examine the six sourcing strategies ( 1. Many Supplier, 2. Few supplier, 3. Verticle integration, 4. Joint venture, 5. Keiretsu networks, 6. Virtual companies) It is important to know and be able to apply these strategies correctly to a business. For this week write a paper that examines the six supplier strategies and applies each strategy to a specific type of business. Assignment format: Separate the paper into sections by strategy. Each section should contain

a brief description of the strategies (above mention 6 strategies)

Answer:

The six supplier strategies are implemented in order to help assist managers to help decide what to outsource.

• Many Suppliers
  • With the many-suppliers strategy, a supplier responds to the demands and specifications of a “request for quotation,” with the order usually going to the low bidder. This is a common strategy when products are commodities. This strategy plays one supplier against another and places the burden of meeting the buyer’s demands on the supplier. Suppliers aggressively compete with one another. This approach holds the supplier responsible for maintaining the necessary technology, expertise, and forecasting abilities, as well as cost, quality, and delivery competencies. Long-term “partnering” relations are not the goal.
• Few Suppliers
  • Strategy of a few suppliers implies that rather than looking for short-term attributes, such as low cost, a buyer is better off forming a long-term relationship with a few dedicated suppliers. Long-term suppliers are more likely to understand the broad objectives of the procuring firm and the end customer. Using a few suppliers can create value by allowing the supplier to have economies of scale and a learning curve that yields both lower transaction costs and lower product costs. This strategy also encourages those suppliers to provide design innovations and technological expertise.
  • Downside – few suppliers, the cost of changing partners is huge, so both the buyer and supplier run the risk of becoming captives of the other.
• Vertical Integration
  • Developing the ability to produce goods or services previously purchased or to actually buy a supplier or a distributor. It can take the form of either forward or backward integration
    • Backward Integration: suggests a firm purchase of its suppliers, as in the case of Apply deciding to manufacture its own semiconductors. Or by establishing its own revolutionary retail stores.

. Joint Ventures- Formal collaboration, cooperation without diluting brand or conceding competitive advantage. Joint ventures can represent a nice way to gain the benefits of partnering while retaining independence and being in a relationship that is easier to dissolve. Sony- Ericsson

• Enhance skills
• Secure supply
• Reduce costs & risks

5. Keiretsu Networks

1. A middle ground between few suppliers & vertical integration
2. Often provide financial support for suppliers
3. Members expect long-term relationships and provide technical expertise and stable deliveries

6. Virtual Companies

1. Rely on a variety of supplier relationships to provide services on demand
2. Fluid organizational boundaries that allow the creation of unique enterprises to meet changing market demands
3. Exceptionally lean performance, low capital investment, flexibility.