Western Governors University
Hand-Tool Corporation, hereafter referred to as the initialism, HTC, was established to take advantage of the hand-tools market, which consists of sales of electric drills, saws, and sanders, to consumers in the homebuilding and home-improvement market. These consumers will comprise both business and private end users.
The corporation is seeking data to determine the optimal course of action for distribution, referred to hereafter as the supply chain. This analyst has researched several supply-chain strategies. These strategies will be presented in this report. The analyst will also provide a concerted recommendation for a course of action that will support the company’s profit-maximization goals.
As indicated in the precedent paragraph, there are several supply-chain strategies extant in the business world. However, some of the strategies are insufficient to meet the corporation’s business needs. The following list offers the attributes of two competing strategies as well as a recommendation for or against it.
Bloomberg Businessweek offers the following definition of a virtual corporation:
The virtual corporation is a temporary network of independent companies--suppliers, customers, even erstwhile rivals--linked by information technology to share skills, costs, and access to one another's markets. It will have neither central office nor organization chart. It will have no hierarchy, no vertical integration (Bloomberg Businessweek, 1993).
The virtual corporation is also known as a hollow corporation. For supply-chain purposes, the hollow corporation implies that a source company, Hand-Tool Corporation, outsources all supply-chain-related activities. For example, in this network, Hand-Tool Corporation would not be responsible for the procurement and quality validation of the resources needed to build a drill. An identified company or cluster of companies would manage those processes. This concept applies to all areas of the supply chain. Human resources and the issues that it presents are managed by another entity. Payroll and its own issues are managed by a separate company. The actual manufacturing of the product is handled by another entity. And the distribution of the goods is handled by another entity.
The hollow corporation is a compelling strategy for many businesses, including Hand-Tool Corporation. This approach allows HTC to focus on the conceptual, rather than the physical, development of its products and the marketing of it to an identified customer segment. Essentially, this network types supports mellifluousness regarding operations management. Whereas HTC’s investment in any aspect of the supply chain would require substantial resources to change directions, hollow corporations leave those responsibilities to vendors. It should be viewed as a professional hands-off approach to the supply chain.
The principal detractor for this network type is the overreliance on vendors for the management of the supply chain. For example, if an issue arises with the procurement of raw materials to produce the corporation’s hand tools due to labor disputes, i.e., striking employees, a significant failure of the supply chain will occur, and it will be HTC’s responsibility to communicate and remedy this failure with its customers.
Unfortunately, this network type is incompatible with the aims of the corporation’s investors. HTC is committed to corporately involving itself in the supply chain, which is at variance with the attributes of a hollow corporation. This analyst is compelled to not recommend this network type. Please note that this analyst does believe that this network type is a viable solution now and should be pursued. However, all indications from the investors are that they are interested in some...