SUPPLY CHAIN RELATIONSHIP l The objective : control by vertically integrated firm. l To control all aspects of inventory moving from a network of manufacturing, services and assembly plants. l No firm can be self sufficient. l Market/distribution channel : intra company/organization units and extra company agents-wholesalers-retails. l The universal functions : exchange, physical distribution, and facilitating. The concept of specialization and assortment are to achieve these function requirements. l Specialization - efficient business. When a firm specializes in performance of a specific function, it develops economic of scale and scope to achieve operational economies.
l This economic benefits + associated expertise = core competency of the specialized business. l Example : for-hire transportation, warehouse service company, pallet providers and packaging designers. l Specialization is the underlying construct of product assortment. l Assortment - synergy or cooperative performance by a number of independent business that orchestrate their activities to deliver products and material assortments to the right location at the desired time. l Three basic steps : concentration, customization and dispersion.
l Concentration : large shipment of products produced at various factories are transferred to the consolidation warehouse. It reduces overall transactions. Other alternative arrangement is to use the services of an industrial distributor or wholesaler. l Customization : the process of sorting and grouping products into unique combination. Offering mixed or combination of products in one delivery. l Dispersion : the role of strategically located wholesalers or distributors is positioned to perform the assortment process for a number of different retailers and manufacturers. l Innovative specialization, sharing risk, reducing duplication of efforts.
l Logistical services alliance is fueled by the desire to concentrate basic business resources on core competencies. l The idea of outsourcing support activities such as logistics and focus the activities on ‘what they know how to do best’. l Mutual dependency : a great deal of dependency is facilitated by the advanced information technology. l Core specialization : the logistical specialist is better positioned to perform essential service than a firm with primary competency in making or selling products.
l Power clarity : nothing moves in a continuous basis unless it sells on a continuous basis. l Cooperation emphasis : ‘being easy to do business with’ is the primary appealing attributes of preferred service specialists. The marketing strategy of a highly successful service provider builds on a platform of cooperation. l The formation of alliance between service suppliers to increase their operating capabilities and efficiencies.