Reduced Number of Suppliers
Companies. as part of their supply chain programs. have significantly reduced the number of vendors they buy from. Managers currently believe in establishing long-term relationships with a few, highly reliable vendors rather than haying multiple sources for every purchased item. As seen in Exhibit 13.3, the reduction in the number of suppliers has been significant in recent years, and is even more impressive in light of the tact that most of these companies are now offering a wider variety of products to their customers.
Increase in Competition
The emergence of a global economy has dramatically increased the number of competitors that offer similar products. As stated earlier. no corner of the world is immune to international competition. and this competition will only increase in intensity in the foreseeable future. As a result. supply chains will continue to grow in both directions: backwards toward suppliers in other countries and forward 10 aid new customers in these same countries.
Shorter Product Life Cycles
Product life cycles continue to shorten a, comparison introduce products al an ever increasing rate in the hope of gaining market and a competitive adv garage. In order to respond quickly to new product introduction-. a company need- to have processes hat can be converted easily to new product requirements-. Flexibility abo can he achieved by shifting more responsibility onto supplier.
Increase in Supplier-Managed Inventories (SMI
In order to decrease purchasing transaction and record-keeping co-tv, many firms now use a concept known as supplier-managed inventories (5\11) (or vendor-managed inventories (VMI» for many of their cost bolt.
other tpes of fasteners. Thi approach is sometimes referred to as the breadbin method. (The term breadline comes from commercial bakeries where the Bremen or salesmen determine the number of loaves of bread to deliver to each retail outlet on their routes. and who are also responsible for placing the bread on the retailer’s shelves. The retail operations then receive credit for any unsold bread that is returned.) With thi approach. minimum and maximum inventory level are established for each item. The firm’s supplier then are empowered to determine h w often these items should be replenish d. In addition. the suppliers have direct access to the manufacturing floor, and usually restock the item t the points where they will be used. This eliminates the need for stockroom. With approach. paperwork is reduced significantly because there are no punch . order” g noted. The receiving function also b reduced significantly, the need for per one to move the Item from the stockroom onto the manufacturing floor