Managers And Owners Are An Aggressive Cost Reduction

Suppliers want steady orders and prompt payment, they also want to feel valued by the company that they supply.

The Bargaining Power of Suppliers (Moderate): Most of the industry’s products are sourced and manufactured by a network of third parties. The supplier group is diluted compared to the industry; KMD alone has over 45 suppliers. There is credible threat of suppliers adopting forward integration resulting in loss of major suppliers and emergence of new competitors for the industry. Highly effective and specialised products will pose high supplier switching costs for industry firms.

A supply chain is a net work of firms. Thus, each firm in the chain should build its own supply chains to support the competitive priorities of its services or products. Two distinct designs used to competitive advantage are efficient supply chains and responsive supply chains. Efficient supply chains work best in environments where demand is highly predictable. The focus of the supply chain is on efficient flows of services and materials keeping inventories to a minimum. The firm’s competitive priorities are low-cost operations, consistent quality, and on-time delivery. Responsive supply chains designed to react quickly in order to hedge against uncertainties in demand. Work best when firms offer a great variety of services or products and demand predictability is low. Typical competitive priorities are development speed, fast delivery times, customization, variety, volume flexibility, and top quality. Tables below show the environments and design features that best suit each design.

Supply chains manage the movement of products from the acquisition of raw materials through production and finally distribution to the end user. A properly designed supply chain can create many opportunities to drive down cost and increase revenue opportunities. In order to create a supply chain that is sustainable and flexible it is necessary to identify and align company goals and initiatives with the manufacturing and distribution of products.

Bargaining Power of Suppliers: A producing industry requires raw materials - labour, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits. Tesco maintains direct professional business relationships with all their suppliers of organic food and non-food product worldwide. They also conduct supplier viewpoint surveys to find out what their suppliers think of Tesco.

However, as a new member with a new product, electronic product in North American market, the reputation is also an important attribute. Especially, quick delivery time is a key attribute for this company, due to the demand of quick delivery in all markets. Moreover, the manufacturing process of the new product, electronic product, on which our company will definitely focus, has a lot demands. Such as, technology, innovation and quick delivery time even the ability to make the product be the first one appearing in the market (other company, which is developing the same product, may become our competitive opponents). Especially, technology is predicted to play the most important role in the manufacturing process. On the other hand, the traditional cost system has a lot of limitations. Traditional costing system focuses on the cost reduction and the efficiency, particular the products with relatively few standardized components; Clifton, however, produces a wide range of airplane components. In addition, nonfinancial aspects of

Blanchard  (2009), “successful supplier relationships require two-way information, recommendations, metrics and incentives. Riordan Manufacturing must understand the cost and value of their entire supply chain. Without a detailed understanding of all costs, from raw materials through the end product or service, and the value provided by its supplier in the process, a supplier cannot be evaluated. Therefore, there are several things Riordan Manufacturing can do to improve their relationship with it suppliers. They can incorporate appropriate service levels and metrics into agreement, share critical information as early as possible, plan for major contingencies, expect and reward honesty and finally, make relationship meetings meaningful” (10 Strategies for Managing Suppliers).

Bargaining power of suppliers – Being a big player in industries that are dominated by smaller players also ensures that suppliers don’t have much bargaining power.

Global business environment has become more unstable, supplier negotiations have taken important new role on helping improve corporate competitiveness. The goal of most supplier negotiations today is no longer just to get the lowest price. It is also to find new and innovative ways to meet a wide variety of business challenges, often by tapping into the knowledge and expertise of the supplier community and a good relationship.

Many companies produce products from parts of raw materials that are purchased from suppliers, till these products are reach the markets and presented for the customers, then you have the supply chain starting from the purchase of raw material from different areas , through the manufacturing steps and stages till is being sold by the consumer. Some of supply chains are well defined and easy to determined, while there are other supply chains complex to analyze. However, supply chains vary with the size of the facility such as; complexities, performance, abilities, flexibility, quality, speed, dependability and cost of preparing goods for manufacturing and the chain length distribution. So the supply chain is a network of wholesalers, retailers, distributors, workers in the transport, storage facilities, suppliers, and manufacturers who participate in the production, delivery and sale of the product to the last consumer. A supply chain is a group of facilities that coordinate activities among it and to avoid the competitors. Moreover, to ensure the supply chain management is operating efficiently and generating the highest level of customer

What is the right supply chain for your product ? is the question asked by Marshall L. Fisher in his article titled, “What is the Right Supply Chain for Your Product ?” published in March-April 1997 issue of the Harvard Business Review. Author raises the question stating the fact that new ideas and technology implemented haven’t lead to improved performance. Performance has not become better but rather in at least some cases, has worsened due to costs rocketing to unprecedented levels.

If suppliers are limited, they have a greater opportunity to charge higher prices for raw materials, and they may also pose a threat of forward integration to the industry.  Similarly, if an industry has few buyers, or buyers can cheaply and easily change suppliers, they can make demands for less expensive higher quality products, causing impact to profit (Porter, 2008, p. 83).

The Competition: Suppliers need to be able to keep costs down, in order to keep

Honda always tries to maintain relationship with suppliers. It is hard to communicate effectively in Honda’s four trade zone but Honda always pays attention to it. As Mr. Morita says, “Honda places value on maintaining relationships, so we do not enter into them lightly.” Different from companies which focus on the immediate benefit of low cost rather than long-term benefits of maintaining relationship, Honda values suppliers and tries best to maintain

One factor that adds to the success of Toyota’s supply chain is their relationship with their suppliers and how they do business with those suppliers. Toyota does not simply give their supply contracts to the highest bidder; instead they work incredibly closely with their suppliers so that they can get the highest quality products possible. Toyota uses long-term, just-in-time contracts with all of their suppliers (Winfield & Hay, 1997). Toyota does not engage in any kind of mutual contracts, such as buy-back or revenue-sharing; however, they do take multiple steps to ensure a mutual benefit when they pair up with a supplier. Toyota invests in their suppliers to help them develop products (Liker & Choi, 2004). They also ensure that they share information with their suppliers in a structured fashion. They believe that targeted information leads to results and they ensure that specific communication is relayed to their suppliers at set times and in set ways (Liker & Choi, 2004). Perhaps the most unique aspect of Toyota’s relationships with their suppliers is that they embark on joint improvement ventures together. They set up study groups with suppliers to help both parties learn how to improve operations and send executives and engineers to the supply plants to help them improve processes (Liker & Choi, 2004). These kinds of benefits are described in the contracts Toyota keeps with their suppliers (Toyota Supplier, 2011). The close relationships that