Distribution Systems: Concentrated Clustering
Case Assignment - Module 2|
The Core of Concentrated Clusters
Since the definition of supply chain management is, "the oversight of materials, information, and finances as they move in a process from supplier to manufacturer to wholesaler to retailer to consumer", it only makes sense then that placing each part of the supply chain in close proximity to one another makes for easier oversight. (Rouse, 2010) This is the basis for the clustering theory. (DeWitt, Giunipero, & Melton, 2006) Not just in theory, but in practice as well, clustering has proven to give those companies involved in a supply chain distinct competitive advantages via its three characteristics of physical proximity, core competencies, and enhanced relationships. (DeWitt, Giunipero, & Melton, 2006)
Clusters Enhancing Supply Chain Management
Geographical proximity is probably the most observable and recognized aspect of concentrated clusters. From close physical proximity, businesses benefit from decreased shipping cost and simplified transportation systems. Additionally, it offers "face-to-face networking, common labor markets and the diffusion of knowledge". (Brown, 2000) Even the fact that closer proximity eliminates the nuisance associated with differing time zones can be beneficial. Furthermore, clusters create normative traits and thus a higher degree of synergy. (Peters, 2004) All of these aspects serve to foster relationships and cultivate core competencies. Proximity encourages communication and downgrades the chances of mistakes along a number of lines. From speaking a common dialect to reducing travel times, the closer each part of the chain is to the others, the smoother supply chain management becomes. Concentrated clustering tends to have a explicit effect on core competency enhancement. Clustering draws in skilled workers. The gathering of skilled workers...