Question

Identify and explain six sourcing strategies in supply chain management?

Answer 1

Following are the Six Sourcing Strategies in supply chain management:

1. Many Suppliers: In this sourcing strategy, the suppliers are responsible for technology, expertise, forecasting, cost, quality, and delivery. This is Commonly used for commodity products and the purchasing is based on prices. Suppliers have tough competition with each other.

2. Few Suppliers: In this strategy, the buyer companies develop longer-term relationships with fewer suppliers. Create value through economies of scale and learning curve improvements. Suppliers are more willing to participate in JIT programs and contribute design and technological expertise. For buyer companies, the cost of changing suppliers is huge.

3. Vertical integration: In this strategy, the Integration can be forward, towards the customer, or backward, towards suppliers. It includes Merging companies at different stages of production or distribution in the same industry. It can improve cost, quality, and inventory but requires capital, managerial skills, and demand.

4. Joint Ventures: In its strategy, the business entity is created by two or more parties, generally defined by shared ownership, shared returns and risks, and shared governance. It is a formal collaboration that enhances the skills and secure supply at reduced costs.

5. Keiretsu Networks: This strategy is a middle ground between a few suppliers and vertical integration. The supplier becomes part of the company coalition. Members expect long-term relationships and provide technical expertise and stable deliveries. It can extend to various levels of the supply chain.

6. Virtual Companies: In this strategy, the company relay on a variety of supplier relationships to provide services on demand. Fluid organizational boundaries that allow the creation of unique enterprises to meet changing market demands It ensures exceptionally lean performance, low capital investment, flexibility, and speed