Supply chain partnership.docx
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Supplychainpartnership
SupplyChainPartnership
-Toyota'sSCPbackground
240.754
SupplyChainOptimization
Abstract
Inthepastfewdecades,thecompetitionbetweencompaniesisbecomingmorecompetitive.Themostofcompaniesarelookingforthemethods,inwhichcanimprovetheircompetitiveedge.Meanwhile,thecompetitionofmarketsharebetweencompanieshasbeeninsteadofthecompetitionbetweenthesupplychainofcompanies,especiallyintheindustryofretial.Asanindustryofpullingtheproductsofdailyconsumption,itssupplychainmanagementplaysanimportantroleinthecompetition.Andhowtoimprovethecooperationrelationshipbetweenvendorsandbuyersisoneofthemainpointtoimprovethesupplychainmanagement.Hencecompaniestriedtointegratetheirsuppliers'resourcesandsetupthesupplierstrategicpartnerrelationshiptoimprovetheirefficiencyofsupplychain.Thispaperwillanalysishowimportantsupplierspartnerrelationshipisandwhatarethedifferencesbetweentraditionalrelationshipandpartnerrelationship.AnditwillalsodiscusstheToyota'ssupplychainpartnership.
Introduction
Supplychainpartnership(SCP),onwhichmoreandmorecompaniesarefocusing,meansthatinordertoachievequicklyresponsibility,sharethemarketinformationandmakegoodusesofresources,adevelopmentalassociationismadeupofagroupofcompaniesinthesupplychainincludingsuppliers,manufactures,distributors,retailers.Inthealliance,thecompaniessharethebenefitsandrisks,andusetheircoretechnologytocomplementtheadvantagesanddisadvantages.TheSCPmakeseachmemberofthealliancefocusontheirrelevantbusiness,sothatitimprovesthecompetitiveedgeofwholesupplychain.
Duringthe1980s,academicsandconsultantscreatedanew‘bestpractice’model
ofsupplychainmanagementbasedontheirinterpretationsofthesuccessful
JapaneseautomakerToyota.Thenewmodelwassaidtobeapre-requisiteto
competitivesurvivalinthetwenty-firstcentury(Womack,JonesandRoos,1990).
Variousversionsofithavebeendeveloped,thoughallofthemsharetwoessential
characteristicsincommon.First,theyincorporatelong-term,co-operative
partnershiprelationshipsbetweenbuyersandsuppliers,withhighlevelsof
interactionbetweenfirms.Thisissaidtodeliversuperiorperformanceintermsof
cost,qualityandspeedindailyinteractionsandinnewproductdevelopment.The
secondsharedelementisthejuxtapositionofthenewmodelagainstopposite
practicestraditionallywidespreadintheWest(seeTable).Thisbinaryold/new
approachpresentsfirmswithanattractivemessage.Thenewmodelmayrequire
challengingandrevolutionarythinking,butitpromisestoturncompetitivedecline
intoworldclasssuccess.
Items
Traditional
Partnership
PurchaseCriteria
Lowprice
Productioncapacity,flexibility,quality,deliveryservice,competency
DesignSource
Customerdesign
Co-design
NumberofSuppliers
Severalforeachparts
Oneorfewforeachparts,evenforagroupofparts
CustomerBusinessVolumeperSupplier
Smallandgreatnumberofsupplierstakepartintheprocess
Highandonlysingleorfewsuppliersbeingrecognisedasthesupplingparts
TypeofContact
Singleorder
Cooperateaspartnerrelationship
TermsofAgreement
Duration
Shortterm
Longterm
Cost
Lowprice,buthightransactioncost
Pricenegotiated,reductionofprocesscost
Quality
Variableandcustomreliesonincominginspection
HighqualityundertheprogrammeofTQMandSCP
Shipping
Infrequenceandlargebatches
Supplyon-demand,frequentdeliveriesinsmallquantities
OrderMechanism
Faxorphone
Faxorphone,Kanban,EDI
Customer-SupplierInteraction
Materialandparts
Material,parts,technology,service,expertise
Ascanbeenseeninthetable,therelationshipbetweensuppliersandcustomersisunstableintraditionalrelationship.Firstofall,insucharelationship,thebuyerscanpurchasethelowestpriceofmaterial,butthatwillleadtomorefiercecompetitionbetweenthesuppliers.Secondly,priceisthemainstandardforchoosingandtheoriginalofferpriceistemporary,becausethesupplierswilltrytochangethepriceaftertheyarechosen.Thirdly,duetotheshort-termcontractbetweenthebuyersandthesuppliers,therelationshipbetweenthemisquiteloose,whichleadstokeephighinventorytoavoidtheunpredictablemarketdemandforbothofthem.Finally,imperfectionqualitysysteminthosesupplychainscausesthatthecompaniesneedtosolvetheproductproblemscontinuouslyinthemarket.
Whycompaniesneedtoconstructsucharelationship(SCP)?
