Basic Supply Chain Strategies and Purchasing Techniques

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what are the basic supply chain strategies? Explain each strategy, providing relevant examples.

A supply chain strategy is frequently miss-understood with supply chain management, where supply chain actions are controlled to decrease costs, but with supply chain strategy it defines how the supply chain should function in order to compete. Supply chain strategy is an iterative method that evaluates the cost benefit trade-offs of prepared components. A well accomplished supply chain strategy results in value creation for the business.

The basic supply chain strategies are many suppliers, few suppliers, vertical integration, keiretsu network, and virtual company.

The many suppliers strategy has many sources per item, it has adversarial relationships, it is short term, little honesty, bargaining, it has high prices, it’s irregular as well as a delivery to receiving dock. Example for many suppliers is marks and Spencer’s but with this said some companies choose to change strategy and may go into the few suppliers.

The few suppliers’ strategy has 1 or few sources per item, partnerships; it is long-term, stable, On-site checks & visits, limited contracts, it has low prices but large orders. It is common, has small lots and delivery to point of use. Example for this is Xerox.(a company that sells and produces printers as well as services and supplies )

The vertical integration strategy produces goods that have been previously purchased; it works with a make-by issue, major financial commitment, but it is hard to do all things well an example of vertical integration is, iron ore which leads to steel, then to automobiles, then distribution system and finally it goes to the dealers.

The Keiretsu network strategy also known as the affiliated chain is a system of mutual alliances and cross- ownership, it links the manufacturers, suppliers, distributors and lenders. An example would be car dealerships.

Virtual company strategy is a network of...
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