Supply-Chain Management

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“SUPPLY-CHAIN MANAGEMENT”
1. GLOBAL COMPANY PROFILE:
VOLKSWAGEN'S RADICAL EXPERIMENT IN SUPPLY-CHAIN MANAGEMENT

Volkswagen's major suppliers are assigned space in the VW plant, but supply their own components, supplies, and workers. Workers from various suppliers build the truck as it moves down the assembly line. Volkswagen personnel inspect.

Volkswagen plant, however, VW is buying not only the materials but also labor and the related services. Suppliers are integrated tightly into VW's own network, right down to the assembly work in the plant.

Because purchase costs in the auto industry exceed to 60% of the sales dollar, even modest reductions in these costs could make Volkswagen’s payoff substantial. The results are not in yet, but VW is already trying a similar approach in plants in Buenos Aires, Argentina, and with Skoda, in the Czech Republic. Volkswagen’s new level of integration in supply-chain management may be the wave of the future.

2. THE STRATEGIC IMPORTANCE OF SUPPLY-CHAIN MANAGEMENT

Supply-chain management is the integration of the activities that procure materials and services transform them into intermediate goods and final products, and deliver them to customers. These activities include purchasing and outsourcing activities, plus many other functions that are important to relationship with suppliers and distributors. Supply-chain management is the management of activities that procure materials and services, transforming them into intermediate goods and final products, and delivering the products through the distribution system. It includes determining (1) transportation vendors, (2) credit and cash transfers, (3) suppliers, (4) distributors and banks, (5) accounts payable and receivable, (6) warehousing and inventory levels, (7) order fulfillment, and (8) sharing customer, forecasting, and production information. The objective of global supply-chain management is to build a chain of suppliers that focus on maximizing value to the ultimate customer.

2.1 GLOBE SUPPLY-CHAIN ISSUES

The objective of supply-chain management is to build a chain of suppliers that focus on maximizing value to the ultimate customer. Supply chains in a global environment, must be:

1. Flexible enough to react to sudden changes in parts availability, distribution or shipping channels, import duties, and currency rates. 2. Able to use the latest computer and transmission technologies to schedule and manage the shipment of parts in and finished products out. 3. Staffed with local specialist to handle duties, trade, freight, customs, and political issues. 3. SUPPLY-CHAIN ECONOMICS

The supply chain receives such attention because it is an integral part of a firm’s strategy and the most costly activity in most firms. For both goods and services, supply-chain costs as a percent of sales are often substantial. Because such a huge portion of revenue is devoted to the supply chain, an effective strategy is vital. The supply chain provides a major opportunity to reduce costs and increase contribution margins.

3.1 MAKE-OR-BUY DECISION

Choosing between producing a component or a service in-house or purchasing it from an outside source. A wholesaler or retailer buys everything that it sells; a manufacturing operation hardly ever does. Manufacturers, restaurants, and assemblers of products buy components and subassemblies that go into final products.

Reasons for Making:
1) Maintain core competence
2) Lower production cost
3) Unsuitable suppliers
4) Assure adequate supply
5) Utilize surplus labor or facilities and make a marginal contribution 6) Obtain desired quality
7) Remove supplier collusion
8) Obtain unique item that would entail a prohibitive commitment for a supplier 9) Protect personnel from a layoff
10) Protect proprietary design or quality
11) Increase or maintain size of the company
Reasons for Buying:
1) Frees management...
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