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
rke
t
New typology for the subcontracting industry
(source: NEVAT)
Th
e ch
arac
ter
of
Inte
rnal
Op
erat
ion
s A
ctiv
ity
Do
Not
hing
Do
Eve
ryth
ing
Impo
rtan
tD
o E
very
thin
g
Res
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Sco
pe
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
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