Supply chain partnership.docx

1、Supply chain partnershipSupply Chain Partnership- Toyotas SCP background 240.754Supply Chain OptimizationAbstractIn the past few decades, the competition between companies is becoming more competitive. The most of companies are looking for the methods, in which can improve their competitive edge. Me

2、anwhile, the competition of market share between companies has been instead of the competition between the supply chain of companies, especially in the industry of retial. As an industry of pulling the products of daily consumption, its supply chain management plays an important role in the competit

3、ion. And how to improve the cooperation relationship between vendors and buyers is one of the main point to improve the supply chain management. Hence companies tried to integrate their suppliers resources and set up the supplier strategic partner relationship to improve their efficiency of supply c

4、hain. This paper will analysis how important suppliers partner relationship is and what are the differences between traditional relationship and partner relationship. And it will also discuss the Toyotas supply chain partnership.IntroductionSupply chain partnership (SCP), on which more and more comp

5、anies are focusing, means that in order to achieve quickly responsibility, share the market information and make good uses of resources, a developmental association is made up of a group of companies in the supply chain including suppliers, manufactures, distributors, retailers. In the alliance, the

6、 companies share the benefits and risks, and use their core technology to complement the advantages and disadvantages. The SCP makes each member of the alliance focus on their relevant business, so that it improves the competitive edge of whole supply chain. During the 1980s, academics and consultan

7、ts created a new best practice model of supply chain management based on their interpretations of the successful Japanese automaker Toyota. The new model was said to be a pre-requisite to competitive survival in the twenty-first century (Womack, Jones and Roos, 1990). Various versions of it have bee

8、n developed, though all of them share two essential characteristics in common. First, they incorporate long-term, co-operative partnership relationships between buyers and suppliers, with high levels of interaction between firms. This is said to deliver superior performance in terms of cost, quality

9、 and speed in daily interactions and in new product development. The second shared element is the juxtaposition of the new model against opposite practices traditionally widespread in the West (see Table). This binary old/new approach presents firms with an attractive message. The new model may requ

10、ire challenging and revolutionary thinking, but it promises to turn competitive decline into world class success. ItemsTraditionalPartnershipPurchase CriteriaLow priceProduction capacity, flexibility, quality, delivery service, competencyDesign SourceCustomer designCo-designNumber of SuppliersSevera

11、l for each partsOne or few for each parts, even for a group of partsCustomer Business Volume per SupplierSmall and great number of suppliers take part in the processHigh and only single or few suppliers being recognised as the suppling partsType of ContactSingle orderCooperate as partner relationshi

12、pTerms of AgreementDurationShort termLong termCostLow price, but high transaction costPrice negotiated, reduction of process costQualityVariable and custom relies on incoming inspectionHigh quality under the programme of TQM and SCPShippingInfrequence and large batchesSupply on-demand, frequent deli

13、veries in small quantitiesOrder MechanismFax or phoneFax or phone, Kanban, EDICustomer-Supplier InteractionMaterial and partsMaterial, parts, technology, service, expertiseAs can been seen in the table, the relationship between suppliers and customers is unstable in traditional relationship. First o

14、f all, in such a relationship, the buyers can purchase the lowest price of material, but that will lead to more fierce competition between the suppliers. Secondly, price is the main standard for choosing and the original offer price is temporary, because the suppliers will try to change the price af

15、ter they are chosen. Thirdly, due to the short-term contract between the buyers and the suppliers, the relationship between them is quite loose, which leads to keep high inventory to avoid the unpredictable market demand for both of them. Finally, imperfection quality system in those supply chains c

16、auses that the companies need to solve the product problems continuously in the market.Why companies need to construct such a relationship (SCP)?The relational view of supplier management, a key aspect of relationship marketing, has often been deemed to contribute to the success of Japanese firms. I

17、n this view, a buyer and a supplier establish and maintain close relationships on an ongoing basis. They share more information and better coordination of tasks (Ganesan, 1994; Iacobucci, 1994); make relation-specific investments, human and physical, to facilitate cost reduction and quality improvem

18、ent (Hill, 1995; Lohtia and Krapfel, 1994) ; and, build trust-based relationships that can minimize transaction costs (Barney and Hansen, 1995; Doney and Cannon, 1997; Lewin and Johnston, 1997; Sheard,1996). Such partnerships,however, are costly to establish and maintain, and,further, may reduce a c

19、ustomers ability to switch away from inefficient suppliers (Heide and John,1990; Nielson,1996; Salmond, 1994). In sum, the central theme of the relational view is that trust and commitment encourage the long-term relationships between suppliers and buyers to develop as partnerships (Morgan and Hunt,

20、1994; Hunt and Morgan,1994).In traditional model, most of manufactures are get use to cooperate a great number of suppliers, and some of their projects need to be competitive bidding. Hence the suppliers try to make a reduction of the cost of material to gain the contract. Although the firms goal of

21、 decreasing production cost has been achieved by the reduction of purchasing cost, on one had, the manufactures will lose the leading role in the supply chain because of over depending on the suppliers. On the other hand, the quality of supply (including the quality of products, delivery time and se

22、rvice level) will be reduced, because when the suppliers try to get more profits in the products, they will be tend to decline the investment and the production cost. Meanwhile, trading to numerous vendors leads to the high transaction cost of manufactures. And the reduction of products quality lead

23、s to the decreasing of customers satisfaction and the loss of customers loyalty, which makes the manufactures face to the loss of market share. In order to maintain the market share, the manufactures have to reduce the retail price to meet the needs of customers and they also need to decrease the pr

24、oduction cost, which leads to the negative cycle in the supply chain. Those phenomenon will cause a variety of problems in the supply chain, such as the loss of customers confident, the hostility between suppliers and manufacturers. However, more and more scholars and firms realise that in order to

25、increase the value of production and maximise the customer service level, a strategic relationship must be set up in the supply chain between the relevant companies. What are the advantages to set up a suppliers-partner relationship?First of all, the companies in the same supply chain will gain more

26、 benefits when the relationship has been set up, because the suppliers, manufactures, distributors and retailers can consult the solutions of production design, supply of spare parts, sales and distribution. For manufactures, there are some advantages shown as below:It can shorten the time of new pr

27、oduct to market. In the SCP, it is unnecessary to the manufactures to spend more time on design the spare parts of products, because is has been outsourced. And they can focus on researching and designing the new products, which leads to shorten the cycle time of new products. Production cost can be

28、 reduced. During the cooperation, the suppliers can take part in the process of production and the design of new products. Meanwhile, the manufactures can also know more about the design and process of suppliers. Those interactions can help themself to point out problems from the process and improve

29、 the technology to slove them, which can achieve Win-Win and reduction of production cost. In addition, there are seven kinds of waste in the producing process concluded by Toyota: the waste of over production, the waste of waiting time, the waste of transportation, the waste of inventory, the waste

30、 of manufacture, the waste of movement and the waste of substandard product, but since the company adopt the strategy of setting up their SCP, they can solve those problems effectively.Customer service level will be improved by the SCP. First of all, retailers, which are closed to the terminal consu

31、mers and receive more information of markets demands, can provide a variety of suggestions on the design of new products which can be pulled by the customers demand not the traditional pushing marketing. In the cooperation with suppliers, manufactures can produce the right products which means that

32、the products will meet the needs of the demands. In addition, improvement of supply quality leads to supply the spare parts to the manufactures at the right time, right place, right quantity, which can improve the quality of products and shorten the lead-time. Furthermore, when customers complain the products, the retailers, manufactures and suppliers will try to solve the problem together, because they need to share responsibility for the risk in the supply chain. As regards suppliers, when they set up the alliance, the