It is natural that suppliers forecast their own demand, and where long-term relationships have developed, there is a greater potential for the supplier to make the loan for cost. Furthermore, where Riordan is a major customer for that supplier, there may be a greater willingness to fulfill the order, and put that customer before smaller competing firms in terms of priority. If Riordan are ordering from a firm they do not regularly use, there will not be the same level of forecasting, and a supplier may need to obtain relevant inputs before making a delivery.
The situation of the supply themselves will also be relevant. Smaller organizations are likely to have more cash constraints, and have a lower level of inventory on hand, as inventories tie up capital. This problem may be particularly pertinent where organizations lack financial stability. If the organization is small, the influence of production constraints may also impact on the readiness of supplies, especially if Riordan are competing with other companies for similar supplies.
The location of a supplier may also be important, local suppliers may find it easier to make regular frequent deliveries, due to the low cost associated with that delivery. However, if a supplier is located at a significant distance, orders may need to be a minimum size to make delivery financially viable. Furthermore, longer distance deliveries may require more notice in terms of logistics arrangements, especially where the supplier makes deliveries themselves rather than using third party logistics firms.
The way in which any deliveries are made and services received may also reflect the details of any contract, which may include the utilization of performance metrics.
For example,...
Strategic supply chain management will often see companies working with their suppliers in order to share information, and improve forecasting, which benefits the supplier, as they are able to make more accurate forecasts which will help to optimize both production scheduling and investment in stock, and benefits the buyer as the stock will be ready when they needed. However, this will only take place where there is a high level of trust between the two firms.
Lean Manufacturing
At the current time Riordan are using a level system of inventorying management. This is a process where there is a significant amount of inventories held ready to fulfill orders. It maybe argued that there are benefits of moving to lean manufacturing system. A lean manufacturing uses a chase strategy for inventory management; if this was applied the production of fans would be stimulated by the demand from customers, rather than being based on forecasts. A lean process may provide Riordan with a number of benefits. The first benefits will be the ability to eliminate a higher level of the resources utilized to store finished goods, which would reduce the running costs of the shipping department. Without inventory being held ready for order, the organization will also improve their cash flow as a much lower level of capital will be tied up in stock. Where an organization does not hold the stock there is also best potential for that stock to become
