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Alignment of supply chain strategy to organizational goals is crucial in optimizing benefits. For example, in a make-to-stock supply chain, where the strategic focus is on maximizing productivity by leveraging economies of scale, it would be more appropriate to take advantage of the lower costs associated with bulk purchases. This is particularly true in any case where production is planned further in advance for long production runs. Make-to-order strategy has its own dynamics, sacrificing some efficiency for greater agility.
Sophisticated distribution services, such as those offered by Avnet, offer solutions that squarely address these issues by providing lower prices from quantity purchasing; reducing the cost and risk in holding inventory; enabling financing flexibility; steadying inventory supply; and making the supply chain more stable.
Inventory uses precious corporate capital, and sellers carefully price goods based on market conditions, including order quantities and scheduling. In some instances, buyers are large market players that make demands on the seller, including vendor managed inventory (VMI) or vendor owned inventory (VOI). The sale price is a response to market demand, and to a certain extent the seller's own internal financing.
In some models where the seller can only deal in limited quantities, the lowest potential unit cost is not realized because demand doesn't justify driving production efficiencies. In other models where the seller, at the behest of a large buyer, owns inventory, the costs associated with holding inventory must be priced into the final unit cost. In these two models, the lowest unit cost is not recognized.
Inventory is the lifeblood of firms in our industry and typically requires large sums of capital devoted to its presence. It is also subject to market conditions and can, therefore, be unpredictable, unsound, unaffordable, or unavailable. When assurance of supply can be provided, firms may rationally plan production, generate forecasts for customers, arrange financing, and allocate capital towards other business needs. Knowing that supply will be available at a certain price, in certain quantities, and at a certain time allows firms to “know” one of their firm's previous “unknowns.”
International banking is becoming a larger factor in inventory management. Rather than serving only as a means to financing, international banking has become an actual physical link in the supply chain. Sophisticated banking institutions partnering with a trusted logistics provider create a contributing player that can serve the supply chain with access to lower Weighted Average Capital Cost (WACC) and operations capabilities. Typical buyers have limitations in access to capital, and their firm's WACC is a characteristic of their size and industry.
A buyer that engages with these bank-logistics provider hybrids can leverage the advantages of unconstrained capital and realize substantial balance sheet benefits. The bank-logistics provider hybrid can offer volume purchasing, thereby taking advantage of the universal commercial principle that sellers offer lower prices for large purchases.
Further, the bank-logistics provider hybrid has, with its access to operations facilities, the opportunity to have large amounts of inventory at the ready over long periods. This allows the ultimate buyer access to inventory realizing direct advantages in working capital, as well as advantages associated with the hidden cost of holding inventory (warehouse space, insurance, administration, etc.).
In order to address a buyer's capital limitations, the risks associated with holding inventory and the challenges of planning manufacturing operations with components that may have a limited life cycle, the assistance of a sophisticated third party can be valuable. Both buyers and sellers can benefit from this innovative trade finance option. Sellers are able to maintain low levels of both days sales outstanding (DSO) and days inventory outstanding (DIO). Buyers realize advantages normally reserved for direct customers such as optimizing purchase price variance (PPV) and a future assurance of inventory availability.
As supply chains and the product development cycle operate with ever-heightened velocity, innovative solutions that target areas such as inventory obsolescence and the management of financial and supply risks can contribute greatly to effective supply chain strategy and enhanced profitability.
We've all seen what happens when a person or organization believes they are above the law. Bernie Madoff comes to mind. OK, not everybody who flouts the law gets what they deserve, but the Apple-Samsung battle is playing out in a very public way. You are correct in that Apple should adhere to the letter of the law and not interpret it. Eventually, Apple will start to fail in the court of public opinion, if not the court of law.
Out of interest's sake did Apple say anything untruthful in its statement? It sounds like they did as ordered but added a little extra too 😉
@FlyingScot, agreed Apple published a statement. OK! However, adding a little extra is tantamount to sticking its middle finger at the court's ruling. I think Apple was plainly smirking. It's pure arrogance!
@Barbara, absolutely. The law caught up with Bernie Madoff and he is serving his time in prison. But Apple appears to disregard authority and give no thoughts to its actions. I agree Babs; if Apple continues in this manner it may eventually start to fail in the court of public opinion.
@Flyingscot: I agree with you. Apple did appropriate thing for eccentric judge.
_hm, There must be a lot of eccentric judges in the United Kingdom! The first ruling was from one single judge and then three Appeal Court judges confirmed the order, reviewed Apple's “compliance,” found it wanting and ordered it to do only what it was ordered. The eccentric here was . . . Apple.
Aside from the court problems, some consider Apple to have lost its innovative edge:
Apple's innovation is sputtering,” Global Equities Research's Trip Chowdhry wrote in a research note to clients. “Why is that Apple, the company that brought touch to phones and tablets, stopped just there and did not bring touch to notebooks and iMacs? Why is it that Apple brought high-resolution screens to … some MacBooks and not to all devices? High-resolution screens are a commodity today……..
“The analyst added that he believed the company may be rushing products and lacking a viable roadmap, a fact that, Chowdhry said, possibly led to Scott Forstall's departure. “Our contacts speculate that Apple executive leadership may have rushed Scott Forstall to deliver products prematurely,” the analyst wrote. “This may also indicate that Apple may be lacking a three- to four-year product road map, because if a roadmap existed, engineers would not be pushed to ship products prematurely – especially when they are not fully tested.”