Paths to Supply Chain Product Costs

The first alternative path moves across the horizontal axis, staying within a single company then expanding to the supply chain. This pattern will fit a situation where a strong supply chain partner sponsors the cost management approach. Our case company. High Tech, fits this situation. This sponsor uses its clout to elicit cooperation from its suppliers. Such a situation is common in the industries like automotive and aerospace with dominant companies at 

Another path proceeds up the vertical axis. Supply chain partners lay out rules for cost sharing before any move to implement the policies. This situation is most likely to occur in the case of cooperating, coequal companies in the supply chain. A new jointly developed product requiring considerable investment by each partner is an example. 

The second path will also characterize the case of a customer seeking to consolidate its supplier base and outsource some of its own operations. In this case, the customer will seek fewer partners offering a broader range of services. A good example is a manufacturer looking to distributors to supply an increased share of its material requirements. The company will evaluate its own costs as a benchmark for make or buy decisions on specific services. It will also use its cost information to design the package of services needed from selected partners. 

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