Types of Supply Chain Relationships Paper Example

Introduction

Supply Chain Management (SCM) is often termed as integration strategies which are developed to correlate with specific functions across suppliers, manufacturers, distributers as well as retailers (Christopher 328). As a result, it ensures that the distribution of products and services are measured in terms of the right volume, time and location. In their applications, supply chain relationships may range from both transactional and collaborative assessments to strategic assessments. Hence, this study will incorporate supply chain integration strategies by analyzing on the significance as well as their primary role in the overall supply chain management.

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Types of Supply Chain Relationships

Vertical Integration

In vertical integration, the supply chain of a company is developed through coordination. As such, its operation strategy is based on incorporating supplier or distributor supply chains. In turn, this process enhances the expansion of its operations, thus allowing the activities to be traditionally carried out by suppliers and distributors. The main aim of this integration is to secure high levels of controls for organizations (Christopher 328). For most organizations, vertical integration in supply chain ensures that there are no delays of issuing contracts between two parties, therefore, maximizing the profits.

Horizontal Integration

Horizontal integration involves the deployment of a single industry SCM strategy. This integration permits companies to engage in competitive advantage as well as profitable growth. Through value creation, most companies are able to build activities by focusing on a single business or industry (Christopher 328). Therefore, a horizontally integrated supply chain can be regarded as an adequate business model due to its ability to integrate economies of scale and scope, which in turn, assist companies in achieving competitive advantage over other industry competitors.

Full Collaboration Integration

For most companies, it is essential to develop innovative ways to enhance mutual benefit between collaborations. Significantly, by engaging with buyers and suppliers, supply chain partnerships can lead to a long-term sustainability and short-run dissolution of the business. In fact, through full collaboration integration, these benefits may be achieved in a number of remarkable ways (Christopher 328). For instance, the necessary improvements can extend beyond efficiency and effectiveness to assist in meeting customer expectations, market growth, and increased competitive market share. While price is important, collaboration enhances effectiveness by increasing the sales volume which may at times seem difficult even for emerging markets.

Sourcing Strategy and Supplier Relationships

The differentiation of a vendor, partner and strategic alliance is based on the type of relationships formed by each of them. A vendor is often associated with the seller or provider of a particular type of service or product. In most cases, the relationship of a vendor with its buyers does not encompass any integration or collaboration due to its transactional nature. Nevertheless, both parties relate at an arm's length distance. On the other hand, companies may engage in different styles of relationships depending on their level of performance. Strategic alliance partnership is reliant upon the development of suppliers. In this regard, suppliers can be issued with long-term contracts to certify and seemingly enhance the expansion of their shared business. For partners, relationships are structured according to various fundamental factors. These include cost, quality, delivery and flexibility (Pyke, David and Johnson 77). Most companies tend to focus on categorizing different relationship style by evaluating the critical objectives. As mentioned, through the application of these factors, the strategic importance of the purchased component can be developed to meet the demands of each component categorically.

A core competency may be defined as a narrow field or task at which a company transcends. In some instances, it is often difficult for competitors to mimic a company's core competencies. Hence, the need for a company to differentiate itself from its competitors can be applicable in a wide range of business-related activities. For instance, Wal-Mart competitive advantage lies within its ability to lower the price of goods to increase the demand. When compared to its competitors, Wal-Mart exemplifies core competency by generating large sales volume thus increasing profits with low profit margin.

In supply chain organizations, the term 'collaboration' refers to a business practice which is carried out to motivate individual organizations. There are various types of collaboration which differ in numerous ways. These include transaction integration, information sharing and strategic collaboration. This process may range from a wide variety of applications such as sharing of information and resources. Moreover, collaboration allows companies to achieve remarkable results by improving logistics and supply chain activities.

A 3PL (or third-party logistics) is issued for partner companies to provide logistics services. The types of 3PL providers include Standard 3PL Providers, Service Developer 3PL, Customer Adapter 3PL, and Customer Developer 3PL. Even though most 3PL firms are regarded as providers of a wide range of logistics services, it is essential to categorize their promotion in terms of many facets of delivery. As such, they tend to exist in the form of transportation-based, warehouse/distribution-based, forwarder-based, shipper/management-based, financial-based, and information-based firms. Among them, transportation-based 3PLs are the most commonly used.

Unlike 3PL providers, 4PL providers encompass effective strategic planning and analysis of various services within the supply chain management (Aktan et al., 262). Also, this process may range from financial processes to the consideration of customer service. While 3PL relates to physical distribution and logistics, 4PL associates itself with planning and analysis of supply chain management as well as design and optimization. Thus, it can often be termed as an outsourced service whereby there is constant tracking of customer support, supply chain planning, designing and optimization, and analytic reporting. Generally, it is termed as a corporate job which requires less field work and integrates information and analysis of past acquaintances to improve supply chain.

As noted, the benefits of strategic alliances vary widely. For most firms, these benefits ensure higher quality, low-cost and enhanced delivery performance. Despite the numerous risks associated with strategic alliance, companies can be able to respond effectively on the presented issues. For each component, managers should be allowed to evaluate more than one supplier. In turn, this integration may continuously improve their strategies and supplier relationships thus, increasing the possibility of sales volume. Furthermore, the suppliers may also be influenced and motivated, which in turn, promotes close-working relationships to support the alliance in improving efficiencies and costs.

Conclusion

In a tight economy, challenges are often encountered as a result of sales-target increase to meet the demand of customers. For the most part, many companies have engaged in buyer-supplier relationships whereby the value is based on the consistent delivery of services, quality, and returns management among other related factors. Hence, the need to ensure effective collaboration has been significant over the years as more companies have benefited from supply chain relationships. Therefore, it can be said that the enhanced collaboration between supply chain buyer and seller produces a valuable outcome thus increasing efficiencies.

Works Cited

Aktan, Ceyda, Eyyup Ensari, and Nizamettin. "Relation of 3PL and 4PL Activities and Their Effect on Emerging Economies." ijmeb.org, 2016.

Christopher, Martin. Logistics & supply chain management. 3rd Edition. Pearson UK, 2016.

Pyke, David F., and M. Eric Johnson. "Sourcing strategy and supplier relationships: alliances versus eProcurement." The practice of supply chain management: Where theory and application converge. Springer, Boston, MA, 2004.