Breaking Down a Supply Chain Into Component Parts Essay

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Supply Chain: Vacuum Cleaners

A supply chain is defined as "the total sequence of process steps and supplier companies involved in the production and sale of an end item. Most products have multiple supply chains: one or more for each major commodity used in the final product: e.g. sheet metal, electronics, hardware, etc." (Lean manufacturing, 2013, The Hands-On Group). When manufacturing a vacuum cleaner, the first step in the industry supply chain is that of the raw material mining and production of raw materials (such as steel). The purpose of this is obviously the generation of the raw components that will constitute the final product. The cost of raw materials will invariably impact the cost of the final item and the quality of the materials and availability may impact the quality of the item and also the ability to be responsive to customer demand. With any supply chain, "physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows. Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain" (Handfield 2011).

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Manufacturers must be aware of the input costs even very far down the supply chain, such as raw materials.

The second step in the supply chain is the manufacturing of the component parts that make up the vacuum cleaner. This may take place on-site at the company or be outsourced to various other firms. It would be unusual today for a product to be built entirely in-house. Being able to maximize the value of this aspect of the supply chain is essential -- by reducing costs, the company can have greater flexibility in setting the price of its final product. However, manufacturing costs in and of themselves are not always the primary cost of this phase of the supply chain: shipping costs from the manufacturer to the assembly plant can also be prohibitive. Also, defects in manufacturing the component parts can lead to poor quality and loss of customer loyalty. "Too often, companies fail to consider the true full cost of procurement. They also tend to undervalue the loss of control that comes from procured vs. in-house make items" (Lean manufacturing, 2013, The Hands-On Group). A company must carefully weigh what can be saved by outsourcing vs. The hidden costs in….....

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