Costs supply chain pressure

There are two main success factors for a company in the market ftom the point of view of the supply chain. One is to bring the product with the right quality at the right time to the customer. The other is to have the best and most cost-effective processes. Therefore, there is always pressure to optimize the processes with respect to both product quality and cost effectiveness... 

These costs and other pressures are now evident throughout the supply chain for a chemical product - from the increasing costs of raw materials, as petroleum becomes more scarce and carbon taxes penalize their use, to a growing awareness amongst end-users of the risks that chemicals are often associated with, and the need to disassociate themselves from any chemical in their supply chain that is recognized as being hazardous (e.g. phthalates, endocrine disrupters, polybromina-ted compounds, heavy metals, etc. Fig. 1.1-2)... 

Safety on construction sites operates within two distinct contexts. Firstly, the wider processes of the construction industry arguably create an environment in which safety struggles to survive. The constant pressures for production, as time and money are prioritised through the practices of lowest cost tendering and ever-squeezed margins along protracted and convoluted supply chains, are highly influential and can be readily identified as fundamental truths of construction site life. On sites, the presence and inevitability of... 

This chapter showed how the choice of metric of competition and the existence of competitors affects the performance of a supply chain. The first part of the chapter examined the many alternate metrics that can determine performance, including costs, profitability, service, variety, and lead time. Each of these alternate metrics implies different choices for supply chain architecture as well as for the details of operation. In addition, in the presence of competitors, agreements that are good for the supply chain in a monopolistic setting may be bad for the supply chain in a competitive environment. Thus one may find an industry supply chain stuck in a bad equilibrium with frequent harmful promotions or advance order discounts, unable to pull itself out of this state due to competitive pressures. This chapter thus su ests that competitiveness can be a significant driver of supply chain performance. 

To understand such pressures, consider the relationship between a retailer and a manufacturer in a supply chain. Assuming that the retailers warehouse supplies many stores, the demand at the warehouse can be considered to be relatively stable, with a constant rate of D units per unit time. Given an ordering cost and a holding cost at the retailer, it is optimal for the retailers order sizes to follow the economic order quantity to minimize retailer ordering and holding costs. 

The Internet can help companies lower costs throughout their supply chain. It is also possible to use the Internet to improve customer service. Industry is just starting to use the Internet, but as industrial leaders begin to use it they will force others in their industry to do the same thing. Both large firms and small firms will embrace the Internet over the next few years. The computer industry has already done so. As the use of the Internet allows decreased costs and increased customer contact, these firms will become more competitive and put increasing pressure on their competition to take the same steps. 

Health care supply chains have a lot of potential for their continuous improvement, especially in the light of cost pressures. This chapter analyzes opportunities for applying supply chain management best practices in the health care industry. An e-health care supply chain model is discussed and an example of the hospital laboratory supply chain is investigated. 

We can see how an error in any one of these resources is a failure of the entire system. For example, if inventory records are incorrect, the production, shipping, and delivery schedules will be incorrect. Or if the cost or payment calculations are incorrect, the profitability of the entire supply chain will be affected. The performance of all three resources is interconnected, as are the forces that put pressure on these resources, notably time, planning and scheduling, or the systems used to make the eVCM work. 

Whereas in the past the prime objective in supply chain design was probably cost minimisation or possibly service optimisation, the emphasis today has to be upon resilience. Resilience refers to the ability of the supply chain to cope with unexpected disturbances. There is evidence that the tendencies of many companies to seek out low-cost solutions because of pressure on margins may have led to leaner, but more vulnerable, supply chains. 

The pressure to reduce prices at automotive component suppliers is intense. The assemblers have been setting annual price reduction targets for their inbound supply chains for some years. Unless a supplier can match reduced prices at which products are being sold by means of reduced costs, that supplier will gradually go out of business. As a result, many suppliers are cynical about the price down policies of the assemblers. Reduced prices are the reward of cost cutting, and that is most often a collaborative effort by several partners in the supply chain. As indicated in section 1.1, Tesco can make only limited inroads into its in-store costs without the help of its supply chain partners. On the other hand, small dairy farmers continue to be forced out of business because the price of milk paid by supermarkets is less than the price of water. For them, there are few opportunities to cut costs. 

Within the European auto industry at present, the most significant factor seems to be the last. Overcapacity among the assemblers has created massive pressures for cost reduction. The supply chain accounts for 70-80 per cent of an assembler s costs, so this is the primary target. Figure 8.10 shows the inventory profile for volume assemblers in Europe. 

Discuss the challenge to sustainability posed by the tragedy of the commons. Many actions that improve sustainability of a supply chain impose costs that are local (to an individual, a firm, supply chain, or country) but provide common benefits that are more global. In contrast, a disregard for sustainability provides benefits that are local but costs that are shared globally. As a result, encouraging sustainabiUty without some external pressure, in the form of either a public mandate or an economic incentive, can be difficult. 

Very importantly, pressured by government targets of 70% local content within three years, OEMs have deliberately pressured their suppliers to set up production facilities in China to bring the supply chain next door and reduce costs — a pattern common in many industries. Based on current rules, if vehicles have more than 40% imported components, they are subject to tariffs as complete vehicles, which makes them much more expensive than locally made vehicles. Local content is therefore a must in an increasingly competitive environment This in turn pulls foreign suppliers into China if they wish to get a piece of this growth market while it is still young. 

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