Principles of Supply Chain Management
Principles of Supply Chain Management
Situation 1
Prior to cancelling contracts, there has to be sufficient justifications of the different reasons behind the cancellation. Firstly, it is pertinent to note that although Lysco has been tremendously effective, it has not facilitated for cost effectiveness. For any organization, cost effectiveness is an essential attribute that influences the nature of contractual agreements. Since the company has an alternative that is relatively cheaper, this would form an excellent basis for cancelling the contract. The second attribute of consideration pertains to the provisions in the initial contract (Wisner, 2011).
In the company’s initial contractual agreement with Lysco, there is no stipulation that makes assurances for the production contract. Consequently, Lysco cannot hold the company into ransom. Apart from justifying the different reasons for cancelling the contract, it is fundamentally essential to establish a systematic framework for the different stages of cancellation. Firstly, it is crucial to involve representatives from both companies in the deliberations. This approach helps in mitigating potential conflicts in the critical stages of contract cancellation. The second perspective encompasses the evaluation of all legal implications of cancelling the contract (Coyle, 2008). This is because the legal framework is one of the most pertinent components of cont5ractual agreements. All these attributes would help in maintaining an excellent relationship with the R & D supplier.
Situation 2
In this supply chain, there are numerous attributes that might undermine operational efficiency of the entire system. The first risk is the possibility of counterfeit products. This supply chain comprises of numerous middlemen. This forms a platform for potential infiltration of counterfeit products into the United States market. Apart from counterfeit goods, another significant risk is the possibility of legal conflicts. The Indian and Indonesian dealers are skeptical about entering into legal agreements with United States firms. This might serve as a potential stumbling block in the event of defaults in payments. This is because handshake agreements are not credible reference points for contractual agreements.
The third risk in this supply chain is theft (Wisner, 2011). The involvement of numerous parties in the chain facilitates for potential theft of products. This might cause significant losses to the business. Among the three risks, counterfeit products and legal constraints are the two outstanding threats. Although the Asian markets have had an excellent performance in recent years, instances of counterfeit products are predominant. This mostly applies to China in that the country has a history of malicious dealers. From a legal perspective, the absence of legal agreements might destabilize the performance of the chain in the future.
Situation 3
The increase in prices by the supplier would undoubtedly serve as a massive blow to the company’s strategy for price reduction. However, it is fundamentally essential to always ensure that the business operations of external partners do not affect internal strategies. In line with this, it would be critically essential to enter into negotiations with the supplier (Coyle, 2008). The negotiations would serve as a platform for informing the supplier about the company’s internal policy.
Although it is unlikely that the supplier would offer the same prices as before, the negotiations would soften the tough stance on price increase. For instance, the supplier might increase the grace period from 45 days to 90 days. This would give the company sufficient time to strategize. The deliberations would also help in communicating the benefits of the price reduction strategy to the supplier. In essence, an increase in the company’s sales would lead to higher rates of supply from Exact Cutting Tools. In contrast, a reduction in the company’s sales would lead to a reduction in the purchases from Exact Cutting Tools. Consequently, the supplier should support the company’s strategy by maintaining the initial prices.
References
Coyle, JJ & Langley, JC 2008. Supply chain management: A logistics perspective. Mason, OH: South-Western
Wisner, JD 2011. Principles of supply chain management: A balanced approach. Mason, OH: South-Western
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