chap06
DESCRIPTION
TRANSCRIPT
© Nigel Slack and Michael Lewis 2003
Quality
Per
form
ance
o
bje
ctiv
es
Dependability
Process Technology
Developmentand
Organization
Speed
Flexibility
Cost
Resource Usage
Mar
ket
Co
mp
etit
iven
ess
Decision areas
Capacity Supply Network Relationships
Issues include:
• What should we do ourselves and what to subcontract
• When to use ‘market-based’ purchasing
• How to develop ‘partnership’ supply
Issues covered in this chapter
© Nigel Slack and Michael Lewis 2003
Supply network strategy
The concept of supply networks
Vertical integration Partnerships Market
trading
Supply network
relationships
Supply network behavior
The network perspective
Network management
Network dynamics
Co-ordinationDifferentiationReconfiguration
QuantitativeQualitative
Supply network issues
© Nigel Slack and Michael Lewis 2003
Second-tier Suppliers
First-tier Suppliers
Company A
Company B
Company C
x
Second-tier Customers
First-tier Customers
x
xx
x
Focal Level
Upstream Downstream
Supply side of the network
Demand side of the networkFor Company A
Internal supply network
Immediate supply network
Total supply network
Flow of Products/ServicesFlow of Information
Supply networks are the interconnections of relationships between operations
© Nigel Slack and Michael Lewis 2003Total and Immediate Supply Networks
“Second tier” Suppliers
“First tier” Suppliers
“Second tier” Customers
“First tier” Customers
The Operation
Supply side of the network
Demand side of the network
The Immediate Supply Network
The Total Supply Network
Internal Supply Networks
Slide 6.4
© Nigel Slack and Michael Lewis 2003
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
© Nigel Slack and Michael Lewis 2003
Motor Vehicle Parts Distribution Chains
Distribution Chain of Parts Manufacturer
Distribution Chain of
V.M.
Manufacturing Chain
Dealer network
Vehicle manufacturer
Installer
Local distributor
Area distributor
Prime distributor
Supplier
Sub-supplier
Stockist
Raw materials
© Nigel Slack and Michael Lewis 2003
Firms in the same industry may configure their supply networks in different ways
Home Office Market
Corp. Market
Suppliers
Retailers
COMPAQ
Home Office Market
Corp. Market
Suppliers
Retailers
DELL
© Nigel Slack and Michael Lewis 2003
Supply chain Management
The opportunities lie at the boundaries
© Nigel Slack and Michael Lewis 2003
Extent of Activity (Quantitative)
Nature of Activity (Qualitative)
‘Structure’
Number of relationships
‘Posture’
Closeness of relationships
Degree of activity performed ‘in-house’
Importance of activity performed ‘in-house’
Market Relationships
Resource Scope
The market and resource dimensions of supply networks
© Nigel Slack and Michael Lewis 2003
Do Nothing
Do Everything
The character of internal operations activity
Types of supply relationship
Virtual Spot
Trading
Traditional Market Supply
Resource Scope
Mar
ket
Rel
atio
nsh
ip
Long-term Virtual
Operation
‘Partnership’ Supply
Relationships
Vertical Integration
Typ
e o
f in
ter-
firm
co
nta
ct
Tra
nsa
ctio
nal
–
Man
y su
pp
liers
Clo
se –
Few
su
pp
liers
© Nigel Slack and Michael Lewis 2003
Focal operation
Extent of integration
Backward Integration
Forward Integration
Non-exclusive balance between stages
Exclusive balance between stages
Vertical integration decisions
© Nigel Slack and Michael Lewis 2003
Low HighCost of changing suppliers
When is the use of pure market mechanisms appropriate in buyer-supplier relationships?
Market mechanisms inappropriate
Resource Dimension
Mar
ket
Dim
ensi
on
Market mechanisms appropriate
Leverage needs
uncertainty
Leverage market
uncertainty
Nu
mb
er o
f su
pp
ly a
lter
nat
ives
Few
Man
y
© Nigel Slack and Michael Lewis 2003
Supply chain Management
Partnership relationships are seen as desirable
because they can reduce the transaction costs of
doing business
© Nigel Slack and Michael Lewis 2003
Joint learning
Joint co-ordination of
activities
Multiple points of contact
Trust
Sharing success
Few relationships
Information transparency
Dedicated assets
Joint problem solving
Long-term expectations
Attitudes
Actions
Closeness of relationship
Elements of partnership relationships
© Nigel Slack and Michael Lewis 2003
Supply chain Management
There are strong forces acting against the
maintenance of trust
© Nigel Slack and Michael Lewis 2003
Mr. White gets 5 yrs
Mr. Orange gets 5 yrs
Mr. White goes free
Mr. Orange gets 10 yrs
Mr. White get 10 yrs
Mr. Orange goes free
Mr. White gets 3 yrs
Mr. Orange gets 3 yrs
Doesn’t confess
Confesses
Confesses
Doesn’t confess
The “prisoner’s dilemma” decision
Mr. White
Mr. Orange
© Nigel Slack and Michael Lewis 2003
Mr. White goes free
Mr. Orange gets 10 yrs
Mr. White gets 3 yrs
Mr. Orange gets 3 yrs
Doesn’t confess
Confesses
Confesses
Doesn’t confess
The “prisoner’s dilemma” decision
Mr. White gets 5 yrs
Mr. Orange gets 5 yrs
Mr. White get 10 yrs
Mr. Orange goes free
Mr. White
Mr. Orange
Assume Mr. Orange confesses
© Nigel Slack and Michael Lewis 2003
Mr. White gets 5 yrs
Mr. Orange gets 5 yrs
Doesn’t confess
Confesses
Mr. White
Confesses
Doesn’t confess
Mr. Orange
The “prisoner’s dilemma” decision
Mr. White get 10 yrs
Mr. Orange goes free
Mr. White goes free
Mr. Orange gets 10 yrs
Mr. White gets 3 yrs
Mr. Orange gets 3 yrs
Assume Mr. Orange doesn’t confess
© Nigel Slack and Michael Lewis 2003
…trusting you is likely to give me more benefits than not trusting you...
…I believe I can trust you because I think I know
you enough to be confident you will behave
as I would wish...
…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......
Calculative trust
Cognitive trust
Bonding trust
Deg
ree
of
clo
sen
ess
Based on knowledge
Based on feelings
Tim
e
Cu
mu
lati
ve p
osi
tive
exp
erie
nce
s
Degrees of trust
© Nigel Slack and Michael Lewis 2003
Market position
Market risks
Market structure
Competitive behavior
Economies of scale
Transaction costs
Learning potential
Resource deficiencies
Some factors influencing the nature of network relationships
OPERATIONS RESOURCES
MARKET REQUIREMENTS
Nature of network
relationship
© Nigel Slack and Michael Lewis 2003
Will Desron find someone else to ‘single supply’?
Turns down Desron’s offer
Accepts Desron’s offer
Minimises investment but high vulnerability
Increases investment in capacity but retains ‘safety net’ of other customers
Dedicate to Desron
Retain some other customers
Options for Aztec