In this assignment, I will suggest and describe potential disadvantages and pitfalls on an integrated supply chain. I will produce a detailed report in which I will show the disadvantages of an integrated supply chain and the effect that this will have on the company and also when a business should abandon their integrated supply chain.
I am working as the Manager of Logistics of BMW and have been asked to use my experience to suggest the way forward over the next few years.
Task 1 (P5 & M3)
Stock Levels
I will now describe the potential vulnerabilities in an integrated supply chain. There are many potential problems that could occur in the supply chain and all these could affect the way the business operates and its effectiveness.
The first potential vulnerability that I will discuss in an integrated supply chain is stock levels. This is because there may be delays in certain parts of the supply chain, meaning that the products will take longer to get to its destination. Another way in which the stock levels may become vulnerable is because there may be a shortage of certain materials so therefore it will take longer to produce the goods.
If this happens it could have a great impact on the company because if they do not have the stock levels that they require then they will not be able to keep up with customer demand. This could result in the company making less profit because the customers want the product when they want it, not when the company can provide it, therefore resulting in a loss of profits.
Stock levels are not really a problem for BMW, this is because they will constantly make the cars and ship them to their showrooms. However if there was a problem which meant that the stock levels would be reduced in the showrooms, then this would mean BMW would receive less profit and a decrease in customer satisfaction as they would not be able to get the cars to the customers.
Customer Demand
The second vulnerability that I am going to talk about is customer demand. Customer demand constantly changes. Customers continually want the next big thing, however this is a big vulnerability in the integrated supply chain because if a company has made thousands of products that are popular one day but the day after they are no longer wanted then all that money has been wasted and more than likely the products won’t sell the price they once did. This is potentially a massive vulnerability as it could lose companies a lot of money and this shows that customers influence the supply chain because of their buying trends.
If this did happen in a business then it could result in many things. If you have just produced thousands of a certain product and a new/better one has been released then that product is worthless. This will result in many companies making a loss because they would have to sell the products at much cheaper prices than they expected in order to get some of their cash back. Therefore this is a bi vulnerability because companies won’t make the profit they intended to.
Customer demand is a big issue for BMW. This is because there are so many different specifications that can be fitted to a car now. A customer at BMW can choose what they want from their tyres, interior colour and interior material, engine size, body kits etc. All this could mean that if BMW make a car and send it to a showroom and the customer wanted it different then they could lose out on a sale. Therefore BMW have started to take orders from the customers to allow them to personalise the car they want, to how they want it to look, therefore the customer’s satisfaction is met and they can still sell cars without them sitting in the showrooms for long period
