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| NETWORK BUSINESSES EXAMPLES | IV |
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This section deals with examples of network enterprises. Chapters 13 and 14 present the supplier and manufacturing network enterprises respectively. Chapter 15 and 16 describe e-business and platform network enterprises respectively. Chapter 17 is on popular social network enterprise applications like Facebook and Twitter. Chapter 18 introduces the sensor network enterprises.
Chapter 13Supplier Networks
Chapter 14Manufacturing Network Enterprises
Chapter 15E-Business Networks
Chapter 16Platform Networks
Chapter 17Social Networks
Chapter 18Wireless Sensor Networks
| To avoid being tedious, we may refer to network enterprises as networks, but the reader should not lose the sight of the fact that every time we refer to network we are truly referring to network enterprises. |
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Chapter 13
Supplier Networks
Enterprises that wish to engage in e-business find that they must be involved in managing the network of all upstream companies (supplier side) that provide input directly or indirectly, as well as the network of all downstream companies (customer side) that are responsible for delivery and aftermarket service of a particular product to a customer. Essentially, a supply chain is a network of interlinked suppliers and customers, where each customer is, in turn, a supplier to the next downstream organization, until a complete product reaches the end customer. We may define a supply network enterprise as the network that encompasses all the organizations and activities associated with the flow and transformation of decisions, information, and goods from the raw material stage, through to the end user.
In this definition, decisions, information, and materials flow both up and down the supply chain, while the supply network manages the ICT infrastructure, enterprise information systems, sourcing and procurement, production scheduling, order processing, inventory management, warehousing, customer service, and overarching policies and strategies that oversee enterprise operations. Supply networks are typically comprised of geographically dispersed facilities and capabilities, including sources of raw materials, product design, and engineering organizations, manufacturing plants, distribution centers, retail outlets, and customers, as well as the transportation and communication links between them. The supply network includes all of the capabilities and functions required to design, fabricate, distribute, sell, support, use, recycle, and dispose of a product, as well as the associated decisions and information that flows up and down the network enterprise.
13.1Suppliers
Suppliers can be categorized into the following types:
1.Facilities and equipment builders or vendors: These are companies involved in the construction of supply chain network (SCN) facilities or in the productionādistribution of manufacturing and warehousing equipment. They provide the lasting resources used by the company to perform insourced activities.
2.Contract manufacturers: These are the subcontractors selected by the ļ¬rm to perform outsourced manufacturing activities.
3.Logistics service providers: These are warehousing and/or transportation companies providing storage space for outsourced storage activities and transportation means for the movement of products between activity locations.
4.Material vendors: These are external raw material, component, or product sources. In a manufacturing context, they provide the material associated with the leaves of bill of material (BOM) trees. In a distribution context, they provide the products sold to customers. In an activity graph, they provide the material identiļ¬ed on the arcs adjacent to the generic supply activity.
5.MRO vendors: MROs are maintenance, repair, and operating supplies. They are required to perform activities, but they do not become part of the end product or are not central to the ļ¬rmās output. MRO items include consumables such as cleaning, testing, or ofļ¬ce supplies; minor industrial equipment such as measurement instruments and safety equipment; spare parts, lubricants, and repair tools required to maintain facilities and equipment; computers; furniture; and so on. MRO items are usually not shown explicitly on activity graphs.
The nature of the relationship developed with suppliers is significantly influenced by three contextual factors:
1.The value creation impact of the product or service: The value creation impact is related in particular to technology. A commodity has much less value than a high-tech component based on proprietary technology.
2.The complexity of the supply process: Supply complexity depends on how easily a product or service can be obtained. A commodity largely available on the market is easy to procure. However, if only a few vendors qualify to supply the product, if capacity is limited, if just-in-time (JIT) deliveries are required, or if quality is critical, then it is much more difļ¬cult to ļ¬nd good suppliers.
3.The risks involved.: Risks are related mainly to the possible disruption of the supply line and to price fluctuations. If an item is procured close by in the same country, risks are lower than if it is purchased overseas in a country with highly fluctuating exchange rates and strong inflation.
The nature of the relationships developed with suppliers depends on whether the need for its products or services is repetitive or not. Most buying and outsourcing relationships involve repetitive needs. They may also involve a single product or a family of products. This is important because signiļ¬cant economies of scope may be generated when several items are procured from the same vendor. In this context, some kind of contract must be negotiated with suppliers. These can range from mid-term commodity-speciļ¬c contracts to long-term partnerships. For example, contracts with material vendors could take the following forms:
1.Fixed price: The vendor sets a unit price based on expected volumes and the buyer has the flexibility to order any quantity at any time during the contract period. This type of contract is widely used in practice.
2.Fixed commitment: A periodic (say, monthly) ļ¬xed delivery quantity is speciļ¬ed by the contract. Discounts are offered based on the level of the ļ¬xed quantity commitment.
3.Minimum quantity commitment: Periodic minimum quantities are imposed by the contract and the buyer has the flexibility to order any quantity above this minimum in each period of the contract (say, each month of a yearly contract). Discounts are offered based on the level of the minimum commitment.
4.Order band commitment: Periodic minimum and maximum quantities are imposed by the vendor and the buyer has the flexibility to order any quantity in the interval speciļ¬ed. Discounts are offered based on the level of the minimum commitment and the range of the interval.
The procurement of plant, equipment, and MRO supplies is often nonrepetitive. In the former case, it takes the form of investment projects. Alternative proposals are usually evaluated using a life cycle cost approach; that is, the evaluation is based on the total cost of ownership over the life of the asset. In addition to the ļ¬nancing of the construction acquisition costs, the expenditures considered include operations, maintenance, overhaul, and replacement or disposal costs. When relevant, the environmental and social impact of the options considered must also be evaluated. ...
