FedEx: Question 2

2. List the benefits of a virtual supply chain.

What is Virtual Supply Chain?

Virtual Supply Chain (VSC) is a temporary network of enterprises formed to exploit the fast and ever-changing opportunities (Duffy, 2000; Gunasekaran& Ngai, 2004).“In VSCs, a network of firms provides different products or services so that a complete service can be performed by the virtual organization” (Gunasekaran& Ngai, 2004). It arises owing tothe shortlife cycle of products and the presence of information technology (Chandrashekar&Schary, 1999; Duffy, 2000; Gunasekaran& Ngai, 2004).

The characteristics of the VSC aredescribed as follows:

1.     Themembersof the network may subject to change (Chandrashekar&Schary, 1999; Gunasekaran& Ngai, 2004).

2.     The network is “governed through pre-arrangements as latent networks”(Chandrashekar&Schary, 1999).

3.     Internet plays an important role (Gunasekaran& Ngai, 2004).

4.     “Information flows in both ways along the VSC, but the materials flow in only one direction, except for product returns”(Gunasekaran& Ngai, 2004).

The Benefit of Virtual Supply Chain

1.     Flexibility

Due to temporarynature of VSC, firms have the flexibility to adapt changes. Since VSC is a temporary alliance which members, together with resources, can be changed, firms can quicklyresponse to the market changes by modifying the structure of VSC. A customized supply chain is therefore feasible.

2.     Save cost

VSC can savecost as a result of its dependence on internet. Gunasekaranand Ngai (2004) commented that with the use computer applications and internet, virtual logistics resources, such as production processes, tools, can be traded at a low level of logistics operation, “in much the same way as banks and individuals trade foreign currencies and shares”. This can save the transaction cost of entering the virtual supply chain.

In addition, VSC can minimize the non-value-added component. The flexibility of VSC allows phasing out or replacing the non-value-added to the value-added. It saves the cost on employing the non-value-added one.

Reference:

Chandrashekar, A. &Schary, P.B. 1999, "Toward the virtual supply chain: The convergence of IT and organization”, International Journal of Logistics Management, vol. 10, no. 2, pp. 27-39.Available from: Proquest [29 March 2014].

Duffy, Roberta J. 2000, “Take the Initiative: Continuing coverage of the trends shaping the profession”, Purchasing Today®, May 2000, pp. 47. Available from: Institute of Supply Management [29 March 2014].

Gunasekaran, A. & Ngai, E.W.T. 2004, "Virtual supply-chain management", Production Planning & Control, vol. 15, no. 6, pp. 584-595.Available from: Taylor & Francis Online [29 March 2014].