Week 6

In this weeks blog I will discuss how I anaylsed the upstream and downstream of Supply Chain and discuss the different concepts that could be included including

  • Push-Pull supply models
  • Vertical Integration vs Disintegration vs Virtual Integration
  • Efficiencies in Supply Chain
  • Value Networks

Wine.com get their wine from all over the world, they have different warehouses but are based in California. The wine they have is made over various numbers of years and they don’t make the wine on the spot as they don’t make the wine they import it from different vineyards all over the world as well as some vineyards that they control. They do not make their products but store the wine.

Supply chain management is all the supply activities of an organisation from its suppliers to its customer. Downstream supply chain is transactions between an organisation and its customers and intermediaries, equivalent to sell side e-commerce. Upstream supply chain is transactions between an organisation and its suppliers and intermediaries, equivalent to buy side e-commerce. Wine.com uses both downstream and upstream, the company uses upstream to make transactions from their suppliers they contact the suppliers to get the products for their customers. They also use downstream to make transactions between their company and their customers.

The diagram below shows the supply chain management system. Taking from google images.

supplychain

Push-Pull strategy in business describes the movement of a product or information between two subjects. Pull is when the consumer ‘pulls’ the goods they demand or need, while the suppliers ‘pushes’ the goods towards the costumer. Wine.com is a ‘push’ company as they market their products to their customers and aim to make the customers want to buy their product. Through marketing they use the ‘Push-Pull’ strategy to entice the customers, if wine.com used a ‘pull’ strategy they would have to wait until the customer placed an order to make the wine. This is not viable for the company as most off the wine takes years to mature and develop their correct taste and flavours. By using ‘push’ the products are pushed through the channel, from the production side to the retailer.

800px-Technology-Push_Market-Pull

The diagram below of www.wikipedia.org is of a Push-Pull Model.

Vertical Integration is concerned with how much control a company has over its upstream supplier and downstream buyers. There are three different varieties of Vertical Integration, backward vertical integration which is upstream, forward vertical integration which is downstream and balanced vertical integration which is a combination of both. A company uses Backward Vertical Integration when it controls subsidiaries that produce some of the inputs used to in the production of its products. A company uses Forward Vertical Integration when it controls distribution centres and retailers where its products are sold. Balanced Vertical Integration means a firm controls all of the components, from raw materials to final delivery. Wine.com I believe to be balanced as they control everything within the business and how it is run.

Vertical Disintegration as opposed to integration, in which production occurs within a singular organisation, vertical disintegration means that various dis-economies of scale have broken a production process into separate companies. A major reason for Disintegration is to share risk, it is more likely to happen in volatile markets and I believe that wine.com does not use Disintegration but that it may be brought in, if new companies begin to compete in the market.

Virtual Integration is a new form of Value Chain Management. Virtual Integration plans to allow manufacturers to become virtual companies, owning only the brand and the customer. Vertical Integration is history as the future will be about virtual organisations operating within virtual supply chains. Virtual Integration as opposed to vertical integration represents the decomposition of a traditional company. The main difference is that Vertical Integration performs and Virtual Integration innovates. Wine.com could possibly be called a Virtual store having operated on the internet for years, they also may be able to include third parties when selling goods to try and reach a wider target audience.. Wine.com may not be considered virtual at the minute although they may be able to start to look to change their direction and improve relations with other third parties and new forms of advertising and marketing to get new customers.

The main difference between Vertical Integration and Virtual Integration is that Vertical is the extent to which supply chain activities are undertaken and controlled within the organisation and Virtual is the extent to which all activities are undertaken outside the organisation by third parties.

The diagram below is taken from the power-point notes that were displayed in Maurice Mulvenna’s lectures this week showing the different forms of integration.

integration

Value Network is a complex set of social and technical resources. They work together via relationships to create economic value. They account for the overall worth of products and services. External Value networks and Internal Value networks differ in that external includes customers or recipients and internal focus on key activities, processes and relationships although a company will use both.

Fjeldstad and Stabells say that a value network consists of theses components;

  • A set of customers
  • Some service the customers all use, enables interaction between customers
  • An organisation that provides the service
  • A set of contracts that enables access to the service

The purpose of a value network is to create the most benefit for the people involved in the network. When considering wine.com when discussing Value Networks you realise that they must have a value network that allows the customers to access their products and services and that they are vital in the overall process of the company. Value Networks are essential for a company to be successful and rely on their products and services being successful. As Fjeldstad and Stabells say there are a few key points that are needed when thinking about how successful a company can be and that the value network allows the company to provide a service.

When dealing with efficiencies within supply chain I could not find how it was linked to wine.com and do not know how they are related.

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