Case Study #1 - Sunspot, Inc
1. What are the most likely benefits of forming strategic supply alliances with Sunspot’s key suppliers? A strategic alliance between Sunspot and its key suppliers will result in a relationship based on trust. It’s key for both parties to develop and manage this “institutional” trust or the alliance will fail. Trust will facilitate communication which will lead to less errors and higher quality, faster development times, and lower costs. Synergies created by alliances result in reductions of direct and indirect costs associated with labor, machinery, materials, and overhead. Other benefits are reduced time to market, improved technology flow from suppliers, and improved continuity of supply. With strategic alliances, all parties have a stake in the success of Sunspot’s business.
2. What are the disadvantages or risks of such alliances? Alliances are a resource-intense approach to supply management with several disadvantages or risks. There’s a danger the supplier will act in an opportunistic manner over time; perhaps Sunspot’s electronic systems don’t allow for optimum information sharing and communication with its suppliers. Mr. Bart Lyons will have to ensure he has a supply manager who is trained in managing alliance partnerships--if not, the alliance will fail. Sunspot will have to accept added risk associated with reducing the supply base. Both the supplier and buyer need be aligned in what their ultimate customer considers valuable and in their respective visions thus able to make long term commitments to each other. Sunspot must determine if the benefits of an alliance outweigh the effort, risk, and resources required.
3. How can these disadvantages be offset?
The three most important factors in a successful buyer-supplier relationship are two-way communication; the supplier’s responsiveness to supply management’s needs; and clear product specifications. To offset the risk and/or disadvantages actions can be taken to appoint an inter-firm team that receives guidance and training in the implementation of practices. Additionally, the firms can develop a communication system that addresses risks and rewards openly. They can take actions to develop and measure trust, as well as, use negotiation as a trust-building opportunity. Addressing the risk and disadvantages early will aid in the success of the relationship and both firms.
Case Study #2 - The Privileged Fly
1. Discuss the basic inventory problem confronting this firm. Mrs. Glass made the decision to reduce cost by reducing inventories without considering the problems it would cause for other functions. This created a shortage of inventory causing increased cost by using air freight to meet demand while keeping the company’s commitment to the customer for prompt delivery.
2. Air freight bills keep growing both in numbers and in total dollar value of freight transported. What are the factors that have contributed to the development of this situation? Do they reflect efficient or inefficient management of supply, inventories, and production in firms such as this one? Discuss. Air freight bills keep growing because of the lack of inventory on hand to run a complete production. One factor contributing to this situation is the company’s promise of prompt delivery without regard to what the company’s actual capability is. Another includes decisions being made by one department without consideration of the how it would affect the entire chain or timely information on sales forecasts. It appears the company has not yet found an organizational structure and governance process that will allow the supply chain to function effectively and efficiently. Additionally, prior to this meeting it seems there was no cross-functional approach to supply management. Decisions are being made without team...
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