The paper "Strategic Management Procurement " is an outstanding example of a management assignment. Friendly Grocer is a grocery store located in Australia. It sells groceries and general products. Examples of products offered include fresh juices, and candy and snacks. Characteristics of these products can influence logistic and supply chain costs. The production of products having different characteristics sustains two supply chain costs including production costs and market mediation costs (Qi, Boyer and Zhao, 2009). Mediation cost occurs as a result of market variability and they include opportunity costs, inventory holding costs, as well as product mark-down costs.
On the other hand, production costs comprise a material, labour, technological investments and manufacturing. When choosing suitable logistic and supply chain strategies, manufacturers often consider characteristics of products such as product variety, forecasting error, distribution intensity, product life cycle length and product demand (Bruce, Daly and Towers, 2004). From a supply chain perspective, with regard to product characteristics, products can be categorized as either uncertain/innovative or certain/functional. A product can either be functional or innovative. Functional products include those that people buy frequently in retail outlets with more predictable and stable demand and long life cycles (Mason-Jones, Naylor and Towill, 2000).
On the other hand, innovative products have fluctuated and unpredictable demand coupled with a shorter lifecycle. Most of Friendly Grocer’ s products are functional. Effective management of the flow of materials from the supply source to end-users is a major challenge to the company. In order to ensure success, there is a need to develop an effective supply chain strategy (Qi, Boyer and Zhao, 2009). Supply chain strategy depends on product characteristics.
The three logistics and supply chain strategies include agile, lean and agile/lean. The purpose of the lean supply chain is to minimize cost at the same time improve efficiency by eliminating wastes in organisational processes. On the other hand, the agile supply chain is aimed at offering customer-driven products so as to boost competitive advantage (Qi, Boyer and Zhao, 2009).
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