Understanding the Supply Chain and Strategic Fit

Supply chain management various stages takes a systems view regarding all processes needed to bring a product to the final customer. Hence, the value creation process extends beyond the boundaries of a single business, and involves integrated business processes among the suppliers, manufacturers, and customers (Vanpoucke E. et al., 2009). Purchasing a can of soda at a convenience store can be an example of how a convenience store supply chain functions. The soda starts out with a drink manufacturer such as Coca-Cola, which often uses raw materials suppliers like sugar and a bottling plant. After the soda can are complete they can then be shipped to out to a convenience store where a customer purchases and consumes the soda. After the soda is sold, information is about the sale is sent back to the distributor through sales data. This sales information flows upstream, which gives the opportunity for the distributor to plan production and shipments. The customer pays the retailer, the retailer pays the wholesaler, and each pays its suppliers. Hence, when the customer purchases a soda, the money flows back through the supply chain, completing the financial cycle for that item. Why should a firm such as Dell take into account total supply chain profitability when making decisions? A firm like Dell should consider total supply chain profitability since its decisions affect all partners involved. Dell has the ability to negotiate with suppliers but does not mean the company should be greedy and not let their suppliers thrive. If Dell focused only on its own profits by squeezing suppliers with unfair contract terms, then suppliers might cut corners or exit, affecting the long-term chain viability or even pushing the increased costs to the customers. By working together with suppliers in sharing forecasts and cutting out retailers, Dell is able to reduce its costs and be able to offer their products at more favorable prices. As Dell also depends on suppliers the company should work together in order to have the suppliers relieve some of the consequences of uncertainty. This is consistent with the "pull" principle and may improve the supply chain efficiency when the supplier is better positioned to accommodate uncertainty due to an ability to risk pool (Cheng, Z. et al., 2017). These decisions can improve customer value and also improve the profits throughout the supply chain. Furthermore, by Dell sharing their production schedules and demand forecasts with key suppliers, the company can lower lead times and unnessecary inventory. If Dell had only considered its own profit, it might have stocked inventory of extra components internally and passed the warehousing costs along to its buyers.

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