Chapter 5 Flashcards
Why is supply strategy important?
- no operations strategy can work in isolation
- purchasing and supply network strategy create operation’s competitiveness
- increased global sourcing
- value-creating supply network
What relationships can evolve in supply networks?
dyadic network relationships vs. triadic network relationships
What are the benefits of the supply network perspective?
- creates understanding supplier and customer behavior
- identify key players in network
- shifts emphasis to long-term
- changes nature of supplier-buyer-relationship (compete and collaborate)
Why is it important to decide between do and buy?
it is the most fundamental puchasing and supply strategy issue
- refers to vertical integration
- has effects on all operations’ performance objectives
What are the effects of do vs buy on speed?
1) do it yourself
+ closer synchronization of schedules –> speed throughput time up
- internal customers get low priority
2) buy it
+ speed of response can be built into contract
+ commercial pressure –> good performance
- significant transport/delivery delays
What are the effects of do vs buy on quality?
1) do it yourself
+ origins of quality problems easily traced
+ immediate improvement
- risk of complacency
2) buy it
+ specialized knowledge of suppliers
+ suppliers motivated by market pressure
- communication of quality problems difficult
What are the effects of do vs buy on dependability?
1) do it yourself
+ easier communication internally –> dependable delivery and info on delay
- low priority of internal customers
2) buy it
+ late delivery penalties in contract –> good performance
- distance & organizational barriers –> bad communication
What are the effects of do vs buy on flexibility?
1) do it yourself
+ closeness to real needs –> quick alert
- ability to respond limited by scale & scope of internal operations
2) buy it
+ larger, wider capabilities –> more ability to respond
- balance conflicting needs of different customers
What are the effects of do vs buy on cost?
1) do it yourself
+ potential for sharing costs
+ no margin by outside suppliers
- low volumes –> difficult to gain economies of scale
2) buy it
+ economies of scale
+ motivated to reduce own costs
- extra costs of communication & coordination
What factors define vertical integration?
Balance
Direction (forward vs backward integration)
Extent
How do you decide what to do yourself and what to outsource?
Top-down strategic level -> long-term positioning of firm
Bottom-up operational level -> short-term capacity and capabilities of firm
What are strategic aspects of operations scope decisions?
How much of the supply network do you want to own?
(supply network structure, strategic ambition, capabilities, risk of knowledge leakage, profitability)
What are operational aspects of operations scope decisions?
Do you want to do it yourself or outsource it?
(availability of supplier capability and capacity, puchasing skills & knowledge, relative cost, effect on customer delivery, potential for improvement)
What are the 2 extremes of supply relationships?
Transactional supply arrangement vs partnership supply arrangement
What are the elements of partnership relationships?
1) Attitudes
1.1 joint learning
1.2 long-term expectations
1.3 trust
1.4 sharing success (increase size of pie)
1.5 multiple points of contact
2) Actions
2.1 joint coorination of activities
2.2 joint problem solcing
2.3 dedicated assests
2.4 information transparency
2.5 few relationships
