Download - Strategic Alliances Designing & Managing the Supply Chain Chapter 6 Yao yaxian [email protected]
Strategic Alliances
Designing & Managing the Supply Chain
Chapter 6
Yao yaxian
Outline
How Kimberly-Clark keeps client Costco in diapers
Introduction
A framework for strategic alliances
Third-party logistics
Retailer-supplier partnerships
Distributor integration
CASE: How Kimberly-Clark keeps client Costco in diapers
Introduction Kimberly-Clark is a company which products diapers
Costco is a retailer who sales Kimberly-Clark’s productions
The retailer pressures their suppliers to make a more active role in shepherding products from factory to store shelves
CASE: How Kimberly-Clark keeps client Costco in diapers
Changing sizes In some cases, suppliers shoulder the costs of
warehousing excess merchandise. In others, it means pushing suppliers to change
product or package sizes. In this case, the plan is officially called ”vendor-
managed inventory,” Kimberly-Clark oversees and pays for everything involved with managing Costco’s inventory except the actual shelf-stockers in store aisles
CASE: How Kimberly-Clark keeps client Costco in diapers
Return to unisex Less variety makes for easier inventory-tracking in its
factories and trucks Better cooperation between retailers and suppliers
has been made possible by improved technology Costco’ shelves are less likely to go empty under the
new system
A “Pull” product It means that shoppers make a trip to the store
specifically to buy them
CASE: How Kimberly-Clark keeps client Costco in diapers
A canceled order The drive for efficiency creates new problems Costco store managers complain that some deliveries
are incomplete Some drivers accidentally unloading items intend for a
later stop Now, Kimberly-Clark uses a simple cardboard divider
to separate each store’ order
Introduction
As with any business function, there are four basic ways for a firm to ensure that a logistics-related business function is completed:
1. internal activities. A firm can perform the activity using internal resources and expertise, if they are available.
2. acquisitions. If a firm doesn’t have the expertise or specialized resources internally, it can acquire another firm that does.
Introduction
3. arm’s-length transactions. This kind of short-term arrangement fulfills a particular business need but does not lead to long-term strategic advantages
4. strategic alliances. These are typically multifaceted, goal-oriented, long-term partnerships between two companies in which both risks and rewards are shared
A framework for strategic alliances
To determine whether a particular strategic alliance is appropriate for your firm, consider how the alliance will help address the following issues: Adding value to products Improving market access Strengthening operations Adding technological strength Enhancing strategic growth Enhancing organizational skills Building financial strength
Third-party logistics
What is 3PL? Third-party logistics is simply the use of an outside
company to perform all or part of the firm’s management and product distribution
They are true strategic alliances
Advantages and disadvantages of 3PL Focus on core strengths Provides technological flexibility Provides other flexibilities
Important disadvantages of 3PL Loss of control inherent in outsourcing a particular function No sense to out source these activities to a supplier if
logistics is one of the core competencies of a firm
order stream
Third-party logistics
3PL issues and requirements Know your own costs to compare with the cost of using an
outsourcing firm Customer orientation of the 3PL Specialization of the 3PL Asset-owning versus non-asset-owning 3PL
3PL implementation issues Agreements need to be reached and appropriate efforts
must be made by both companies to initiate the relationship effectively
Both parties must be committed to devoting the time and effort needed to making a success of the relationship
Third-party logistics
Other important issues to discuss with potential 3PL providers including the following: The third party and its service providers must respect the
confidentiality of the data that you provide them Specific performance measures must be agreed upon Specific criteria regarding subcontractors should be
discussed Arbitration issues should be considered before entering
into a contract Escape clauses should be negotiated into the contract Methods of ensuring that performance goals are being met
should be discussed
Retailer-supplier partnerships
Types of RSP At one end is information sharing, which helps the vendor
plan more efficiently At the other is a consignment scheme, where the vendor
completely manages and owns the inventory until the retailer sells it
Requirements for RSP The most important requirement for an effective retailer-
supplier partnership, especially one toward the VMI end of the partnership spectrum, is advanced information systems, on both the supplier and retailer sides of the supply chain
Retailer-supplier partnerships
Requirements for RSP As in all initiatives that can radically change the way a
company operates top management commitment is required for the project to success.
Finally, RSP requires the partners to develop a certain level of trust without which the alliance is going to fail.
Inventory ownership in RSP Now, some VMI partnerships are moving to a consignment
relationship in which the supplier owns the goods until they are sold
The benefit of this kind of relationship to the retailer is obvious: lower inventory cost
Retailer-supplier partnerships
Inventory ownership in RSP In VMI, one tries to optimize the entire system by
coordinating production and distribution. In addition, the supplier can further decrease total
cost by coordinating production and distribution for several retailers.
In addition to inventory and ownership issues, advanced strategic alliances can cover many different areas.
Issues such as joint forecasting, meshed planning cycles, and even joint product development are sometimes considered.
Retailer-supplier partnerships
Issues in RSP implementation
For any agreement to be a success, performance measurement criteria must also be agreed to
When information is being shared between retailers and suppliers, confidentiality becomes an issue
When entering any kind of strategic, it is important for both parties to realize that there will initially be problems that can only be worked out through communication and cooperation
The supplier in a partnership commits to fast response to emergencies and situational changes at the retailer
Steps in RSP implementation
1. the contractual terms of the agreement must be negotiated
2. if they do not exist, integrated information systems must be developed for both supplier and retailer
3. effective forecasting techniques to be used by the vendor and the retailer must be developed
4. a tactical decision support tool to assist in coordinating inventory management and transportation policies must be developed
Advantages and disadvantages of RSP
Advantages The knowledge the supplier has about order
quantities, implying an ability to control the bullwhip effect
Through transfer of customer demand information that allows the supplier to reduce lead time
In VMI, controlling the variability in order quantities
Decrease managerial expenses and decreased inventory costs are obvious
Reduce forecast uncertainties and thus better coordinate production and distribution
Advantages and disadvantages of RSP
Disadvantages It is necessary to employ advanced technology,
which is often expensive It is essential to develop trust in what once may
have been an adversarial supplier-retailer relationship
The supplier often has much more responsibility than formerly. This may force the supplier to add personnel to meet this responsibility
Finally, expenses at the supplier often increase as managerial responsibilities increase
Distributor integration
Types of distributor integration In term of inventory, DI can be used to create a
large pool of inventory across the entire distributor network, lowering total inventory costs while raising service levels
DI can be used to meet a customer’s specialized technical service requests by steering these requests to the distributors best suited to address them
Issues in Distributor Integration
First, distributors may be skeptical of the rewards of participating in such a system.
In addition, participating distributors will be forced to rely upon other distributors, some of whom may not know
This new kind of relationship also tends to take certain responsibilities and areas of expertise away from certain distributors, and concentrate them on a few distributors
Issues in Distributor Integration
Establishing a DI relationship requires a large commitment of resources and effort on the part of the manufacturing
Distributors must feel sure that this is a long-term alliance
Organizers must work hard to build trust among the participants
The manufacturer may have to provide pledges and guarantees
The manufacturer may have to provide pledges and guarantees to ensure distributor commitment
Summary
In this chapter, we examined various types of partnerships that can be used to manage the supply chain more effectively
Increasingly, third-party logistics providers are taking over some of a firm’s logistics responsibilities
Retailer-supplier partnerships, in which the supplier manages a portion of the retailer’s business-typically retail inventories-are also becoming common
Finally, we discussed a class of alliances, called distributor intergration