The supply chain is often one of the greatest sources of cost for companies and

Question

The supply chain is often one of the greatest sources of cost for companies and consequently it often becomes a major target of cost reduction. This is true for both product and service industries. For example, in manufacturing, managers seeking to reduce supply costs have a number of options including re-designing products so that they can be built with less costly parts (sometimes referred to as "value engineering" (Meeker & McWilliams, n.d.), automation, transitioning sources of supply from high-cost domestic suppliers to suppliers in low cost regions of the world, among other options. In the service industry input services must be combined in some fashion to provide the output service a customer wants to buy. Therefore, managers seeking to reduce supply chain costs can automate input services or outsource them from high-cost employees to low-cost service-providers, among other options. In this light, address one of the following: (a) Select an organization. Discuss in detail some methods it has used to reduce supply chain costs and what results were achieved; ( b) Select a cost reduction approach or method (like the concept of "value engineering" (Meeker & McWilliams, n.d.) I mentioned above, or outsourcing of employee labor, as examples), provide a real-world illustration of it, and discuss the advantages and disadvantages it holds for organizations that use it; (c) Select a company. How would you determine how much of the total cost of that company is associated with the supply chain? Provide detailed steps that you would take to perform this analysis and arrive at a conclusion. Given that the supply chain is one source of cost, what are the other sources of cost for the company?

Explanation / Answer

a) JIT or Just in Time manufacturing system works with the objective of keeping the inventory level minimal. This objective is met by conducting production to meet customer orders.

Dell opts for JIT manufacturing, as it wants to meet the following objectives:

JIT deals with only few trusted suppliers who have been supplying resources for the plant. The domain of few suppliers helps in adhering to quality of supply. The JIT system cherishes long-term relationship with suppliers. The suppliers understand the need of quality products in JIT, Hence they coordinate to certify various production processes. Usually the suppliers co-locate facilities which enables quick flow of resources.

The advantages of using JIT manufacturing system are:

b) One of the ways in which a company may opt for reducing the supply chain costs is to incorporate the supply chain sustainability. Supply chain sustainability is the overview of the supply chain processes and technologies that is used to address the social, legal, economical and environmental factors of the supply chain components. Sustainability in supply chain works with the aim of building goodwill for the company, lowering environmental risk and increasing the profitability of business. Supply chain sustainability may not do much cost savings in the short run, however, in the long run, cost savings will be highly effective using this approach.

There are 6 ways in which supply chain can be made more sustainable:

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