Supply Chain Strategy Component Manufacturing Is Acquiring

Supply Chain Strategy

Component Manufacturing is acquiring Arrow-Hart, a highly regarded contractor manufacturer, to distribute their electrical components, cutting Replacement Components, Inc. business by cutting exclusivity in selling the electrical components and creating a high level of competition for the electrical components. This is a big blow to Replacement Components, Inc. because they helped Component Manufacturing to implement their business and purchased products with prepaid orders for them to grow their business, which has also weakened the business relationship with the acquisition. Cutting exclusivity of distributorship cuts Replacement Components, Inc. healthy margins and effects costs and credit risk. The main problem is that distribution exclusivity is disappearing where suppliers are starting to integrate and bypass distributors to sell directly to customers and gain higher profitability in their own profit margins. This creates a strategic decision making process for Replacement Components, Inc. To maintain market share, profit margins, and grow in the process.

Alternatives can include searching for alternative supply sources, which can take more time to find suppliers who are equipped to meet the business needs. Acquisition of suppliers is another alternative, but requires high costs. Replacement Components, Inc. could threaten to not sell the electric components and charge Component Manufacturing for the costs Replacement Components, Inc. has paid to carry the components. This could drive customer demand to other competitors while Replacement Components, Inc. is looking for other supply sources. Still, another alternative is to look for new product innovation for replacement, which again, takes time.

Lowering prices to fight the competition can reduce profitability for competition, but could also affect profit margin for Replacement Components, Inc. At the same time. Adding supplier brands is an alternative, but could affect Replacement Components, Inc. sales on their own brands. Focusing on competitor weakness and concentrating sales in areas that competitors have weak sales is another alternative. Still, another alternative is to focus on continuous improvement in customer and representative relationships to build and maintain a deeper competitiveness.