Sesseion 14 Partnership

8/8/2019 Sesseion 14 Partnership

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PARTNERSHIP ASSTRATEGIC OPTION

By

Megha Sheoran

Sudarsan

MFT III sem

NIFT

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SCM

SCM is the integration of key business processes from

end-user through original supplier that provides

products, services, and information that add value for

customers and other stakeholders

The supply chain is not a chain of businesses, but a

network of businesses and relationships

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SPECIALIZATION ERA-PHASE ONE:OUTSOURCED MANUFACTURING &

DISTRIBUTION In the 1990s industries began to focus on core

competencies and adopted a specialization model

Companies abandoned vertical integration, sold off non-

core operations, and outsourced those functions to other

companies

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STRATEGIC PARTNERING

The SCs which compete for the customers' business, not

individual firms or the products

So it makes sense for firms to look for collaborativeframeworks which will 'maximise' the strength of the

'chain' in order to deliver the leanest value to the

customer

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The basis of this new business model is the philosophy

of strategic partnership between different supply chain

partners

Strategic partnering(SP) is when two or more firms that

have complementary products or services join such that

each may realize a strategic benefit

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The principal concern is the bestmanagement, not the

ownership of all activities aimed at achieving the goal

Business security, transparency and integration issuescan be much better managed when the ownership is

common

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The other rational approach would be to purchase

products and services from specialised firms through

arm's length bargaining

Motivations for strategic alliances and partnering have

clearly reduced costs and better product quality

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CORE COMPETENCE

The achievement of these goals is usually the result of

focussing on the 'core competencies' of firms in the

supply chain

The concept ofcore competence holds that competitive

success requires the nurturing of distinctive skills or

'competencies' unique to each firm

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CORE COMPETENCE

In the worst case, non-core activities divert

management attention from activities which create real

value

One of the goals of strategic partnering is to harness the

advantages associated with the core competency of each

firm in the supply chain

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SUPPLY CHAIN PARTNERSHIPMODELS

Partnership models in supply chain manufacturer and

supplier

Vertically oriented

Manufacturer and 3PL service providers Manufacturer and distributor

Suppliers and retailers

Management related activities

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HORIZONTAL PARTNERSHIP

Partners do have overlapping capabilities

A number of factors may aid in forming such

partnerships, including wider market coverage andbetter capacity utilisation

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HORIZONTAL PARTNERSHIP

Prime examples of this kind of horizontal partnership in

the transportation and logistics sector-liner shipping

companies or airlines achieving greater economies of

scale, connectivity and load factor by slot sharing or

code sharing

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MANUFACTURER & SUPPLIERPARTNERSHIP

In the new supply chain paradigm, the traditional

adversarial relationship between the manufacturer and

the supplier-industrial feudalism

In which manufacturers would consider their suppliers as

expendable 'vassals'

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In collaborative relationship whereby the manufacturer

and supplier interact like partners

It is obvious that 'transparency' in information and'cooperation' in activities is not possible if

independent business entities can not develop a

common business framework

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Dell computers and HP (Hewlett-Packard) can be cited

as leading companies with a strong partnership focus

with suppliers

It clearly demonstrates the potential of such a strategic

alliance for creating a winning supply chain

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STRATEGIC PARTNERING WITHLOGISTICS SERVICE PROVIDERS

Value adding activities

The product changes its physical shape through

manufacturing, assembling or packaging

The logistics activities of transportation and distribution

which keep the supply chain workable

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Costs attributable to logistics activities can represent a

significant percentage of the final cost of many products

This is another reason for firms to focus on controllingtheir logistics-related costs in order to achieve

competitive advantage

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Firms can tightly monitor and control logistics costs and

performance by trying to manage these activities

internally

This is particularly true for distribution of finished goods

as the products represent high cost per unit of volume or

weight

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The firm's service standard are often judged more by the

quality of its distribution network

Activities on behalf of the 'manufacturing' or 'trading'firm whose core competency lies somewhere else

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This approach calls for vertical integration of the firm's

activities and in the past most large manufacturing

companies would own their own fleet of trucks,

distribution centres and warehouses

This outsourcing trend has assisted in the advent and

development of a new breed of market players known as

3PL firms and, more lately 4PL firms

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LOGISTICS OUTSOURCING - 3PL &4 PL FIRMS

The first is the 3PL or 3rd party logistics firms which

emerged in the 1980s

The fact that these firms have emerged from thetraditional road haulage and freight forwarding firms

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3 PL FIRMS

In the EU the percentage of logistics activities

outsourced in 1998 was 18% of all logistics related

activities and the prediction at that time was for this

percentage to rise to 22% by 2002. (Marketline 1998)

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4 PL FIRMS

A further new development in the e-commerce era is the

development of a breed of business firm known as the

4PL firm or 4th party logistics service provider

An alternative way to refer to these kind of firms is LLP

- Lead Logistics service Provider

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4 PL FIRMS

This is a concept which is built on 'one stop shopping'

philosophy by which the LLP or the 4PL

Will take over the role of coordinating all logisticsrelated activities in addition to managing the flow of

goods and information throughout the supply chain

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4 PL FIRMS

And it is the 4PL which is most suited to be the strategic

partner, rather than the tactical partner (like the 3PL)

A 4PL, in principle, is a supply chain integrator and theskill sets necessary for it are unique

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4 PL FIRMS1

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RSP OR RETAILER SUPPLIERPARTNERSHIP

