Conduct research on
the following topics and give a real life business example for each of them:
1. Supply Chain Management (SCM) vs Logistics Management
2. Producer-driven value chains vs buyer-driven value chains
3. Vendor Managed Inventory (VMI) system
4. Made-to-measure
(MTM) system
1.Supply Chain Management
(SCM) vs Logistics Management
Supply chain
management spans all movement and storage of raw materials, work-in-process
inventory, and finished goods from point of origin to point of consumption.Supply chain management also means the
"design, planning, execution, control, and monitoring of supply chain
activities with the objective of creating net value, building a competitive infrastructure,
leveraging worldwide logistics, synchronizing supply with demand and measuring
performance globally."
Logistics Management is the part of Supply
Chain Management that plans, implements, and controls the efficient, effective,
forward, and reverse flow and storage of goods, services, and related
information between the point of origin and the point of consumption in order
to meet customer's requirements.
Li & Fung is a
HK-based firm which is founded in 1906 with 3,000 employees. Its turnover is in
excess of US$5 billion. And it is one of the biggest suppliers of goods to
retailers including Walmart, Target, Zara and Marks & Spencers.
This company
applies a concept of global supply chain management. Global systems of supplier
relationships and the expansion of supply chains over national boundaries and
into other continents are noted in this company. Li & Fung has any
ownership of raw material, factories and distribution channels. It purchases
raw materials from different locations like China, Japan, Pakistan and at the
same time, outsourced the functions of production, distribution, warehousing to
other entities that can perform the activities better or more cost effectively.
For example, it outsources its production process to plants in Bangladesh.
Global Supply Chain
Management can achieve the goal of increasing company’s competitive advantage,
value-adding, and reducing costs through global sourcing.
2. Producer-driven
value chains vs buyer-driven value chains
Industrial and commercial firms have both promoted
globalization, establishing two
types of international economic networks. One is “producer-driven” and the other “buyer-driven” chains.
In producer-driven value chains, large, usually transnational, manufacturers play the central
roles in coordinating production networks. For instance, they includes automobiles, aircraft, computers, semiconductors and heavy machinery which are the typical of capital-intense and technology intense industries. For the evolution of producer-driven value chain, direct foreign investment by transnational corporations is the main reason. The corporations usually established international production networks to access raw materials and new overseas markets.
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Boeing Company
which is the manufacturer of advanced products. It is one of the key economic
agents both in terms of earnings and ability to exert control over backward
linkages with raw material and component suppliers, and forward linkages into
distribution and retailing. Boeing is a good example that develop and sell brand-named
product have considerable control of manufacturing. It is because the company
is one of the international oligopolies. This kind of company control the
producer-driven value chains at the point of production
In buyer-driven
value chains, large retailers, marketers and branded manufacturers play the important
roles in setting up decentralized production networks in a variety of exporting
countries. Typically, they are located in developing countries. This kind of
value chain becomes common in labor-intensive, consumer-goods industries. For
example, they include garments, footwear, toys, handicrafts and consumer
electronics. Tiered networks of
third-world contractors that make finished goods for foreign buyers carry out
production. Large retailers or marketers that order the goods supply the
specifications.
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Producer-driven
value chains VS Buyer-driven value chains
Producer-Driven Chain
|
Buyer-Driven Chain
|
|
Drivers of
Global
Commodity Chains
|
Industrial Capital
|
Commercial Capital
|
Core
Competencies
|
Research & Development;
Production
|
Design; Marketing
|
Barriers to Entry
|
Economies of Scale
|
Economies of Scope
|
Economic Sectors
|
Consumer Durables
Intermediate Goods
Capital Goods
|
Consumer Nondurables
|
Typical Industries
|
Automobiles; Computers;
Aircraft
|
Apparel; Footwear; Toys
|
Ownership of
Manufacturing Firms
|
Transnational Firms
|
Local Firms,
predominantly in
developing countries
|
Main Network Links
|
Investment-based
|
Trade-based
|
Predominant Network
Structure
|
Vertical
|
Horizontal
|
Above table summarizes the main characteristics of producer-driven value chains and
buyer-driven value chains. First, both of them are rooted in distinct
industrial sectors which they are led by different types of transnational
capital. Besides, they vary in their core competencies and their entry barriers.
