Chapter 3: Supply chain
relationships
1. Globalization of supply chains
- New sourcing patterns because of growth in international trade and global competition (chapter 2)
- Critical role of relationships in contemporary global supply chains
- Effective relationships between suppliers and customers have become differentiators of high-
performing supply chains.
Has resulted in the following trends:
Global competition
Competitors, partners and customers from around the world
Global sourcing
Global presence
Global value chains resulting in increasing complexity and competition
Global access to knowledge and new technologies
High levels of customer awareness and expectation
Rapid pace of technological change
Fast rate of product commoditization
SCM expertise and innovation as preconditions for business success
Asia, India and China have become global centres for a large number of sectors (see example on p36 on
volvo trucks):
Manufacturing
Software development
Retailing and financial support
Ongoing trend of OUTSOURCING or OFFSHORING but includes difficulties as well (see part on failures)
Reasons?
Wage is not the only criterion
!!! total cost of outsourcing !!!
, 2. Outsourcing
The transfer of the management and delivery of a process previously performed by the company itself
to a “third party”
1) Selecting partners to work with
2) Manage the chosen partner
Requiring:
Order winners and qualifiers identified
Service level agreements (SLAs) made up before agreement being signed
Supplier development: avoid to squeeze suppliers by pressure on costs alone
Good supplier relationship management = sharing risks and benefits (information)
Make or buy decision: What to do yourself and what to outsource?
Creating:
- Virtual organizations (ex AirBnB, Vente Exclusive, …) = most found in e-business sector
Hard to manage whole network of suppliers !
- Organization of suppliers into tiers (layers)
Tiers explained:
Think of a pyramid
Top tier is the
ultimate, final
producer that
carries the
brand -> called
original
equipment
manufacturer
(OEM)
Next layers
are called
- First-
tier
suppliers
- Second-tier suppliers
Contract manufacturers = term used to describe suppliers manufacturing or assembling the products in
agreement with the OEM
relationships
1. Globalization of supply chains
- New sourcing patterns because of growth in international trade and global competition (chapter 2)
- Critical role of relationships in contemporary global supply chains
- Effective relationships between suppliers and customers have become differentiators of high-
performing supply chains.
Has resulted in the following trends:
Global competition
Competitors, partners and customers from around the world
Global sourcing
Global presence
Global value chains resulting in increasing complexity and competition
Global access to knowledge and new technologies
High levels of customer awareness and expectation
Rapid pace of technological change
Fast rate of product commoditization
SCM expertise and innovation as preconditions for business success
Asia, India and China have become global centres for a large number of sectors (see example on p36 on
volvo trucks):
Manufacturing
Software development
Retailing and financial support
Ongoing trend of OUTSOURCING or OFFSHORING but includes difficulties as well (see part on failures)
Reasons?
Wage is not the only criterion
!!! total cost of outsourcing !!!
, 2. Outsourcing
The transfer of the management and delivery of a process previously performed by the company itself
to a “third party”
1) Selecting partners to work with
2) Manage the chosen partner
Requiring:
Order winners and qualifiers identified
Service level agreements (SLAs) made up before agreement being signed
Supplier development: avoid to squeeze suppliers by pressure on costs alone
Good supplier relationship management = sharing risks and benefits (information)
Make or buy decision: What to do yourself and what to outsource?
Creating:
- Virtual organizations (ex AirBnB, Vente Exclusive, …) = most found in e-business sector
Hard to manage whole network of suppliers !
- Organization of suppliers into tiers (layers)
Tiers explained:
Think of a pyramid
Top tier is the
ultimate, final
producer that
carries the
brand -> called
original
equipment
manufacturer
(OEM)
Next layers
are called
- First-
tier
suppliers
- Second-tier suppliers
Contract manufacturers = term used to describe suppliers manufacturing or assembling the products in
agreement with the OEM
