Quality

1. Resource Usage Issues include: • What should we do ourselves and what to subcontract • When to use ‘market-based’ purchasing • How to develop ‘partnership’ supply Quality Speed Performance objectives Dependability Market Competitiveness Flexibility Cost Development and Organization Supply Network Relationships Process Technology Capacity Decision areas Issues covered in this chapter

2. Supply network strategy The concept of supply networks Supply network relationships Supply network behavior The network perspective Vertical integration Market trading Partnerships Network dynamics Network management Co-ordination Differentiation Reconfiguration Quantitative Qualitative Supply network issues

3. Downstream Upstream Focal Level Second-tier Suppliers Second-tier Customers First-tier Suppliers First-tier Customers Company A Company B Company C x x x x x Demand side of the network Supply side of the network For Company A Internal supply network Flow of Products/Services Flow of Information Immediate supply network Total supply network Supply networks are the interconnections of relationships between operations

4. “Second tier” Suppliers “First tier” Suppliers “First tier” Customers “Second tier” Customers The Operation Supply side of the network Demand side of the network The Total Supply Network The Immediate Supply Network Internal Supply Networks Total and Immediate Supply Networks Slide 6.4

5. Operations performance should be seen as a whole supply chain issue • Benefits of looking at the whole supply chain include • Puts the operation into its competitive context • Helps to identify the key players • Shifts emphasis to the long term • Sensitizes the operation to macro changes • Changes the nature of the ‘supplier-buyer’ relationship

6. Motor Vehicle Parts Distribution Chains Installer Dealer network Local distributor Area distributor Vehicle manufacturer Prime distributor Distribution Chain of V.M. Distribution Chain of Parts Manufacturer Supplier Sub-supplier Manufacturing Chain Stockist Raw materials

7. COMPAQ Corp. Market Home Office Market Suppliers Retailers Corp. Market DELL Home Office Market Retailers Suppliers Firms in the same industry may configure their supply networks in different ways

8. Supply chain Management The opportunities lie at the boundaries

9. Extent of Activity (Quantitative) Nature of Activity (Qualitative) ‘Structure’ Number of relationships ‘Posture’ Closeness of relationships Market Relationships Importance of activity performed ‘in-house’ Degree of activity performed ‘in-house’ Resource Scope The market and resource dimensions of supply networks

10. Long-term Virtual Operation Close – Few suppliers Vertical Integration ‘Partnership’ Supply Relationships Market Relationship Type of inter-firm contact Traditional Market Supply Virtual Spot Trading Transactional – Many suppliers Resource Scope The character of internal operations activity Do Everything Do Nothing Types of supply relationship

11. Exclusive balance between stages Non-exclusive balance between stages Backward Integration Forward Integration Focal operation Extent of integration Vertical integration decisions

12. Many Market mechanisms appropriate Leverage market uncertainty Market Dimension Number of supply alternatives Leverage needs uncertainty Market mechanisms inappropriate Resource Dimension Few Low Cost of changing suppliers High When is the use of pure market mechanisms appropriate in buyer-supplier relationships?

13. Supply chain Management Partnership relationships are seen as desirable because they can reduce the transaction costs of doing business

14. Actions Trust Sharing success Long-term expectations Attitudes Multiple points of contact Joint learning Closeness of relationship Joint co-ordination of activities Few relationships Joint problem solving Information transparency Dedicated assets Elements of partnership relationships

15. Supply chain Management There are strong forces acting against the maintenance of trust

16. The “prisoner’s dilemma” decision Mr. Orange Doesn’t confess Confesses Mr. White gets 5 yrs Mr. Orange gets 5 yrs Mr. White goes free Mr. Orange gets 10 yrs Confesses Mr. White Mr. White get 10 yrs Mr. Orange goes free Mr. White gets 3 yrs Mr. Orange gets 3 yrs Doesn’t confess

17. The “prisoner’s dilemma” decision Assume Mr. Orange confesses Mr. Orange Doesn’t confess Confesses Mr. White gets 5 yrs Mr. Orange gets 5 yrs Mr. White goes free Mr. Orange gets 10 yrs Confesses Mr. White Mr. White get 10 yrs Mr. Orange goes free Mr. White gets 3 yrs Mr. Orange gets 3 yrs Doesn’t confess

18. The “prisoner’s dilemma” decision Assume Mr. Orange doesn’t confess Mr. Orange Doesn’t confess Confesses Mr. White gets 5 yrs Mr. Orange gets 5 yrs Mr. White goes free Mr. Orange gets 10 yrs Confesses Mr. White Mr. White get 10 yrs Mr. Orange goes free Mr. White gets 3 yrs Mr. Orange gets 3 yrs Doesn’t confess

19. Calculative trust …trusting you is likely to give me more benefits than not trusting you... Based on knowledge Cognitive trust …I believe I can trust you because I think I know you enough to be confident you will behave as I would wish... Cumulative positive experiences Time Degree of closeness Bonding trust …I trust you because I know that you know that I wouldn’t let you down and you know that I know that you wouldn’t either...... Based on feelings Degrees of trust

20. Market position Economies of scale Transaction costs Market risks Nature of network relationship OPERATIONS RESOURCES MARKET REQUIREMENTS Learning potential Market structure Competitive behavior Resource deficiencies Some factors influencing the nature of network relationships

21. Will Desron find someone else to ‘single supply’? Turns down Desron’s offer Minimises investment but high vulnerability Dedicate to Desron Accepts Desron’s offer Retain some other customers Increases investment in capacity but retains ‘safety net’ of other customers Options for Aztec