Supply Chain Management

Boundaries of the Firm

In section 2 we discussed the strategic choices involved in the Make/Do or Buy/ Trade decision and the answers to this will largely determine to where the boundaries of the firm or business extend. Activities performed by third parties in the supply market are definitely supply chain ones with the opportunities and threats that that implies.

Strategic Role of Purchasing

Purchasing function has a strategically indispensable role to play in supply chain management. It covers the sourcing end of supply chain management interfacing with the delivery end of the suppliers.

The classical definition of purchasing is: to obtain materials and/or services of the right quality in the right quantity from the right source, deliver them to the right place at the right price.

For years, researchers and practitioners have primarily investigated the various processes within manufacturing supply chains individually. Recently, however, there has been increasing attention placed on the performance, design, and analysis of the supply chain as a whole.

This attention is largely a result of the rising costs of manufacturing, the shrinking resources of manufacturing bases, shortened product life cycles, the leveling of the playing field within manufacturing, and the globalization of market economies.

One of the important issues in supply chain management is to design and plan out the overall architecture of the supply chain network and the value-adding flows that go through it. This means that managers should step back and looks at the supply chain as a whole and formulates strategies and processes that maximize the total supply chain value-adding and minimizes the total supply chain costs.

To date, our world market is dominated mostly by many well established global brands. Over the last three decades, there has been a steady trend of global market convergence – the tendency that indigenous markets start to converge on a set of similar products or services across the world. The end-result of the global market convergence is that companies have succeeded in their products or services now have the whole wide world to embrace for their marketing as well as sourcing.