Manufacturer/End-Customer Relations - Research Paper Example

Manufacturer/End-Customer Relations The supply chain management has been described as the amalgamation of core business processes from end-customers through the suppliers resulting in the provision of goods, services as well as information that results in value addition for stakeholders including the end-customer. Supply chains that are customer-centric and strive for customer satisfaction are often more efficient than others. The increased emphasis on enhancing the manufacturer-end-customer linkage is demonstrated by the use of pull systems as opposed to push systems whereby products were pushed from the manufacturer to customer. Ultimately supply chains serve the purpose of generating sales, and therefore, profits for manufacturers. Keeping this objective in view, it can be undoubtedly claimed that manufacturers and customers are the two core parties in any supply chain and that their relationship is often symbiotic as well as conflicting. Conflict between these two arises due to the presence of intermediaries such as wholesalers, distributors and suppliers. This paper shall analyze this paradoxical relationship between the manufacturers and end-customers. Typically, demand pull supply chain systems today are based on the premise that manufacturers depend on customers’ tastes and preferences for their survival. Similarly, end customers would not be able to satisfy their demand without manufacturers support. Manufacturers often rely on end customers owing to the perceptions regarding customer’s expertise (known as expert power), status (referent power) as well as owing to the view that customers have the right to affect manufacturer’s decisions (legitimate power) (Zhao, Huo and Flynn 370). This relationship, however, is too simplistic. Intermediaries often struggle to keep wide margins which results in an increase in the price of the goods and services being offered. It is not in the interest of the end customer to pay a higher price and would prefer buying directly from the manufacturer. Manufacturers too would want to eliminate intermediaries because the lower prices would attract more customers. However, this seldom happens because intermediaries offer the advantage of breaking the bulk into smaller portions thereby guaranteeing affordability to the customer (Gerth). Therefore, the relationship between manufacturers and end-customers becomes intricate as the parties lose direct contact with each other. However, with instances such as online shopping (e-commerce) this distance is gradually fading. Furthermore, research also shows how supply chain integration is hampered by conflicting objectives between supply chain members particularly customers and manufacturers. At the very least, the need to develop systems that are both lean and flexible presents a challenge. Agile systems under an integrated supply chain present a situation whereby any near term alterations in customer demand as well as manufacturer’s supply are responded to in real-time while disruptions are handled within time as well (Lee 105). The focus is on a responsive supply chain which may require cutting down on buffer stock due to unpredictable demand. While this is in line with the lean paradigm whereby waste is minimized (and so is excess stock), there may be situations where holding buffer stock will enhance the manufacturer’s ability to respond but may increase the costs of holding stock. Therefore, a conflict between order winners emerges with a cost vs. flexibility scenario (Harrison and Hoek 259). For instance, Compaq lost market share to Intel in 1990’s because of long design cycles because of which it could not take advantage of falling prices of components resulting in higher prices compared to competitors (Lee 105). This means that too much focus on costs and speed can lead to loss of customers. Furthermore, the type of production employed also results in differences between the manufacturer and the customer. In an integrated supply chain where customers engage in collaborative partnerships with manufacturers, the need to obtain tailor made, customized products may be inevitably high. On the other hand, manufacturers may find such a strategy inefficient due to high costs associated with producing one-off items. Essentially, mass production and product standardization may be in the best interests of manufacturers who want to incur low costs. However, to remain adaptive modular production may be a viable option for both manufacturers and customers as it requires meshing products allowing for mass-customization (Mahadevan 196). Dell’s success, for instance, can largely be attributed to this strategy. Another issue pertaining to supply chain integration arises from the need to share information closely with vendors. With decentralized models such as Vendor Managed Inventory suppliers are empowered to track inventory and ship it to distribution centers. Often this requires manufacturers sharing sensitive data, including customer data for the purpose of meeting customer demand in real-time (Harrison and Hoek 253). This is in the best interests of the end-customers who demand products as per their specifications as well as innovations to break the status-quo. However, this involves a trade-off since suppliers can share this data with competitors harms manufacturers (Cutcher-Gershenfeld 23). Considering the joint decision making and collaborative nature of integrated supply chains, it is in the customer’s interests to have geographically dispersed production facilities as opposed to single site facilities. However, this may present a challenge to manufacturers who may incur higher costs for managing such complex networks in the process of integrating logistics and other supply chain partners through means such as electronic communication. To conclude, supply chain integration requires far closer relationships between manufacturers and customers than in traditional channels. Differences over order winners, the divergence between an agile and lean strategy as well as the risk of having confidential customer data leaked to competitors create conflicting objectives between the two parties. Furthermore, the use of intermediaries further elongates the distance between manufacturers and customers which constrains their relationship. Nevertheless, the alignment of the customer-centric paradigm with an integrated supply chain reinforces the two-fold relationship between manufacturers and customers whose survival is dependent on each other. Works Cited Cutcher-Gershenfeld, Joel. "Customer and Supplier Integration Across the Supply Chain." 1999. Web. Gerth, David. Unit 13: Channels of Distribution, Logistics, and Wholesaling. n.d. Web. 13 July 2013. Harrison, A. and R. V. Hoek. Logistics Management & Strategy. San Francisco: Prentice Hall, 2011. Print. Lee, Hau L. "The Triple-A Supply Chain." Harvard Business Review (2004): 103-112. Web. Mahadevan, B. Operations Management: Theory and Practice. New Delhi: Dorling Kindersley Pvt. Ltd., 2008. Web. Zhao, Xiande, et al. "The impact of power and relationship commitment on the integration between manufacturers and customers in a supply chain." Journal of Operations Management (2008): 368–388. Web. Read More