Therelationalviewofsuppliermanagement,akeyaspectofrelationshipmarketing,hasoftenbeendeemedtocontributetothesuccessofJapanesefirms.Inthisview,abuyerandasupplierestablishandmaintaincloserelationshipsonanongoingbasis.Theysharemoreinformationandbettercoordinationoftasks(Ganesan,1994;Iacobucci,1994);makerelation-specificinvestments,humanandphysical,tofacilitatecostreductionandqualityimprovement(Hill,1995;LohtiaandKrapfel,1994);and,buildtrust-basedrelationshipsthatcanminimizetransactioncosts(BarneyandHansen,1995;DoneyandCannon,1997;LewinandJohnston,1997;Sheard,1996).Suchpartnerships,however,arecostlytoestablishandmaintain,and,
further,mayreduceacustomer'sabilitytoswitchawayfrominefficientsuppliers(HeideandJohn,1990;Nielson,1996;Salmond,1994).Insum,thecentralthemeoftherelationalviewisthattrustandcommitmentencouragethelong-termrelationshipsbetweensuppliersandbuyerstodevelopaspartnerships(MorganandHunt,1994;HuntandMorgan,1994).
Intraditionalmodel,mostofmanufacturesaregetusetocooperateagreatnumberofsuppliers,andsomeoftheirprojectsneedtobecompetitivebidding.Hencethesupplierstrytomakeareductionofthecostofmaterialtogainthecontract.Althoughthefirms'goalofdecreasingproductioncosthasbeenachievedbythereductionofpurchasingcost,ononehad,themanufactureswilllosetheleadingroleinthesupplychainbecauseofoverdependingonthesuppliers.Ontheotherhand,thequalityofsupply(includingthequalityofproducts,deliverytimeandservicelevel)willbereduced,becausewhenthesupplierstrytogetmoreprofitsintheproducts,theywillbetendtodeclinetheinvestmentandtheproductioncost.Meanwhile,tradingtonumerousvendorsleadstothehightransactioncostofmanufactures.Andthereductionofproductsqualityleadstothedecreasingofcustomers'satisfactionandthelossofcustomers'loyalty,whichmakesthemanufacturesfacetothelossofmarketshare.Inordertomaintainthemarketshare,themanufactureshavetoreducetheretailpricetomeettheneedsofcustomersandtheyalsoneedtodecreasetheproductioncost,whichleadstothenegativecycleinthesupplychain.Thosephenomenonwillcauseavarietyofproblemsinthesupplychain,suchasthelossofcustomers'confident,thehostilitybetweensuppliersandmanufacturers.However,moreandmorescholarsandfirmsrealisethatinordertoincreasethevalueofproductionandmaximisethecustomerservicelevel,astrategicrelationshipmustbesetupinthesupplychainbetweentherelevantcompanies.
Whataretheadvantagestosetupasuppliers-partnerrelationship?
Firstofall,thecompaniesinthesamesupplychainwillgainmorebenefitswhentherelationshiphasbeensetup,becausethesuppliers,manufactures,distributorsandretailerscanconsultthesolutionsofproductiondesign,supplyofspareparts,salesanddistribution.Formanufactures,therearesomeadvantagesshownasbelow:
·Itcanshortenthetimeofnewproducttomarket.IntheSCP,itisunnecessarytothemanufacturestospendmoretimeondesignthesparepartsofproducts,becauseishasbeenoutsourced.Andtheycanfocusonresearchinganddesigningthenewproducts,whichleadstoshortenthecycletimeofnewproducts.
·Productioncostcanbereduced.Duringthecooperation,thesupplierscantakepartintheprocessofproductionandthedesignofnewproducts.Meanwhile,themanufacturescanalsoknowmoreaboutthedesignandprocessofsuppliers.Thoseinteractionscanhelpthemselftopointoutproblemsfromtheprocessandimprovethetechnologytoslovethem,whichcanachieve"Win-Win"andreductionofproductioncost.Inaddition,therearesevenkindsofwasteintheproducingprocessconcludedbyToyota:
thewasteofoverproduction,thewasteofwaitingtime,thewasteoftransportation,thewasteofinventory,thewasteofmanufacture,thewasteofmovementandthewasteofsubstandardproduct,butsincethecompanyadoptthestrategyofsettinguptheirSCP,theycansolvethoseproblemseffectively.
·CustomerservicelevelwillbeimprovedbytheSCP.Firstofall,retailers,whichareclosedtotheterminalconsumersandreceivemoreinformationofmarket'sdemands,canprovideavarietyofsuggestionsonthedesignofnewproductswhichcanbepulledbythecustomers'demandnotthetraditionalpushingmarketing.Inthecooperationwithsuppliers,manufacturescanproducetherightproductswhichmeansthattheproductswillmeettheneedsofthedemands.Inaddition,improvementofsupplyqualityleadstosupplythesparepartstothemanufacturesattherighttime,rightplace,rightquantity,whichcanimprovethequalityofproductsandshortenthelead-time.Furthermore,whencustomerscomplaintheproducts,theretailers,manufacturesandsupplierswilltrytosolvetheproblemtogether,becausetheyneedtoshareresponsibilityfortheriskinthesupplychain.Asregardssuppliers,whentheysetupthealliance,the