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Integrating the SC Members. There has to be an incentive for the members in a SC to work together for the highest profit possible. Individual vs the whole SC network profit . The foundation of SC. The concept of partnership—based on TRUST. Partnership among the members in a SC
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Integrating the SC Members There has to be an incentive for the members in a SC to work together for the highest profit possible. Individual vs the whole SC network profit
The foundation of SC • The concept of partnership—based on TRUST. • Partnership among the members in a SC • A mutual relationship • A competitive advantage • Who gets the benefit?
Profit sharing • On a fair ground • Suppliers: • From satisfy customers’ needs • To joint action to increase competition • Buyers: • From cost-based selection • To provide mutual beneficial negotiation • A win-win situation!
Abusing partnership • Suppliers usually try hard to provide the best services • But buyers hardly do the same! • Looking for even lower costs • Using other suppliers services for bargaining tools to the existing suppliers • Transfer costs to less innovative suppliers • Resulting in a shaky partnership relationship
The cause for unsuccessful partnership • Different business concept between the suppliers and the buyers • Lower costs but not higher profits • Buyers use quantity as their bargaining power • Suppliers are always defensive • No breakthrough in reducing costs
Successful partnership • Mostly in retail business • Low profit margin forcing members to work together • A major characteristics-Use of EDI • Example: Benetton’s using barcoding and information technology for fast and efficient integration • Resource sharing and joint planning
More examples • Dana to Ford: • Information gathering and processing in 5-10 minutes • No documents, POs or receipts • Database sharing • P&G to Wal-Mart: • CRP • P&G expanding customer base for better shipping operation
Finding the implicit values in a SC • Draw the information flowchart for order processing • Manufacturers, suppliers, and customers decide how the transfer the actual consumption information using real-time system to reduce safety stock and assure delivery • Redesign the flow chart to reduce inventory, improve replenishment plans ( can reduce maybe 3-week of inventory) • Use electronic money transfer
Starting point in a company • Prioritize goals • Sharing resources among functions in a company • Human resource integration and team work • Identify the “Suppliers” and “buyers” within the organization • More than 40% of the process can be improved
Identify the strength of the company • Identify the target to be improved upon • Business process reengineering • Finding the resources necessary to maintain the strength
Using logistics as the catalyzer • Delivery quality • JIT from inbound to outbound logistics • Combining core activities with the suppliers’ services • Fast cash transfer • Example: Ryder to Toyota
Considering from the whole network • Inventory reduced by 40-60% (due majorly to reduction in safety stock) • Inventory turn up from 5-7 times a year to 25-30 (due to less inventory) • Delivery time reduced by 50-60% (due to EDI and elimination of non value-added activities) • Increase sales and market share by 35-55% (due to joint customer response system and attracting customers)
Considering from the whole network • Profit increased by 15-30% (due to improved process design and further cost reduction) • Customer relationship improved by 20-40% (due to better communication and services to the customers)
Strategic decisions • Who will survive? • Who will dominate the market? • Who can maintain a healthy growth? • Who has the same concept and strategy as ours? • Who has the management concept to support the partnership? • Who can share the resources to promote mutual benefits? • Who can share the rewards?