfolio model for component purchasing strategy and the case study of two South Korean elevator manufacturers‟.. Vol. So S. No. (2006) „From relationships to partnerships: New forms of cooperation between buyer and supplier‟. pp.. (2004) „A comparison of manufacturers and financial services suppliers‟ and buyers‟ use of relationship management methods‟.. Tai-woo C. pp. 22. Vol. D. No. (2005) „Reinventing the supplier negotiation process at Motorola‟. F.. and Hayya C. No. Vol. 26. (2009) „Special topic on sustainable supply chain management: Introduction and reflections on the role of purchasing management‟. Harlan R. (2008) „From vendor to partner: Why and how leading companies collaborate with suppliers for competitive advantage‟. 48. 109. Global Business and Organisational Excellence. 4. London: Prentice-Hall Lee D.