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Early Supplier Integration Memorandum

by Expert Dr. Didion | 13 Sep 2017

In order to achieve such goals, Nolan should focus on four fundamental criteria. These criteria are necessary for identifying and justifying which supplies to integrate in the development phase. The first criterion is product delivery. Scott Nolan must identify which suppliers have the least time differential in delivery time. The second criterion is product range. The input-output mix of the company depended on the simplicity of the input market matrix. The selection process for choosing industrial equipment must be both cost-effective and efficient. In short, Nolan has to choose suppliers which entail reduced operational costs. The last criterion is least price differential. The cost-effectiveness of the supply chain is depended on minimal price differential (proportional). Least price differential assumes that prices of input goods are proportionally the same within a specified range. After 1996, New Holland refused to sell additional production capacity to Deere & Company. The reason is obvious. Deere & Company would be able to expand the market of skid steers at the cost of New Holland. As a result, Deere & Company decided that it needed to regain direct control of the design and manufacturing of this potential lucrative product. Should Nolan reduce the price differential of input goods; the company will be able to expand its production capacity.

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Applying the above-mentioned criteria, Nolan should choose suppliers which: 1)offer relatively cheaper input goods than New Holland, 2)have relatively the same delivery time, 3)have the same price retail differential. An obtrusive method of aggregating or integrating the supply chain can be achieved by: 1)creating a master schedule (which includes a framework for inbound logistics), and 2)establishing a framework for supplier relations. The company has to take into account changes in shipping procedures and close proximity of suppliers. The purpose of the master schedule is to create a uniform load on all work centers that support final assembly. The framework for supplier relations is used to assess supplier participation in the production process.

To increase the efficiency of the supply chain, the company has to periodically reduce its inventory. An unwarranted or excessive accumulation of inventories results to increased operational costs. The suppliers have to actively participate in the manufacturing process (indirectly). The purpose of which is to maximize the 'just-in-time production' of the company. Note that these recommendations are 'supply-side' solutions.

Improving supplier participation and periodic reduction of inventories eliminate waste, and thus reduces potential investment. More than increased savings, the company has to establish long-term relationship with the suppliers. This can be achieved by providing semi-exclusive contract to suppliers in exchange for a specific price schedule. Sometimes, future price reductions or maximum increases are specified in the schedule. This results to increased savings and less investment for the company. In other words, forging strong relationship with suppliers stabilizes the supply chain.

References

  • Zlatko SalcÌŒić "Export credit insurance and guarantees : a practitioner's guide Hampshire": Palgrave Macmillan, 2014.
  • Dean Leffingwell "Scaled agile framework reference guide". Addison-Wesley, 2016.
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