Total and Immediate Supply Networks

“Second tier” Suppliers

“First tier” Suppliers

“Second tier” Customers

“First tier” Customers

The Operation

The Operation

Supply side of the network

Demand side of the network

The Immediate Supply Network

The Total Supply Network

Internal Supply Networks

Motor Vehicle Parts Distribution Chains

Distribution Chain of Parts Manufacturer

Distribution Chain of Parts Manufacturer

Distribution Chain of

V.M.

Distribution Chain of

V.M.

Manufacturing Chain

Manufacturing Chain

Dealer network

Vehicle manufacturer

Installer

Local distributor

Area distributor

Prime distributor

Supplier

Sub-supplier

Stockist

Raw materials

Advantages of taking a network perspective

Vertical integrationHow much of the network should the operation seek to own?

Taking a network perspective helps

businesses address the three key network

design decisions.

Location of the operationWhere should the operation be located?

Balance of capacityHow should capacity be managed in the long-term?

Direction, extent and balance of vertical integration

Raw material

suppliers

Component maker

Assembly operation Wholesaler Retailer

Downstream vertical integration

Upstream vertical integration

Narrow process span

Wide process span

Should excess capacity be used to supply other companies?

• Inadequate ramp-up capabilities• overcapacity during recession• continuously unbalanced organisation• not enough money available for

marketing and development• limitation of innovation speed• management not focussed on market,

clients and products

Consequences of vertical integration

Advantages & disadvantages of a network

Advantages Flexibility Independency Focusing on core

competencies

Disadvantages• Difficulty in

alignment of strategies

Hierarchical model of supply chain

OEM

System suppliers

Co-makers

Jobbers

Bolwijn: Verandering van markteisen en prestatiecriteria

1960 1970 1980 1990Markt-eisen

Prestatie-criteria

Prijs

Kwaliteit

Varieteit

Uniekheid

Efficiency

Kwaliteit

Flexibiliteit

Innovativiteit

The five performance objectives

• Quality Do things right• Speed Do things fast• Dependability Do things on time• Flexibility Change what you do• Cost Do things cheaply

Genericsystem supplier

Organisational- competence and

projectmanagement

Applicationsystem supplier

Technology en application know-how

Process supplier

Specialisedmanufacturing-

technology

Parts supplier

Product- en application-know-how

market

market

ma

rke

t

ma

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t

New typology for the subcontracting industry

(source: NEVAT)

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Market RelationshipTransactional - Many Suppliers

Close - Few Suppliers

Type of Inter-firm Contact

Virtual Spot

Trading

Long-term Virtual

Operation

Traditional Supply

Management

Vertically Integrated Operation

“Partnership” Supply

Management

Types of supply relationship

Traditional relationship

Partnership relationship

Lean relationship

Price Quality Information Relationship

Planned

Negotiated

Bids

Kaizen

Monitored

Historical

Transparent

Shared

Secretive

Integrated

Cooperative

Adversarial

Time

The nature of the interaction between players in supply networks is changing

Change drivers

• Ubiquitous availability and distribution of information

• Accelerating pace of change in technology• Rapidly expanding technology access• Globalization of markets and business

competition• Global wage and job skills shifts• Environmental responsibility and resource

limitations• Increasing customer expectations