Collaborative strategies like CPFR and ECR are clear

examples of collaboration between supplier and retailer

Information sharing and process integration to reducedemand fluctuations, bullwhip effect and the

accompanying inefficiencies in the supply chain

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The financial responsibility associated with the

inventory is also often retained by the supplier or

vendor, thus reducing the retailer's risk

The net effect on the supply chain partners is reduced

cost and improved service level

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The supplier can schedule supplies to all retailers in a

way which minimises transportation cost which helps the

vendor better manage the manufacturing schedule by

advanced planning and scheduling

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The service level also can be improved by VMI as

distribution and transhipment of inventory between

different retailers become possible when the inventory is

owned by the supplier and when demand varies between

different retailers

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DISTRIBUTOR INTEGRATION

Distributors form an essential link in the firm's

marketing channel and are often the repository of vital

market information

In the case of manufactured goods, -not only sell the

product, but also perform vital functions like after sales

service, financing and promotion

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DISTRIBUTOR INTEGRATION

Requires greater service level and a quicker response

time

A suboptimal performance by the distributor, like

inadequate technical service or inventory stock out,

would adversely affect the firm's brand image

Both inventory and services can be made available over

a number of distributor zones

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THE PARTNERSHIP MODEL-LAMBERT, DOUGLAS M-

The model separates the drivers , the facilitators, the

components and the outcomes of partnership into 4

major areas for attention

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THE PARTNERSHIP MODEL1

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DRIVERS

Drivers are the compelling reasons to partner, and must

be examined first when approaching a potential partner

Drivers add managerial complexity and commit

resources to a supply chain relationship if a good, long-

term contract

To the degree that business as usual will not get the

supply chain efficiencies needed, partnership may be

necessary

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DRIVERS

The model separates the drivers into 4 categories:

asset/cost efficiencies,

customer service improvements,

marketing advantage, and profit stability and growth

All businesses are concerned with these four issues, and

the four can capture the goals of managers for theirrelationships

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FACILITATORS

The nature of the two firms involved in partnership

implementation will determine how easy or hard it will

be to tailor the relationship

If the two firms mesh easily, the managerial effort and

resources devoted to putting the correct relationship in

place will be lower for the same results

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FACILITATORS

The elements that make partnership implementation

easy or hard are called facilitators

They represent the environment of the partnership;

those aspects of the two firms that will help or hinder

partnership activities

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COMPONENTS

While drivers and facilitators determine the potential for

partnership, the components are the building blocks of

partnership

They are universal and direct control of the managers

involved

In other words, they are the activities that managers in

the two firms actually perform to implement the

partnership

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COMPONENTS

There are eight components of partnership:

Planning,

Joint operating controls,

Communications, Risk/reward sharing,

Trust and commitment,

Contract

Style, Scope and investment

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OUTCOMES

A partnership, if appropriately established and

effectively managed, should improve performance for

both parties

Profit enhancement, process improvements, and

increased competitive advantage are all likely

outcomes of effective partnerships

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THE PARTNERSHIP BUILDINGSESSION

The correct team from each firm must be identified and

committed to a meeting time

These teams should include top managers, middle

managers, operations personnel and staff personnel

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A broad mix, both in terms of management level and

functional expertise, is required in order to ensure that

all perspectives are considered

The success of the partnership building process depends

on the openness and creativity brought to the session

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The process is not about whether to have a business

relationship; it is about the style of the relationship

The partnership building session is only a first step in a

challenging but rewarding long-term effort to tailor your

business relationship for enhanced results

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TYPES OF STRATEGIC


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TYPES OF STRATEGICPARTNERING

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QUICKRESPONSE

In quick response SP vendors receive point-of-sales

(POS) data from retailers

The data are then used to synchronize production and

inventory management at the supplier

Although the retailer still prepares and submits

individual orders to the supplier, the POS data is used to

improve forecasting and scheduling

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CONTINUOUS REPLENISHMENT

In continuous replenishment SP vendors again receive

POS data and use them to prepare shipments at

previously agreed to intervals as well as to maintain

agreed to inventory levels. This approach is used by

WalMart

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ADVANCED CONTINUOUSREPLENISHMENT

In advanced continuous replenishment SP suppliers will

gradually decrease inventory levels at the retailers

location as long as they can still meet service levels

The result is that inventory level are continuously

improved. Kmart uses this approach

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VENDOR MANAGED INVENTORY

In VMI SP the supplier will decide on the appropriate

inventory levels for each of the products it supplies and

the appropriate inventory policies to maintain these

levels

One of the best examples of this is the SP between

WalMart and Proctor & Gamble

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PARTNERSHIP MODEL

Criteria Types

Decision

Maker

Quick

Response

Retailer

Continuous

Replenishment

Contractually Agree

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REQUIREMENTS FOR ANEFFECTIVE SP

Advanced information systems,

Top management commitment, and

Mutual trust

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STEPS IN SP IMPLEMENTATION

Contractual negotiations

Ownership

Credit terms

Ordering decisions

Performance measures

Develop or integrate information systems

Develop effective forecasting techniques

Develop a tactical decision support tool to assist incoordinating inventory management andtransportation policies

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ADVANTAGES OF SP

Fully utilize system knowledge

Decrease required inventory levels

Improve service levels

Decrease work duplicationImprove forecasts

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DISADVANTAGES OF SP

Expensive technology is required

Must develop supplier/retailer trust

Supplier responsibility increases

Expenses at the supplier also often increase

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http://www.marcbowles.com/courses/adv_dip/module http://www.industryforum.co.uk/services/business_im An Executive Summary of SUPPLY CHAIN

MANAGEMENT Processes, Partnerships,Performance - Lambert, Douglas M.

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http://www.marcbowles.com/courses/adv_dip/module4/module8/m8overview.htmhttp://www.industryforum.co.uk/services/business_improvement/supply_chain/http://www.industryforum.co.uk/services/business_improvement/supply_chain/http://www.marcbowles.com/courses/adv_dip/module4/module8/m8overview.htm


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thanks

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Sesseion 14 Partnership

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