For the finished goods, they tend to be supplied by core country transnationals
in producer-driven chains, while they are generally made by locally owned firms
in developing countries in buyer-driven chains. Finally, the network structure
in producer-driven chains is investment-based vertical networks, and the one in
buyer-driven chain is trade-based horizontal networks.
3. Vendor Managed Inventory (VMI) system
Vendor Managed Inventory (VMI) system is a continuous
replenishment program whereby the vendor created the purchase orders based on
the demand at the store or warehouse level which means the buyer of the product
provides certain information to a vendor supplier of that product and the
supplier takes full responsibility for maintaining an agreed inventory of
material, usually at the buyer’s consumption location (point of sales).
Inventory
management plays an essential role affecting company’s performance as poor
inventory control brings huge loss to the company. Vendor Managed Inventory system adds value to the
supply chain by avoiding out-of-stock and parts inventory traffic jam, together
with a stable and reliable replenishment cycles. By using Vendor Managed Inventory system, better
inventory management and information sharing among the supply chain are
achieved.
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ZF Friedrichshafen AG is a leading supplier of driveline and chassis technology to global
manufacturers in the automotive, construction equipment, heavy truck, bus and
marine industries, implementing Vendor Managed Inventory systems with its supplier and using technology
from SupplyOn. In the past, lead time and poorly delivery performance causes
problem to ZF Friedrichshafen AG as they send releases to their suppliers, telling them what
materials we want on what day and in what quantity after they get orders from
customers. And due to dynamics within the business, there can be a lot of
fluctuations and program changes from the customers, which they have to pass on
to our supply base. Also, increasing inventory could shorten the lead time but
cause a huge financial issue to the company. Therefore ZF Friedrichshafen AG worked together with
SupplyOn and turns out they solved the inventory problems. For example, they
shorten the lead time from 2 years to six to twelve months.
ZF Friedrichshafen AG show all the
demand information to SupplyOn and give them the minimum and maximum quantities
that have to be available for a specific part. Between the min and max figures,
it is the supplier's responsibility to figure out whenZF Friedrichshafen AG needs to replenish
and in what quantity, again reflecting back to the production schedule. With
the information, the suppliers can smooth their production and throughput based
on runs that are efficient for them. Also, the supplier can see any changes in
its inventory position with ZF Friedrichshafen AG .
VMI is going to be
a major strategic initiative for ZF Friedrichshafen AG as they move our supply chain to the next
level, especially with consolidation and de-consolidation centers around the
world.
4. Made-to-measure
Made-to-measure means the products that made to fit a
particular person or thing .Ready-to-wear means the products that made in a standard size and not made for a particular person.
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Made to measure (MTM) typically refer to the garment industry. It is sewn
from a standard-sized base pattern. Made-to-measure garments are expected to be
superior to ready-to-wear garments because ready-to-wear garment is used to fit
the manufacturer's definition of an average customer. However, made-to-measure
is based on requirement of each customer to produces the garment specifically
fit to him/her.
Pros:
J Garments will be
well-fitted to the customer’s body and the customer may have the opportunity to
customize the fabric and detailing
J Build up the unique
competitive advantages for the company
Cons:
L Customer must wait up to
several weeks for the garment to be sewn and delivered
L Price for a
made-to-measure item is 15% over ready-to-wear
is one of the real life examples that are using Made-to-measure
technology in order to provide an intimate experience to customers and increase
their customer loyalty.Made-to-measure process of Gucci
1. Customers
will be measured by the retailer
2.
Retailer will
choose the standard-sized base pattern which fits the customer’s requirement
closely
3. Retailer
alters the standard-sized base pattern in order to make it fit for the
customers
