Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

2.5 Summary

Estimation of transaction costs leads to a make-or-buy decision. A buy decision results in outsourcing: Parts of the supply chain are turned over to other companies. A make decision results in insourcing; here there are various possibilities of forming organizational entities within the company. With global supply chains, the assessment of the tax situation and the total cost of ownership also inform the make-or-buy decision.

For business relationships with suppliers, concepts such as multiple sourcing, single sourcing, and so on describe only one aspect. The objects to be procured are grouped into material groups. The supplier portfolio distinguishes market-oriented, buyer-dominated, supplier-dominated, and (balanced) partnership relationships. Based on their logistics characteristics, the appropriate supplier relationships are determined for the material groups. As possible business relationships, the traditional marketplace, the customer-supplier partnership, the intensive cooperation in a partnership relationship, and the virtual enterprise are introduced. In all cases, the target area strategies and the supply chain risks that develop between the producer as buyer and the producer’s suppliers are discussed.

Supplier selection is then performed via procurement market research, supplier evaluation, and the actual selection of suppliers. All of the steps of search and initiation and negotiation, in particular, can today be supported by e-procurement; for example, by sell-side or buy-side solutions as well as horizontal and vertical marketplaces. In partnership relationships, in particular, there can be several requests for bids: a first one for product requirement specifications and the rules of cooperation, a second one for prototyping, and a third one for repetitive procurement.

The proposed Advanced Logistics Partnership (ALP) Model is a basic framework for the implementation of intensive cooperation in the supply chain. The required tasks, methods, and techniques at all levels of the companies involved are introduced, with examples of practical application.

Supply chain risk management is a methodological procedure for handling supply chain risks. The crucial element of the methodology is the procedu­ral model with the three phases risk identification, risk assessment, and risk handling.

Course 2: Sections and their intended learning outcomes

  • Course 2 – Supply Chain Design: Business Relations and Risks

    Intended learning outcomes: Explain concepts such as the make-or-buy decision, tariff-orientation and total cost of ownership in a global supply chain. Differentiate strategic design options for the relationships with and the selection of suppliers. Disclose strategies for intensive cooperation in the supply chain. Describe identification, assessment and handling of supply chain risks.

  • 2.1 Ownership and Trade in a Global Supply Chain

    Intended learning outcomes: Present the concept of the make-or-buy decision in detail. Explain the value content requirements and tariff-orientation in a global supply chain. Describe the total cost of ownership in a global supply chain.

  • 2.2 Strategic Procurement

    Intended learning outcomes: Produce an overview on strategic procurement. Differentiate between traditional market-oriented relationship and Customer-Supplier Partnership. Describe strategic procurement portfolios. Explain strategic selection of suppliers. Present basics of supplier relationship management and e-procurement solutions.

  • 2.3 Designing a Strategic Partnership Relationship

    Intended learning outcomes: Present target area strategies for intensive cooperation. Explain the Advanced Logistics Partnership (ALP) model with concepts such as building trust, working out collaborative processes in the supply chain, avoiding the bullwhip effect. Describe the virtual enterprise and other forms of coordination among companies.

  • 2.4 Supply Chain Risk Management

    Intended learning outcomes: Produce an overview on supply chain risk management. Explain the identification of supply chain risks. Describe the assessment of supply chain risks. Disclose how supply chain risks can be handled.

  • 2.5 Summary