Understanding the company’s supply chain involves outlining all of its operations and its suppliers and customers. It is important to understand where you are located in the value chain, then see where is the value (positioning); what drive value to customers?
Note that value migrates with time. The speed of this change depends on each industry; in general value migrates to those areas where changes happen faster (innovation). Other things to consider is the design of the supply chain, vertical integration, outsourcing, make or buy decisions, etc. Positioning within the supply chain include making decisions about: capital requirement, suppliers available in the market, cost factors, future flexibility and risk. Furthermore, it involves determining how much capacity each stage should have.
Managing Supply Chains is about managing relationships, not only choosing the right suppliers, but also ensuring they are given the right information to maintain smooth supply.
There are two approaches:
- Transactional Relationships: arms-length, market-based
- Partnership Relationships: close, longer-term
